2009-10-20

Danish Unity raises $5.5 million from Sequoia

Danish Unity Technologies has raised $5.5 million from Sequoia Capital. Unity develops and licenses a multi-platform game development tool. Congrats to Unity for getting the investment, now the real work continues. :)

Pricing of online ads and Facebook game development

Jerry Neumann on online advertising pricing: Media has always been an attention economy, Two (More) Hypotheses on Low Online CPMs and Details, details. "The online CPM is the above number divided by impressions per hour. Note that the online spend/hour is pretty steady from 2002 to 2008, between $58 and $66 per thousand hours. The decline in online CPMs can't be attributed to this, unless there was a large increase in ads/hour. This may be so (I can think of arguments both ways, but have no idea what the facts are) but who cares, really? If I spend an hour on the NYT site and they show me 30 ads at a $2 CPM or 6 ads at a $10 CPM, they make the same amount of money: I assume they show the number of ads that maximizes their revenue."

VentureBeat on Zynga's making of Cafe World. "The team included 25 producers, product managers, game designers, artists and programmers - all from a variety of backgrounds, not just video games. Sehgal himself considered himself to be a "web guy, not a game guy." ... "To keep the game going, Zynga is releasing new features and assets for the game several times a week. Sehgal told the team that 20 percent of the effort was building the game and 80 percent is operating the game as an ongoing service.""

On price: What is it worth? and What's the relationship between cost and price?

Online video and venture capital links

VentureBeat: The future of online video: Q & A with Brightcove CEO Jeremy Allaire. "When you look at online video advertising, marketers are just trying to re-use what worked offline. I think we're going to see more hybrid video ads that offer experiences and ask users to engage. When ABC launched their catch-up TV services on ABC.com, they started introducing a really compelling format that used Flash to take-over the entire player environment with a rich, engaging and interactive marketing experience. In that kind of model, it is invitational, and the creative opportunities are pretty limitless. However, for media buyers, this is going to involve a lot more custom creative work, so it?s hard for such a format to gain scale."

VentureBeat: Ooyala gets $10M more for online video. "Ooyala, a video startup founded by a group of former Googlers, has raised $10 million in a third round of venture funding. The Mountain View, Calif., company sells its technology to companies that want to include video as part of their web content"

Both Sides of The Table: Retro: My Favorite Blog Post on Raising VC. "So for anybody who has been through the funding process before I hope that this will resonate and for those that haven't I hope it will be interesting. I don?t plan to write the authoritative venture capital blog, just some anecdotes. If you are interested in reading good blogs about venture capital my favorite two are VentureBlog and Feld Thoughts."

Both Sides of The Table: VC Seed Funding is Dead, Long Live VC Seed Funding! "See, I don?t think it?s a question of To VC Seed or Not to VC Seed, I think it?s the age old question of who you?re working with and how well they reference. I?m surprised at how little referencing some founders do on their VCs. I'll save that for another post. You're never going to have a gaurantee with ANY investor that they?ll commit to the next round. But great companies who choose great investors invariably have an easier time."

2009-10-18

For the most part, it's about the people

Anyone who hires (or manages) people or thinks about organizational performance should take a few minutes and (re-)read the late Peter Drucker's Picking People - The Basic Rules from The Essential Drucker.

2009-10-13

Three data points

* YouTube is serving more than 1 billion streams per day. YouTube launched in February 2005 and thus is not even five years old.
* Zynga's Facebook game Café World reached 10 million players in a week (!!!). Zynga's most popular game is Farmville with 56 million players (!!!) in the last month and the company is rumored to have $200 million in annual revenue (!!!). Zynga was founded in June 2007 and is just over two years old.
* MySpace is switching from traditional hard disk drives to solid state drives from Fusion-io. The new drives will have 1 % of the power and cooling costs of traditional drives. MySpace was founded in August 2003.

2009-10-05

Articles about venture capital and startup funding

If you're interested in venture funding, the following articles are worth spending some time on. And as they are pretty long articles, be prepared to spend some time.

Dave McCloud: Gordon Gekko 2.0: Flipping is GOOD. (aka Memo to Jason Fried: Sorry, You're Fucking Wrong.). "In summary, the benefits of selling startups early -- or simply when a transaction is available -- may be a smart strategy for both entrepreneurs and VCs to help improve the market, and reward themselves at the same time. It may not be the best strategy for Bill Gates, Steve Jobs, Mark Zuckerberg, or other titans of industry, but it might be a reasonable strategy for 1st-time entrepreneurs under 30 looking to establish their careers & ensure that future endeavors are more likely."

Reaction Wheel: Is the Time for Angels Past? "The people I've co-invested with over the past couple of years have been a huge resource to the companies we're in. I'd hate to see that strategic value squeezed out in favor of investors who are more money-manager than company-builder. But that, I think, is what is about to happen."

