Henrik Torstensson's Weblog

Scaling, returning, learning - mix of articles

2010-04-12T22:49:00.001+02:00

Mike on Ads: The Challenge of Scaling an Adserver and Scalability Follow-Up ? The challenge customers impose on innovation. When a site/service gets big fast, it is as much about operating it as developing new features. Doing both, like Facebook for example, at the same time is always impressive.

Internet Retailer: Get Back - Return policies can win over customers, and there?s more than one way to do it. Zappo uses returns to drive average spend and thus revenue (as long as additional contribution dollars are less than cost of returns it works well).

Lessons Learned: Learning is better than optimization (the local maximum problem). It's important to keep the big picture in mind and not start to micro-optimize too early.

Venture Beat: China?s top four social networks: RenRen, Kaixin001, Qzone, and 51.com. The Chinese Internet is not like the Western Internet. Interesting data on four of the large social networks in China.

Reaction Wheel: Everybody's an ad exchange (The Thin Exchange, 1) and Open Source the Ad Exchange. Using the stock exchange and a 'perfect market' as the metaphor for an ad exchange doesn't seem like a perfect fit. The, not always perfect, electricity market is likely a better metaphor as an ad impression is not an asset but a flow.

Sticky Slides: CVs are coming to PowerPoint and Axiom One presentation. The way you say it always matters.The way to describe work history in the presentation gave me food for thought.

Google and China

2010-04-12T20:40:00.001+02:00

Google's A new approach to China: an update. I didn't post about Google's March 22nd decision to stop offering a censored version of its search engine for mainland China, but it is one of the most interesting decisions ever made by a technology or media company.

It shows that a corporation doesn't exist solely for (short-term) profit maximization if the owners have other principles or objectives. It also shows that a media/tech company can come to the conclusion that sometimes it is not possible to do business if the price is that one has to accept censorship.

Tencent invests 300 MUSD in DST, form strategic partnership

2010-04-12T20:34:00.004+02:00

Chinese Tencent has invested $300 million in Russian Internet investment firm Digital Sky Technologies for 10.26 % ownership (economic interest mainly, as share of votes is 0.51 %). Obviously DST owns a few percentages of Facebook and Tencent operates QQ, one of the largest Chinese Internet services.

Videoplaza raises 3.5 million euros from Creandum and Northzone

2010-03-18T10:00:00.006+01:00

A little over two years ago Swedish Kanal 5 started using Videoplaza to manage its video advertising. After having spent time with the company's founders Sorosh, Alfred and Dante that spring, I was so impressed with them and their combination of business/sales focus, software development skills and vision that I asked to and was allowed to participate in Videoplaza's angel financing round and joined the company's board of directors.

After almost two years of seeing the business grow, with clients like TV4 Group (Sweden), Ekstrabladet (Denmark), La Vanguardia (Spain), myvideorights.com (UK) and Incisive Media (UK), it feels good that Videoplaza can announce that VC firms Creandum and Northzone have invested 3.5 million euros in a Series A financing round. Read Sorosh's blog post Why we raise 3,5M EUR and what it means for our clients and the press release (pdf) for more information.

It's going to be great to see Sorosh, Alfred, Dante and the amazing team they've assembled continue to build a great service for publishers and a great company to work with and for. As Videoplaza is growing and looking for more employees, the company has move into a new Stockholm office (see video).

Chrome is getting the job done for Google

2010-03-17T20:14:00.004+01:00

Google's web browser Chrome has been growing in the last year and is now used by 5-7 % of Internet users (in the ballpark were I thought Chrome would be by now). Chrome hasn't gotten as many headlines as Google's mobile operating system Android, but Chrome is likely more important to Google's revenue and profit in the next 18 months.

By controlling the browser, Google makes sure it is the default search engine for users. By having its own web browser, Google doesn't have to pay Mozilla (Firefox), Apple (Safari) or Opera to be the default search engine and makes it impossible for Microsoft to buy a part of the market.

