Sunday, January 22, 2012

The Latest from TechCrunch

The Latest from TechCrunch

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DLD 2012 – @Jack Dorsey: “Twitter Has A Business Model That Works”

Posted: 22 Jan 2012 08:56 AM PST


Earlier this fine Sunday afternoon, Twitter and Square founder Jack Dorsey took the stage at the DLD Conference, the annual pre-Davos meeting of minds held in Munich, Germany.

In an interview with not one but two journalists (Holger Schmidt from FOCUS Magazine and Techonomy’s David Kirkpatrick), Dorsey talked a great deal about Twitter and a little bit about Square.

Dorsey didn’t reveal anything spectacular about either company, emphasizing once more how Twitter is not your traditional social network (here’s my counterpoint) and that its business model works, thanks very much for asking.

He also talked about how Square is looking to expand outside of the United States and why 2012 will be a pivotal year for Twitter in Germany.

Below are my notes – some of Dorsey’s responses are slightly paraphrased.

Let’s start by talking about the platform wars. How do you see the future role of twitter compared to Facebook, Google+ and other social networking services?

Twitter is different because we’ve always been about hosting public conversations, that are real-time to boot. There’s always been this perception that you need to tweet to use Twitter, but we see a huge number of people using it for the discovery of news, events, content and so on. Our focus on simplicity is another differentiating factor.

Some people say Google+ is more of an attack on Twitter than on Facebook. Do you look at it that way?

We have concerns about building and growing Twitter, not so much about competitors. We want to get Twitter into more markets, so more people use it. Google has a lot of evolutions to go through, with search slowly becoming replaced by apps, the rise of social and whatnot. But again, social for us is only one part of what people use Twitter for, and we see the service more as an information utility.

Twitter was obviously born from a blogging-centric mindset, but where we shine is real-time discovery, being able to open up Twitter and instantly see what’s going on in the world, or with your friends and family. When we recently redesigned the website, we focused a lot on the discovery part of the equation, making it very simple for people to get value out of Twitter without necessarily participating.

Twitter has just acquired Summify, a startup that built technology for filtering relevant news. Is this an important area for Twitter, helping people overcome information overload?

Our goal is delivering relevant content to people, instantly. This sounds simple but is in fact extremely complicated to pull off in real-time. We want to bring you closer to what’s happening in the world, and we have a lot of work to do – Summify will help us in that regard.

Should we expect more acquisitions?

We’re always looking for amazing teams, and we can get them by acquiring companies, then why not?

In the long run, is Twitter going to become a destination for information, or a distribution channel that brings traffic to other websites?

The beautiful thing about the service is that it is both. The most amazing thing about Twitter is that it reaches every single device on the planet, from the cheapest phone to the most advanced smartphone. We’re not just about distribution, but also about people sharing content on Twitter.

(Dorsey brings up the Hudson river plane crash incident as an example of content that was shared first on Twitter sparking an international conversation.)

Yes, ok, but have you made up your mind about whether you want to be a distribution channel or a destination site?

Well, it’s a blurry line, but in essence we think of every tweet as a destination on itself, while Twitter is also a mechanism for distribution of content.

There’s been a lot of coverage of the Internet’s reaction to SOPA and its subsequent delay. Do you think we’re entering a new world of democracy? Will this outpouring of reactions on social networks, effectively changing things, become more common?

Services like Twitter definitely make this more possible, based on immediate feedback, the fact that everyone can give their opinion right away. This way, you get free access to public thoughts, right from someone’s phone.

We see politicians use Twitter to consume real-time conversations. It’s mind-blowing. Question is what do we do with that information? I’m a believer that if you give people data and information, it will help them make better decisions.

Twitter in that sense can really help the world, allow us to have better conversations, get a better grasp of how people approach the world, their trials and tribulations.

It look a long time for Twitter to develop a business model, and it’s based on advertising. We can agree that Twitter is big in perception but comes up short when it comes to engagement and stickiness. Do you need the same level of engagement other social networks enjoy to make your business model work?

Twitter’s business model has been in development for quite some time, and it works. Advertisers use it and we see them coming back for more. The market has vetted, and confirmed that they want to keep using it. Twitter's ‘Promoted’ products — including promoted tweets, accounts and trends — are currently seeing 3 to 5 percent engagement.

We’re always looking to increase engagement, but I also think about other things, like that fact that our technology can have a positive impact on the world and how businesses interact with their customers.

So what you’re saying is that even with the extremely minimal exposure of ads that you deliver, engagement can still prove sufficient enough to make for lots of revenues down the line?

