The Meaning of Badge Proliferation

The Meaning of Badge Proliferation: “

It seems that the number of conversations I have had in the past two months and the number of articles/blog-posts I’ve read about online badges has skyrocketed. By ‘badges’ I mean small snippets of HTML code which consumers cut and then paste onto their blog or social network profile. (I am not necessarily talking about ‘widgets,’ which contain richer interactive functionality and often reside on the desktop, though I do realize that the definitions and manifestations of the two blur together quite a bit.)

For example, Fred Wilson posted last month about his ‘new blog bling.’ The number of badges has exploded so much recently in that Pete Cashmore asked earlier this week, ‘Are there any startups that don’t plug in to MySpace these days?’. The importance of for the industry of badges and widgets for MySpace pages was highlighted with the recent scramble after the mandate that all Flash-based ones be upgraded to newest version from Adobe.

Tim Post coined a very apt term, calling these badges, the ‘flying seeds of the internet’ and has an excellent blog entirely devoted to the subject (it’s a must read on the subject which I’ve poured through extensively). In a conversation he and I had the other day, we discussed how badges are a unique combination of marketing and technology, like interactive stickers for the web. They are becoming another method for self-expression in and of themselves. Bumper stickers for the internet generation to communicate to others in ‘traffic.’

Just like those sticky pieces of paper slapped on the back of a car, online badges can and will allow people to express affiliations with schools, groups, locations, brands, bands, and much more. But unlike static stickers, online badges (like those created by Badgr) possess the ability to be personalized. And they’re not just for people – Brian Phipps has an interesting post about ‘widgets as brand pipelines,’ which can easily be applied to badges as well.

Beyond the above affiliations, badges have the capability to communicate about individuals’ relationships with products. As many long-time readers of my blog know, I have a keen interest in ‘social commerce’ sites (see a post from last December), as I have a vision where they could provide consumers with rich social context and relevancy to the purchases which they are making. The current crop of social shopping sites are experimenting with badges as a way to promote their service. StyleFeeder, Wists, Nabbr, Kaboodle, Sprout Commerce (the creators of MyPickList and FavoriteThingz), and StyleHive – just to name a few – give consumers the ability to express themselves via products in various ways. It’s a very powerful notion, especially as it introduces the notion of monetizing these badges as forms of advertising. It remains to be seen, however, if any of these services can attract significant enough consumer adoption.

Resulting from my recent exploration, there are two questions which I am currently contemplating and learning about:

1. What are the best practices for marketers to harness the power of these badges to promote services, brand, or products?
2. What are the business models for the services that enable and create these badges? Or are they just another marketing tactic for services as opposed to something to develop a business around? Are they a means to an end or an end in and of themselves?

(Via Genuine VC.)

Surfing Video

Ok.. sometimes I get too serious and it is all work and no play. Well it has been over two months since I surfed, but I can still dream of it. Check out this video…

How to Get in TechCrunch

How to Get in TechCrunch:

Here’s a video of Guy Kawasaki in an interview with Mike Arrington of TechCrunch.

The salient question that Mike answers is, ’How do I get my company in TechCrunch?‘ The short story is:

  1. The ‘standard answer’ is to send an email to editor@techcrunch.com and take your chances. Thirty pitches come in per day this way.

  2. The most effective way is to get a referral from a venture capitalist or someone ‘known’ who can speak on your behalf. Ten per come per day this way. Thirty plus ten equals forty, and he runs four stories per day, so you might think that ten percent make it. However, many of his stories are internally generated (followups, reports on what big companies do, etc.), so the actual percentage is much less.

  3. The key is how good the company is, not the ‘slickness’ of the pitch. For example, an unpolished pitch for a great company will get through. Also, a great pitch for a lousy company won’t. Basically, you should assume that the bull-shiitake detector is always on.

  4. Speaking of bull shiitake, specifically don’t use descriptions such as ‘revolutionary,’ ‘Web 2.0,’ ‘huge,’ ‘change the way you’ll use the Internet,’ and ‘disruptive.’ This is what Mike calls ‘cheap adjectives,’ and they are kisses of death in Michael’s eyes.