In addition by building a faster browser and thus forcing all browser makers to speed up especially JavaScript rendering, Google is putting browser-based applications in a fundamentally stronger competitive situation to native Windows and MacOSX applications. And anything that can undermine Microsoft's profits from Office and Windows is seen as a good thing by Google.

Rusty blogging

2010-03-16T23:43:00.003+01:00

Blogging, like most things, is something you should do often to keep your skills in shape. Not blogging very often makes writing a blog post take a long time. Which proves that input and output are two very different things.

Bronte Media: Bezos 37 Signals. An interesting take on Amazon CEO Jeff Bezos as an investor, secondary markets for private companies and venture capital industry returns.

Venture Beat: Spotify CEO Daniel Ek vague on U.S. launch, company has 320,000 paid subscribers. 10,000 paid subscriptions are roughly ?1 million per year in revenue. Given that Spotify talked about hitting 250,000 subscribers around Midem in January, they seem to be growing their subscription-revenue quite nicely.

Inside Adsense: Google-certified ad networks now available to all publishers. AdSense as a platform for monetization through advertising for publishers. Google's play is more interesting than a general ad network's.

Newteevee: YouTube Opens Up Banner Ad Overlays to Everyone. Standardized ad unit sizes are a good thing as they enable advertising buying at scale. Innovation should happen with the ad server with targeting and inside the ad unit with personalization and dynamic content if the goal is to make a multi-billion industry grow quicker.

The New Dork

2010-03-10T18:00:00.001+01:00

Way more online biz geekier version of Empire State of Mind.

Google's Parisian Love ad is a great feature-oriented ad

2010-02-09T18:59:00.004+01:00

Google's Super Bowl-aired commercial Parisian Love is a great featured-oriented advertisement. It does a really good job describing the depth of Google search to "ordinary" users. An advertisement that shows everyone trying to explain a product that it is possible to explain a deep product in less than a minute.

Happiness and life

2010-02-06T13:53:00.002+01:00

Jim Rohn: "Happiness is not something you postpone for the future; it is something you design for the present." [via: Amanda Rose]

Chris Dixon interviewed, startup life and business models

2010-02-03T22:48:00.004+01:00

StockTwits.tv: Interview with Chris Dixon of Hunch. Good video interview with one of the best Internet biz/startup bloggers out there.

The Monster In Your Head: Disappearing into the Fire. "How many of us create companies, create products where our blood and bone fuse with the glaze to create something so exquisite as to never have existed before? How romantically seductive is the image of giving one?s all to the fire? After all, as Whyte says:

"Work is the very fire where we are baked to perfection, and like the master of the fire itself, we add the essential ingredient and fulfillment when we walk into the flames ourselves and fuel the transformation of ordinary, everyday forms into the exquisite and the rare."

I have to understand this viscerally if I'm going to be of service to my clients. But I have to be mindful, too, of the cost. In disappearing into the kiln, the potter created the most meaningful thing possible. But in the end, he ceased to exist."

There are both good and bad days in the world of startups.

Master of 500 Hats: Subscriptions are the New BLACK. (+ why Facebook, Google, & Apple will own your wallet by 2015). "We have largely WASTED an entire web decade of time, energy & venture capital on extremely inefficient revenue models. There have been a few interesting examples of startups acquired in the 00's for large amounts due to amazing growth (eGroups, MySpace, Skype, YouTube) or advertising potential (aQuantive, DoubleClick, AdMob, RightMedia). However, mostly the decade has been an uninterrupted string of uninspiring business models and small-time acquisitions of Web 2.0 startups filled with rainbows & unicorns, rather than those based on simple, transactional revenue models."

Read the entire post for perspective, but I'm pretty bullish on branded advertising for the next 5-10 years. Especially video advertising. For sites that are not traditional media sites (games, services etc) I see user paid growing as it makes more sense than remnant ads.

Chris Dixon: Institutional failure. "The TV show The Wire is an incredibly instructive lesson on how the modern world works (besides being a great work of art). The recurring theme is how individuals with good intentions are stymied by large institutions."

The Wire is an excellent series (watch it if you haven't already), read how some lessons can be applied to startups and big companies.