Absolutely, it’s huge. Every signal that we’re getting from both users and advertising proves to us that people want more of it.

What’s more important to you as a business right now: make money or get more users? And you can’t answer both.

Both. It’s not really a fair question. We think of revenue as not a destination but as oxygen that feeds the model and vice versa. You can’t build a product without revenue, but you can’t focus on revenue without having a product either. Twitter is an organic system and product. Time and time again, you see companies whose revenue model makes their products better, just look at how Google AdSense improved search.

You’re unusual in many ways, but also because you have two fulltime jobs: you’re also the CEO of Square. Is Square coming to Europe soon, and what obstacles do you expect?

We would love to come to Europe and we’re going to work hard this year to get traction outside of the United States. The company has been around for two years, but the product has only been on the market for one year, and we’re seeing massive uptake. We have about a million merchants currently using Square, creating new jobs because of it.

We don’t want to limit ourselves to the US, and we’re looking at other markets right now. Germany, for example, is fascinating for both Square and Twitter. Many people don’t know this, but the first programmer we hired for Twitter was based in Hamburg, so we definitely have strong ties to Germany.

Interestingly, you just visited China. Twitter is not available there, but will Square soon be?

Square is definitely looking at China. People there use a lot of debet cards, there are lots of sole proprietors, but the tool that’s lacking is a way for them to handle payments. We’re looking all over Asia for opportunities.

In Germany, Twitter is struggling with low adoption rates. What do you plan to do about that?

We’re currently building a team here in Germany. We also plan to have lots of conversations with local entrepreneurs, engineers and press to develop the system so anyone can use it in Germany. This will certainly be a pivotal year for Twitter in Germany.

(Photo not from DLD but TechCrunch Disrupt – sorry about that)

Box’s Next Frontier: Cloud Storage For The Federal Government

Posted: 22 Jan 2012 08:46 AM PST


For Box, 2011 was a huge year in terms of customer acquisition. Box ended the year with 77% of the Fortune 500 using the company’s cloud storage offerings. Procter and Gamble marked one of Box’s largest deployments for the year. While Box is still continuing to focus on cloud solutions for the enterprise in 2012, the company has set its sights on a potentially huge fish for the year—the federal government.

Box CEO and co-founder Aaron Levie tells me that there is a huge opportunity for Box in procuring cloud storage options for government agencies. “There’s going to be a big shift in public sector using cloud services this year,” Levie explains. “With so many agencies having to collaborate with public and other organizations, it’s more efficient to do this in the cloud.”

One of the obstacles to offering cloud services to the government are the high security requirements. For example, we’ve seen some of the early security hurdles Google faced with expanding cloud-based Google Apps to government agencies. But Box has recently started ramping up security for cloud storage, making controls more granular and giving IT administrators more control over user functions. It is expected that Box will add even more security and control for compliance with government agencies’ data.

Levie says that the company is potentially tapping into the $70 billion market for providing technology and software to the government. Clearly, that’s a huge revenue opportunity for the company. And government agencies seem interested in making a move to the cloud. In November, President Obama has ordered federal agencies to improve their records management, encouraging them to ditch paper-based storage to the cloud.

Already, a number of enterprise cloud-services companies are clamoring to appeal to the government for services. Amazon recently launched the GovCloud to provide a secure cloud computing environment for government agencies. IBM, and HP recently won a $250 million private cloud contract. And Salesforce is also eying public sector initiatives to help governments adopt cloud computing.

Box is currently serving a number of local and state governments with cloud storage services, says Levie. At the end of the day, he explains, the government is dealing with the exact same problems as the enterprise. And that is an opportunity Box is not going to pass up.

Apple Just Incentivized Every College Kid To Get An iPad. As For High Schoolers…

Posted: 21 Jan 2012 05:13 PM PST


As I watched Apple’s iBooks event in New York City last week, my mind began to race about the ramifications of such announcements. Everyone had a pretty good idea for weeks (or months if you read the Steve Jobs biography) that textbooks would be a focal point for Apple, but there wasn’t much thought given to what this would mean. During the event itself, I just kept thinking, “wow, Apple just incentivized every college student to get an iPad”.

Except, they didn’t. Not yet.

The weird thing about Apple’s event was that it mainly focused on high school education. Yes, the iTunes U update is fantastic, but for now, the textbook side of the equation is about high schools. And again, that’s weird because the iPad plan seems better suited for college students. In fact, it seems almost perfectly suited for college students.