Fred Destin: On risk taking in the venture world. "Each venture firm tends to have a "risk-return DNA" that determines the natural risk habitat in which they will feel comfortable investing. Some folks are highly comfortable with taking on two technical co-founders in an unproven market whilst others like to help companies scale and like to use reliable KPI's and financial models as a guideline to decision making. The best, most experienced investors and outstanding partnerships may be able to operate across the spectrum."

Both Sides of the Table: The Great VC Ice Age is Thawing (for now) ? Part 1 of 3, The Big VC Thaw ? Why The Market is Moving Again (part 2 of 3) & 2010 VC Funding Outlook for Startups ? Prepare for Winter (Part 3/3). "So what is driving the new energy in the remaining venture capital firms when we kept hearing how much the whole industry was "against the ropes?" 1. The market rebound, 2. IPOs and M&A have returned, 3. You can't get paid for sitting on the sidelines, 4. The success of the iPhone, 5. The growth of Facebook and social gaming led by Zynga, 6. The growth and $1 billion valuation of Twitter and its impact on business.

Above The Crowd: What Is Really Happening to the Venture Capital Industry? "It is indeed quite likely that the venture industry is in the process of a very substantial reduction in size, perhaps the first in the history of the industry. However, the specific catalyst for this reduction is not directly related to the issues just mentioned. In order to fully understand what is happening, one must look upstream from the venture capitalists to the source of funds, for that is where the wheels of change are in motion."

2009-10-04

Facebook is cash-flow positive (news is a month old, but posting for the record)

I never posted a comment to the news that Facebook is free cash-flow positive and passed 300 million active members.

As the news seem to have been missed by some people, I thought posting the news would be appropriate as Facebook being profitable changes some discussions on the viability of Internet startups.

Some thoughts on Facebook's business (and employee stock options) I wrote about a month ago.

2009-10-03

Look at user behavior

Fred Destin writes about Research In Motion, makers of the Blackberry, in the blog post Getting it completely wrong. Very good points.

"So how wrong can you be ? It turns out that a company controlling the device and the server could actually do a few things well, such as deliver on the fundamental requirement of its user base (absolutely reliable email access on the move) and getting the rest right over time (such as the phone).

My lesson from this is that what may seem to be sound strategic thinking from a VC standpoint (absolute focus on one core area of expertise, search for extreme scalability, natural preference for software and "atom-free plays") can lead you to overlook the best companies, those that go all out to crack the user's need in an imperfect but perfectly appropriate way. And yes, we passed on TomTom too...

[...]

Another useful reminder that scrutinising user behaviour and acceptance is the best yardstick for determining which companies will succeed, rather than one's grand opinions about long term market evolution or deep theories about the future of tech !"

One post just for Chris

I was going to put together an interesting links post, but realized that Chris Dixon had penned three posts that each made it on to the list - thus he gets a post of his own.

Chris Dixon: Online advertising is all about purchasing intent. "When people talk about search being a great business model (for, say, Twitter), they should distinguish between search with purchasing intent, which is an incredible business model, and search without purchasing intent, which is a terrible one." Word!

Chris Dixon: What if online business model innovation is slowing down?. "On the other hand, what if we are mostly done creating big new business models for the web? History suggests that business model innovation is rapid right after the advent of a new medium and then slows down considerably. If indeed it is slowing down, social media could end up like instant messaging ? incredibly popular but basically lousy at monetizing." It is not only about business model innovation but about business model adaptation and execution.

Chris Dixon: Why content sites are getting ripped off. "But content sites have no way to track their role in generating purchasing intent. Often intent generation doesn't involve a single trackable click. Even if there were some direct way to measure intent generation, doing so would be seen by many today as a blurring of the the advertising/editorial line. So content sites are left only with impression-based display ads, haggling over CPMs without a meaningful measurement of their impact on generating purchasing intent.

All of this has caused a massive shift in revenues from the top to the bottom of the purchasing funnel - from intent generators to intent harvesters. Somehow this needs to get fixed."

The publishers' work is in figuring out how to start tracking intent generation (via traditional proxies like brand awareness, brand perception etc but also domain type-ins, search volumes), connect it to purchase behavior and get paid for it.

2009-10-01

Listen to Spotify offline

It is now possible to listen to music offline with Spotify when using a computer (and not only when using a mobile phone). It works pretty much like the mobile solution and premium users can sync up to 3,333 tracks for offline listening.

In a little under a month Spotify has gone from a freemium model with a relatively weak reason to upgrade (no ads and some exclusive content) to a quite strong reason to upgrade (no ads, some exclusive content, mobile and offline usage). For each freemium model it is crucial to find and implement the service specific features and reasons for members to start paying.