Health, bonuses and NYC

2010-02-01T22:29:00.005+01:00

Both Sides of The Table: The Yo-Yo Life of a Tech Entrepreneur - A Cautionary Tale. "I somehow never really felt stressed during all of this. At least not externally. Immediately following the closing of the round I flew out to a big real estate conference in France to meet with prospective customers. On the trip I nearly collapsed. I felt dizzy and had an aching in my chest. I started feeling panic attacks. I had never had any symptoms like this in my life.

[...]

The doctor told me that while I didn't ever show my anxiety to my friends and colleagues or even acknowledge it myself, my body still went through the stress internally. How had I let myself get to this point? If you're still young I'm sure you think it would never happen to you - you're fit, right? Age and life catches up with you. I was you, too."

Being an entrepreneur is not the rosy story politicians too often tell.

Steve Blank: Incentives and Legends. "Everyone at our startup was working on startup starvation salaries, and Bob had taken a large pay cut to join us. When the Japanese partner deal was done, Bob said, "Steve, I deserve at least a $10,000 bonus. I haven't been home in weeks, and I pulled off a financing even you admit was unbelievable."

I patiently explained that this type of miraculous event was the norm for startups. The engineers were pulling off miracles on a daily basis, we were all taking fumes for salaries, but our payoff will be when our stock is worth something. Until then, tell your wife you'll get $10,000 when hell freezes over. No bonuses in a startup. To his credit Bob said while he understood, he was going to hear about it at home for not being appreciated.

[...]

I said, "Extraordinary work in a startup is the norm, but you performed even beyond my expectations. In my startups that's worth recognizing.

Rewards for extraordinary effort became part of the company's legend.

[...]

In three or so years these cash incentives added up to no more than $50K. While everyone understood the theory that we were working to make the stock valuable (and we did,) the cash reminded them that we cared and noticed."

Good points.

Chris Dixon: The NYC tech scene is exploding. "The one thing we really need to complete the ecosystem is a couple of runaway succesesses. As California has seen with Paypal, Google, Facebook etc, the big successes spawn all sorts of interesting new startups when employees leave and start new companies. They also set an example for younger entrepreneurs who, say, start a social networking site at Harvard and then decide to move."

Stockholm is developing quite nicely too, but more angel investors and some decent exits would benefit the Stockholm web scene.

YouTube monetizing 1+ billion videos per week and Spotify sales are ?50+ million per year

2010-01-25T20:35:00.003+01:00

Some data points worth noticing in Midem(Net) Blog's Live Post: Conversation with Spotify and YouTube and BBC News'
Spotify boss Daniel Ek sets out future plans.

- YouTube monetizes more than 1 billion videos per week (for each $1 in average CPM for a mix of overlays and pre-rolls YouTube has sales of $1+ million per week/$52 million per year)
- YouTube sells pre-roll ads in the UK for 15-30 pounds
- Spotify has 250,000+ subscribers (about 30+ million euros per year) and Spotify's "advertising business is in the tens of millions of euros each year" making it sound like it is at least on a ?50 million revenue run-rate and growing)

Mark Pincus and Bing Gordon on Internet entrepreneurship

2010-01-25T00:11:00.002+01:00

Really interesting presentation at Stanford by Zynga founder Mark Pincus and former Electronic Arts COO Bing Gordon. Highlights available in shorter clips at Stanford

Themes for 2010 and interesting links

2010-01-23T15:57:00.004+01:00

The Big Picture: The Economy's Lost Decade. Eye-opening data on US job growth, GDP growth and household net worth in the last decade. A horrible decade if you look at underlying growth.

Paul Kedrosky: Playing "What If" With $10,000 From 12/31/1999 to Today. Gold, raw materials and treasuries did well in the last decade, U.S. stocks and venture capital did not.

VentureBeat: How Jajah, a little phone company, sold for $207M while everyone else got killed. Somewhat of a post-mortem (some success factors and key events) on VOIP company Jajah's life as a startup from launch to being acquired by Telefonica.

VentureBeat: Hulu?s success stats: 43 million users, 924 million streams, 14,000 hours of TV. Online video is growing quickly as TV shows are going online. Hulu is an obvious U.S. example, but local Swedish ones (TV4, Kanal5, TV3, SVT) are growing quickly too.