In kicking off the event, Apple SVP Phil Schiller noted that high school students in the U.S. that enter as freshman only have a 70 percent chance of graduating these days. In urban areas, it’s more like 60 percent, he said. Schiller was setting up Apple’s iBooks textbooks as a possible way to  improve this.

The problem is that the cheapest iPad is still $500. What high school student is going to buy that? Basically none — their parents will have to. And that’s fine for some students, but not all. Not even a high percent, I’d imagine. In the inner-cities — again, where education is even more of an issue — it’s probably even less likely of a purchase.

As Josh Topolsky points out, Apple does work with school districts to lease iPads on a four-year schedule, presumably at a nice discount. But that means the school owns the iPads and temporarily gives them out to students. That goes against Apple’s stated mission that students should now buy (or get via redemption code) all iBooks textbooks and keep them forever, keeping their notes, highlights, etc.

The school leasing also probably means the iPads are staying at the schools. How does that help for homework? Or are the schools allowing students to take the iPads home, risking losing them or damaging them? That doesn’t seem like a tenable idea for many budget-minded schools.

Schiller also told The Verge that he felt the numbers worked out favorably if the school districts bought students iPads instead of old-school textbooks and computers for the classroom. Maybe. But computers are a purchase the high schools do in multi-year cycles and students share them. For this new iPad textbook system to fully reach its maximum potential, schools would have to buy one iPad for each student that comes through the school. And again, what if they get lost, or stolen, or break?

My point is that Apple’s textbook plan for iBooks is a wonderful, obvious, and much needed evolution of the current system. But it’s more naturally suited for college students. At least right now.

One could easily imagine students buying $499 iPads and $15 textbooks instead of paying several hundred dollars a year for just the old-school textbooks alone. (Though it wasn’t entirely clear if college-level textbooks would have the same $15 ceiling that high school ones do — again, the focus last week was on high school.)

Yes, college students can (and often do) sell back books once they’re done with them. But having been a college student myself, I feel safe saying the entire experience is pretty crappy. I’d much much much rather have an iPad with all my textbooks on it — that I get for a reasonable price, and keep forever, along with all my notes.

Even better, you could imagine the universities themselves wrapping the cost of an iPad into tuition. Many schools started doing this with laptops years ago. Because college is so expensive — and again, college textbooks are so ridiculously expensive — this works. At the very least, it works a lot better than it currently does for high school students.

Even if when the next iPad is announced, the current model drops in price to something like $400 — or even $300 — that’s still an expensive sell to high school students and/or their parents and/or their schools. If every kid in the world already had an iPad, this would be the most brilliant program ever. Unfortunately, Apple needs to sell at least a few billion more iPads to get to that point.

I’m worried we may have a chicken and egg problem here. Apple is giving students a huge incentive to use iPads, but it’s still prohibitive for many of those students to get one. And if many can’t get one, does the iBooks program take off like it should?

If it does take off, I bet it does in colleges first. And that’s why it’s weird that Apple is starting off by focusing on high school.

The education system in this country (and I’m sure you could certainly argue the same is true in most parts of the world) absolutely needs fixing, and it’s great that Apple is working on the problem. I’m just not sure I see how it’s anything but an extremely slow process with iBooks, if it works at all.

I have no doubt that in the not-too-distant future, students walk around with tablet computers carrying all of their textbooks and other education needs. But we need to get the tablets in their hands to get to that future.

SOPA Debate Part II: Viacom & CDT Square Off Over “Due Process”

Posted: 21 Jan 2012 03:15 PM PST

SOPA Debate #2 Due Process-tc_upload.mp4

Before SOPA was pulled from the House yesterday, opponents of the bill argued (among other things) that sites accused of making copyrighted material available could be shut down without being given full, adverserial, due process. Was this an accurate assessment? Viacom's General Counsel and EVP Michael Fricklas and David Sohn, General Counsel and Director of the Center for Democracy and Technology defend their respective positions in part II of TCTV’s SOPA/PIPA debate.

Part I of this debate here. Part III is coming up.

Summify Shutdown Means Big Gains for

Posted: 21 Jan 2012 01:47 PM PST

news me

When social news startup Summify announced Thursday that it was being acquired by Twitter, it looked like the Summify’s existing users were out-of-luck — the company said the current version of the service would be shut down.

Enter The company is best-known for its iPad newsreading app (which was developed at The New York Times, then commercialized by incubator betaworks) but it also offers an email digest of news from your Twitter stream, similar to Summify. It sounds like jilted Summify users jumped on as an alternative, so the company published a blog post telling Summify users, “We’re here for you,” outlining upcoming features like Facebook integration, and asking for feedback. general manager Jake Levine told me via email that since Summify’s announcement, has been seeing 10 times its normal daily sign ups. He didn’t say specifically how many sign ups that entails, but he noted “tens of thousands of people are already enjoying the Daily Digest” and that it enjoys “consistently awesome open and click through rates.”