  5. To describe what you do, you should provide a tangible frame of reference instead of using the usual bull shiitake. For example, one pitch that worked is ‘YouTube for PowerPoint.’ Many entrepreneurs are loath to mention other products and prefer cheap adjectives. This is a mistake.

  6. Finally, only the first two or three sentences count. If you don’t capture him that quick, you’re hosed.

In short, you should approach TechCrunch as you would a venture capitalist except that TechCrunch doesn’t write checks, but it can get you in front of 250,000 or so people.

(Via Bona tempora volvant–by Guy Kawasaki.)

The Charles River Ventures Quickstart Calculator

The Charles River Ventures Quickstart Calculator: “

calculator2.bmpReader Dave Lavinsky has created a nifty calculator for entrepreneurs wanting to know how their seed and subsequent rounds affect their ownership in a start-up.

He calculates the seed round on the ‘QuickStart’ formula popularized by Charles River Ventures, which we wrote about last week. CRV is writing small checks in return to start-ups in exchange for getting a discount on an investment in a company’s first round.

The calculator allows up to 5 rounds of financing and shows the equity that the management team, CRV (in this case), and other investors get. You can view the calculator here.

calculator.bmp

(Via VentureBeat.)

Knowing when to hold ’em

Knowing when to hold ’emis a great article by Evan Williams today… his post follows: “

Barry Diller actually said something Tuesday at Web 2.0 that was pretty good. In response to a question from an entrepreneur, apparently about whether he should sell his successful web enterprise, Barry said: ‘Don’t sell. The way you build equity is to hold on.’

Which got me to thinking about lots of web companies that have had ‘successful exits’ and wondering if maybe they shouldn’t have been so hasty.

What if Flickr hadn’t sold?

What if del.icio.us hadn’t sold?

What if MySpace hadn’t sold?

What if Blogger hadn’t sold?

Apologies, again, for using Alexa graphs to demonstrate a point. But it’s safe to say that all these properties have grown dramatically since their sale. If you imagine these are stock charts, you would probably conclude that the sellers would have been wise (/lucky) to hold on a little longer.

Now, that’s rather simplistic, isn’t it? You have to ask yourself several things before coming to such a conclusion. You have to ask, first:

How much was the acquiring company responsible for the growth following acquisition?

This is easy to conclude in the MySpace case: hardly at all. Does Fox even have the capability to bring measurable traffic to MySpace? Perhaps in the form of massive TV commercials, but that hasn’t happened.

But in the other cases, obviously Yahoo! and Google have the ability to introduce these fledgling products to many millions of people. That’s definitely part of the promised benefit of these deals. But does it happen?

On the Yahoo! homepage, there’s a link to Yahoo’s product that competes with Flickr. And on their entire site, only a few obscure mentions of Flickr are found.

Same with del.icio.us.

Perhaps they’ve done other things I’m not aware of, like free ad campaigns or emails or marketing dollars (but marketing dollars doesn’t really count as using their distribution). I’m going to go out on a limb and say that very little of these services’ growth was due to Yahoo’s massive distribution power.

How about in the case of Blogger? Blogger is linked on Google’s ‘even more’ page and, in the Google Toolbar, if you go to Options / More, you can turn on a BlogThis! button. Other than that, again, a few obscure mentions. They once ran a homepage promotion for Blogger on non-US Google sites, which had a nice impact for a few days. And the toolbar button brought in quite a few users for a brief while in 2003, when it was on by default, before they hid it. The ‘even more’ page does not have a significant impact.

No, Blogger has grown, for the most part, without tapping into Google’s huge reach.

But the second question you have to ask is:

Have the acquirers stopped imminent doom from happening?

This isn’t as obvious of a benefit of getting acquired as distribution, but it can happen. For example, if rumors are to be believed, YouTube may have melted under the pressure of lawsuits had the awesome power of Google’s attorneys not come in to save the day.

For the services mentioned above, although you never know what’s going on behind the scenes, but it’s hard to imagine such a scenario. I’m assuming, in all cases, that these companies would have acquired reasonable funding had they not sold. (Flickr and Blogger had offers on the table, and Delicious had just raised some.) That being the case, most problems are solvable.