Fred Wilson: Areas of Interest. Union Square Ventures' areas of interest for 2010: Mobile, Mobile What?, Gaming, New forms of commerce and currency, Cloud based platforms and APIs, Education and the Energy/Environment.

Fred Destin: Investment and innovation themes from the Defrag conference. Making e-mail better, Making lifestreams relevant, Measuring and monetizing influence, Extranets, Selling data, Meaning is the new search, Breaking up the corporate IT environment, Education, Application Marketplaces, Identity Metasystems.

Chris Dixon: Why the web economy will continue growing rapidly. "Right now there are lots of inhibitors to brand advertising dollars flowing onto the web. Among them 1) most of the brand dollars are controlled by ad agencies, who seem far more comfortable with traditional media channels, 2) it is hard to know where your online advertising is appearing and whether it is effective, 3) banner ads seem extremely ineffective and are often poorly targeted, 4) big brand advertisers seem scared of user-generated content, today?s major source of ad inventory growth.

But economic logic suggests these problems will be figured out, because advertisers have no choice but to go where the consumers are."

On Playahead closing and Facebook's willingness to change

2010-01-23T11:02:00.003+01:00

The Swedish community Playahead, which was acquired for 102 million SEK in early 2007 (sv), will be closed down this spring (sv). Obviously Facebook's success has eaten into Playahead, but one should not forget Bilddagboken's impact.

In this context it is worth reflecting on Mark Zuckerberg's willingness to make changes to core parts of Facebook's user experience (news feed, privacy settings etc) about once a year. If one is not willing to change a social service, it will die sooner rather than later.

Google revenue up 17 % in Q4 2009

2010-01-22T10:07:00.003+01:00

Google's growth of 17 % to $6.67 billion in Q4 2009 is highly impressive in a slow growth economy.

How to think about Google

2010-01-10T07:18:00.004+01:00

Chris Dixon: What's strategic for Google? "Google makes 99% of their revenue selling text ads for things like airplane tickets, dvd players, and malpractice lawyers. A project is strategic for Google if it affects what sits between the person clicking on an ad and the company paying for the ad. Here is my rough breakdown of the "layers in the stack" between humans and the money:

Human - device ? OS ? browser ? bandwidth ? websites - ads ? ad tech ? relationship to advertiser ? $$$

At each layer, Google either wants to dominate it or commoditize it." Read the entire post.

1000 people can change the world

2009-12-23T22:52:00.002+01:00

Seth Godin: First, organize 1,000. "What's difficult? What's difficult is changing your attitude. Instead of speed dating your way to interruption, instead of yelling at strangers all day trying to make a living, coordinating a tribe of 1,000 requires patience, consistency and a focus on long-term relationships and life time value. You don't find customers for your products. You find products for your customers."

Feature vs product

2009-12-15T01:00:00.002+01:00

Venture Hacks: Sometimes the feature is the product. "How can you tell if a feature is really a product? You can wait for customers to start adopting it, see if they love it, and then try to jump in as an investor or an employee."

Redeye VC: Let's just add in a little virality. "The most disappointing answer is when they say "Oh, we'll just make it viral." As if virality is something you can choose to add in after the product is baked - like a spell checker. Let's imagine the conversation at the marketing department of the wireless phone companies. "Let's see. Should we spend $4 Billion on advertising this year... or should we just make it viral?"" [via: Good Old Think]

Wingify: Only three metrics matter for your online business. "1. Monthly growth in number of paid users. 2. Retention rate of existing paid users. 3. Monthly Revenue."

A VC: The Herd Instinct. "I think there are two approaches that work in the venture business. One is the contrarian approach. When everyone wants to be a consumer web investor, do software as a service/enterprise. Go where the money isn't.

Or you can just be earlier than everyone and anticipate where the herd is going to be next. That is really hard, maybe too hard to do well over a sustained period of time.

But I do believe that both of those approaches will get you top tier returns if you execute them well."