“Feature requests are pouring in through our blog post, on Hacker News, and on twitter,” Levine said. “Summify users clearly feel left out in the cold, and have been highly receptive to our message.”

Cowen: Google’s Mobile Ad Revenues Could Surge To $5.8 Billion In 2012

Posted: 21 Jan 2012 12:58 PM PST


How much does Google make in advertising from mobile? Cowen analyst Jim Friedland estimates that Google is generating $7 per year from each smartphone (and tablet). This includes both search and display advertising in mobile apps on both Android and iOS (iPhones and iPads). Thanks to the rapid growth in active smart mobile devices worldwide from an estimated 509 million last year to an estimated 914 million in 2012, Google’s mobile ad revenues are expected to more than double from an estimated $2.5 billion last year to $5.8 billion in 2012 (see chart).

As a percentage of Google’s total revenues, Friedland estimates that mobile grew from 3 percent in 2010 to 7 percent last year and will almost double again to 13 percent in 2012. By 2016, he expects mobile to be a $20 billion business for Google, and represent 26 percent of its total revenues.

Google doesn’t regularly break out mobile revenues, so estimates are all we have to go by. Friedland’s model is below. He starts with an estimate of total active smartphones and tablets, applies a discount to estimate Google’s penetration, and then builds his model fron there. Friedland’s numbers are in line with other data from the company and elsewhere. Back in October, CEO Larry Page disclosed that Google’s annualized mobile ad revenue run-rate was $2.5 billion, which is what Friedland estimates for 2011. So Freidland might be a little aggressive there, but not by much.

During Google’s latest earnings call last Thursday, Page disclosed that all display ad revenus (which includes mobile) is now at a $5 billion annualized run-rate. So could mobile alone end the year at more than $5 billion as Friedland suggests? That depends on how many smartphones and tablets are sold this year.

If indeed we are going to go from 509 million active smart mobile devices to 914 million, that would be a huge jump and could drive mobile ad revenues sky-high, especially if Google increases the amount it makes from each device. Friedland expects Google to be able to squeeze another dollar out of each smartphone user this year, or $8. For context, Google already makes about $30 a year from each desktop computer out there. Oracle claims that Google already makes $14 from each Android handset, but that number comes from a lawsuit and is likely inflated.

14 Steps To Successful SEO For Startups

Posted: 21 Jan 2012 11:00 AM PST


This is a guest post by Ryan Spoon (@ryanspoon), a principal at Polaris Ventures. Read more about Ryan on his blog at

For startups, it is dangerous to entirely separate product and marketing – both strategically and organizationally. A great product isn't overly useful without an audience. And a great marketing strategy can't save a poor product. Product and marketing have to coexist.

So when imaging, building and eventually launching your product, it is important to also hone the marketing strategy. There are five core channels:

- Paid marketing (SEM, display, affiliates, etc)
- Social & viral marketing
- Search engine optimization (SEO)
- Partnerships & business development
- PR

For early-stage companies, advertising at scale is expensive and consequently difficult. Furthermore, PR and business development become easier efforts as the company matures. So where does that leave you as a resource-constrained startup?

Marketing needs to come from the product itself. Last week I explored the role that social and virals play. And while the tech world is fascinated with social media and major platforms like Facebook and Twitter, we shouldn't overlook the role of SEO (and consequently Google). Like Facebook and Twitter, SEO is another opportunity to expand your funnel and increase your audience — without an advertising budget! Also like social, SEO is far more effective when built directly into the product ("from the ground up"). Here are 14 guidelines for thinking about SEO.

Dave McClure Isn’t Worried About The “Series A Crunch”

Posted: 21 Jan 2012 10:56 AM PST

alexia dave mcclure

In recent months, there’s been some hand-wringing about a “Series A Crunch” — namely, a glut of startups raising seed and angel funding, then struggling once they need a proper Series A. But in a recent interview, 500 Startups founder Dave McClure said those complaints are misguided.

McClure was interviewed Thursday by TechCrunch’s Alexia Tsotsis at the Founder Institute‘s Founder Showcase. During the interview (video embedded below), McClure made it clear that he sees no problem in backing a lot of startups. When comparing 500 Startups to Y Combinator’s Paul Graham, he said his firm is “more of a singles or a doubles hitter” in contrast to Graham’s search for home runs. He estimated that 500 Startups has invested in more than 250 companies, and when asked if he could name all of them, said, “No, no fucking way. With a spreadsheet in front of me, yes. I’m allowed to do that.”