One of the promised benefits of going to a Yahoo! or Google is scalability. Maybe they’ll save you from doing a Friendster (which probably would have been better off selling). I don’t know about Flickr, but I know del.icio.us is moving, or has recently moved, to some Yahoo! infrastructure that is purportedly quite nice. (If they have moved, it wasn’t very long ago.)

As for Blogger, this was definitely something we needed and looked forward to. There was no way our codebase in early 2003 would support the load of today. However, until the most recent version, which is in beta now, Blogger has run on 90% homegrown code. Not code that we came there with, but code that was written specifically for Blogger (and the same database). There just wasn’t any magical Google scaling device we could port to.

Of course, we ran on Google hardware and network, took advantage of Google libraries here and there, and had great Google-recruited engineers working on it. Also, as I’m sure with all of these services (save MySpace), we had parent-company ops and security folks who may have averted a disaster or two. But these aren’t the core things that tend to illicit or prevent growth.

So, this is pure speculation, but it’s hard to say that any of these sites would have been taken down, or seriously hindered, were it not for getting acquired.

As long as you’re asking these questions, you should probably ask:

Would they have grown even more had they not been acquired?

Who knows. But it’s not beyond the realm of possibility that these sites have been hindered after acquisition by a lack of flexibility or by having fewer resources to do what they needed to do than they would have otherwise, because they had to compete for them internally instead of buying them on the open market.

Just a thought.

Am I saying these companies shouldn’t have sold?

No. There are still many other things to consider. For example, if you traded one stock for another stock that grew even faster, that would still be a good deal from a financial perspective. Also, from a financial perspective, it’s possible that your further funding may have diluted you more than your growth made up for.

Or, not the case for any of those mentioned above, but if you just got offered a ridiculous price, despite not having a lot of substance to your business, you might regret not taking it.

Or if you just don’t want to hack it out on your own—which I know is the case for some tiny startups that have gotten acquired by Google before really getting going—that’s a legitimate reason. (In the vast majority of cases, the opposite is true, and founders beat their heads against brick walls in the big company for a couple years until escaping.) Or if you’re just not interested in your thing anymore and want to move on, it can be great to find a stable home for it (not that acquirers don’t often kill entrepreneur’s babies on a whim).

All I’m saying is that you often hear about companies that should have sold when they had the opportunity, but you rarely hear about companies that shouldn’t have.

And that Barry Diller has a point: Sometimes you should hold on.

Addendum! Kevin Fox writes in with several excellent points, not all of which I had thought about, but all of which I agree with. From Kevin:

An additional aspect that’s important to consider is to what degree predicted performance is built in to the offer price. Even if Alexa traffic charts were accurate measures of traffic over time, they alone tell us nothing about the estimated future traffic at various points along the way. Thinking about Web 2.0 timing is much more like buying and selling tech stocks than it is trading commodities.

Take any significant Web 2.0 acquisition and try to estimate what the annual growth would have to be for the price paid to be a fair price. How much will Myspace have to grow to pay back Fox for its half-billion dollar bill? While P/E and PEG ratios are part of the standard vocabulary when valuing stocks, their equivalent (most 2.0 acquisitions are still in the red, rendering these numbers undefined) is just as important as their current web footprint.

Finally, hindsight usually favors waiting since people forget about the companies that didn’t sell when their growth estimates were higher than their actual outcome. Just like mutual fund companies that start dozens of funds a year and only keep the ones that perform well, the persistence of memory (or lack thereof) is a confounding factor. There will always be success stories, and there will always be failures. I would guess (and you would have more experience than I in this) the ability to hedge your bet and cash out weighs heavily on the minds of founders of promising companies with negative cashflow.

Of course, another factor is often a founder’s desire to be an eternal entrepreneur. There comes a point when you want to do something new, whether it’s changing to a different project at your new parent company or leaving to start the adventure all over again.

This is an attitude I admire. 😉

Right on. So, in conclusion: You never know.

(Via evhead.)