Sunday links

2009-12-06T00:27:00.002+01:00

dshen: Talking People Out of Being Entrepreneurs. "It's sexy being an entrepreneur. The rewards are great. The upsides are what everyone sees, and nobody sees the downsides. Dealing with the downsides is where the rubber meets the road and where you'll be tested sorely on whether or not you are a great entrepreneur. But if you're not entrepreneur material, you're not and that's that, whether it's your personality, life stage, or otherwise. You're not a bad person; it's just not for you and we should all just realize this, and not fool ourselves into thinking otherwise."

Financial Times: The rise and fall of MySpace. Good read on the corporate side of MySpace post-acquisition.

New York Times: Swan Songs?. ""A study last year conducted by members of PRS for Music, a nonprofit royalty collection agency, found that of the 13 million songs for sale online last year, 10 million never got a single buyer and 80 percent of all revenue came from about 52,000 songs. That?s less than one percent of the songs."

Seth Godin: If Craigslist cost $1. "Money creates a sort of friction. In the digital economy, magical things can happen when there is no friction. You can scale to infinity. On the other hand, sometimes you want friction.

If you lead a group that allows anyone to join, for free, your group might be large, but it's not tight, it's not organized to make important change. Commitment slows things down in the short run, but ultimately aligns interests."

The future of CPM advertising, Google's secret sauce and Facebook's future

2009-12-03T00:05:00.000+01:00

A few weeks ago Christian Rudolf did a video interview with me about CPM advertising, Google's system to get its customers to spend more on Adwords and Facebook's ad model. Head over to Disruptive for the six minute interview (in Swedish). Please leave feedback in the comments section at Disruptive.

The interview inspired Christian to do an in-depth video on Google's business system and what entrepreneurs can learn from it (also in Swedish). So if you find the subject interesting, you can dig deeper.

Videoplaza hiring - 10 open positions

2009-12-01T18:44:00.002+01:00

Video ad serving company Videoplaza is looking for ten people (a mix of developers, sales and admin). Please take a look at the openings and apply if you like any of them or tell your friends about the openings.

Please consider helping these organizations make the world a little bit better

2009-12-01T01:13:00.006+01:00

If 2009 has been good to you, please consider joining me in contributing to the following organizations that try and make the world a slightly better place.

* charity: water - charity: water is a non-profit organization that brings clean and safe drinking water to people in developing nations. I haven't contributed previously, but as both Shak and Daniel have repeatedly tweeted about the organization and its cause I've made a contribution.

* Creative Commons - Copyright law needs to adapt to a networked world and Creative Commons is an example of how works can be copyrighted in a way that facilitates remixing and creative use. I think a good example, like Creative Commons, will play an important role in changing legislation over time.

* Kiva - Kiva aggregates microlending organizations and lets you lend directly. Kiva works with local partners who find entrepreneurs seeking loans and manage the contact with the entrepreneurs. As a lender one chooses which entrepreneurs to lend to. Read more about Kiva and the concept of microlending in the blog post I wrote when I made my first loan in 2008. (If you sign-up as a Kiva member as a result of this blog post, feel free to add my e-mail henrik@torstensson.com in the Referred by a friend? field on the sign-up page.)

* M�decins Sans Fronti�res / L�kare Utan Gr�nser - M�decins Sans Fronti�res is a medical humanitarian organisation that delivers emergency aid to people affected by armed conflict, epidemics, healthcare exclusion and natural or man-made disasters. MSF helps people in very bad situations in some of the worst places on earth. Please donate.

* Wikimedia Foundation - Wikimedia is the foundation that runs Wikipedia. Wikipedia, even with its issues, is an amazing thing that deserves support.

How do you improve a startup?

2009-11-26T23:34:00.002+01:00

Glenn Kelmann: Good Question! The Eight Best Questions We Got While Raising Venture Capital. Good questions, not always easy to answer.

Steve Jobs' secret: having a vision, being right and executing amazingly

2009-11-26T23:27:00.003+01:00

Fortune named Steve Jobs CEO of the Century some weeks ago. In understanding why that came to be, watch his presentation of Apple's vision from 2001 (via: Andie):