McClure also ran through some rapid-fire math to argue that more firms should be taking his approach. Take a firm with a $500 million fund — it’s probably looking for a return of $1.5 billion in 10 years, and since it will typically own 20 percent of a company at exit, that means its startups need to be acquired or IPO for a total of $7.5 billion. And given the normal success rate of VCs, that means the firm is really leaning on a few exits to earn more than $1 billion.

“It’s too small a sample size,” McClure said. “Expecting that you’re going to get billion-dollar wins out of 30 picks is tough.”

At that point, Alexia wanted to know if McClure is “single-handedly responsible for the Series A Crunch,” and he fired back that “the framing of that is just wrong.” What’s really happening, he said, is that it’s much easier to build a company now. As for later-stage investors who are complaining, the trend should actually help them, because it means they get to choose from more companies: “It’s not really their problem, except on a selection basis.” And many startups aren’t going to need a traditional Series A, McClure said, because they will start earning revenue or can look for alternative sources of funding.

Anyway, McClure said the approach seems to be working for him. He said 500 Startups has invested about $19 million of the $29 million that it has raised, and that it’s currently showing a profit of 30 or 40 percent, though those gains are currently “unrealized.” He added: “We might do other things to increase that sum at some point.” When pressed on whether that means he’s going to be fundraising soon, McClure demurred, saying that any comments on that front would probably be a violation of SEC regulations.

“Which is a stupid fucking law, which should change,” he said. “I will change that in five years.”

9th Founder Showcase – Alexia Tsostis of TechCrunch Interviews Dave McClure of 500 Startups from Founder Institute on Vimeo.

Steal This Book!

Posted: 21 Jan 2012 10:11 AM PST


Nobody wants to be told that their business model is obsolete. Ask Kodak. Or Hollywood. And the publishing industry is slower on its feet than most. Bookstores don’t want to believe that they’ll ultimately lose 75% of their pre-e-book business to that scourge plus Amazon delivery. (I’m assuming e-book market share will eventually plateau somewhere north of 50%.) Meanwhile, publishers cling to the model wherein readers purchase books individually, usually before they’ve been read: a model so entrenched that many seem to find it literally impossible to believe that alternatives might exist.

I’ve been lamenting that paucity of imagination in my columns here for some time now. It’s why publishers have lashed out so ineptly at any suggestion of a subscription model. But I’ve also been saying for five years that publishing’s business model will ultimately become even less restrictive than that. In the end, lo these many decades from now, most books–and all novels–will be free to read, and their readers will decide whether and how much to pay for them after reading them.

I know, big talk, no action, right? So:

The rights to my technothriller Invisible Armies finally reverted to me last month. It’s my personal favorite among my thrillers; it’s won acclaim from The Economist, Bruce Sterling, and a host of others — and now I’m releasing it and its sort-of-sequel Swarm1 online, for free, under a Creative Commons license. You can download them to the device of your choice from Feedbooks. (Which, by the way, is awesome. Android users: the mega-popular Aldiko e-reader app is one of several with built-in Feedbooks integration)

Links: Invisible Armies, Swarm.

(Some Kindle users may have to sideload, I’m afraid. Sorry. Talk to Amazon.)

Anyone who wants to pay for either book after they read it can buy an e-copy from iBooks or the Kindle Store2 at their leisure. (I’m deliberately not linking to either here.) That’s pretty clumsy, I know: I expect that in the future e-books will come with a “Pay What You Want” interface on the very last page. But hey, you have to start somewhere.

Obviously I’m far from the first to free my books. The Baen Free Library has been around for years. Tim O’Reilly says, “In my experience, losses due to piracy are far outweighed by the benefits of the free flow of information, which makes the world richer, and develops new markets for legitimate content.” And Cory Doctorow, of course, has been doing it for his entire oeuvre from day one.

But Cory is kind of sui generis. The real test is whether a critical mass of hundreds, if not thousands, of writers — especially ones who, like me, have been previously anointed as Real Authors by the almighty dinosaurs of the publishing industry — start doing it. And, well, here’s one more small step in that direction. Let’s see where we all end up.

1Invisible Armies is about hackers, anti-corporate protestors, globalization, and the surveillance society; Swarm is about fleets of UAVs in The Wrong Hands.

2Unless you live in Canada, where HarperCollins still claims those e-rights. Sorry. The whole international-publishing-rights thing is a colossal mess, and will remain that way for some time.

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