Musings of a VC in NYC

Protect My Cookies Please (continued)

Dave Morgan, CEO of Tacoda - one of our portoflio companies, weighs in on the cookie debate that I have mentioned more than a few times in the past week.  He also links to my original blog post.

The column is on MediaPost.  You can read it here.  (registration required).

Here's the best part of Dave's column if you don't have the time or inclination to link through to it.

The cookies that concern Walt are not "secret," nor are they delivered without the user's permission. For all reputable sites, including WSJ.com, their use is fully disclosed in their privacy policies. In fact, many argue that they are an implicit part of the "Terms of Service." In other words, if you want free content, you must accept the fact that the site is going to try to place cookies. You can block them. You can delete them. But you can't say that you didn't expect them. In addition, users control cookies. All of the major browsers have features that can be set to notify users every time a cookie is set, or to block cookies according to pre-set rules.

The problem is that no one has taken the time to educate consumers about what their cookies do and what to expect from them. Of course, before the days of browser-based cookie controls and anti-spyware software, this didn't matter. Cookies just happened in the background, and consumers rarely saw them or played with them.

Now, however, the game has changed. Consumers are in control. They are all like Walt. If they don't know what these things are, they assume the worst. Now is the time for those that place cookies to step up and fill this void. Now is the time for the industry to step up. Walt is just the messenger. Don't shoot him.

As I said in my post yesterday, tracking is good.  It delivers relevant advertising.  No it doesn't cure AIDS, but it might get an advertisement for an AIDS drug to an AIDS patient.

As Dave says, the media industry needs to sell tracking to consumers and explain how they do it and the benefits it delivers. So let's get busy doing that.

Exploding Radio (continued)

It's been a while since I've posted on one of my favorite topics, HD Radio.

The New York Times' Glenn Fleishman did a nice piece this morning called Revolution on the Radio.

Glenn writes:

Plug a set of headphones into a radio tuned to an FM jazz station. Hear the hiss at the bottom of the range and the fuzz at the top. Remember why you like compact discs.

But don't be impatient: wait eight seconds. An "HD" light appears on the tuner. And now the bottom drops out. The hiss turns to silence. The stereo channels separate, opening a cramped room into a performance hall. And the high fuzz is now crisp high notes from a trumpet or Ella Fitzgerald.

This is all true, but I honestly don't believe the superior audio quality in both the FM and AM bands is going to make HD Radio popular.

I think its going to be the explosion of new formats and programming that will result from broadcasters ability to multicast two, three, or even four signals on a single FM channel.

I think other data services like "buy now", something that XM and Napster are rolling out for satellite radio now, will also prove to be big hits with consumers.

But if you are interested in the future of broadcast radio, go read the article.

AOL

Jeff Jarvis wrote a goodbye note to AOL the other day.

It's a good read and brought back a lot of memories.

I also have one of the original AOL email addresses with no numbers in it, [email protected], that I'd like to turn over to the spammers who have owned it for the past 10 years. 

But unlike Jeff, I have kids who still use AOL and like it.

So I won't be shutting down my AOL account anytime soon, unfortunately.

links for 2005-07-28

• Nivi : Introducing: The Bay Area Technology Event Groupcast
  great idea Nivi
  (tags: VC delicious bayarea)
• HotOrNot + Google Maps
  google maps is it for local apps
  (tags: ajax google maps)
• Eater: Shake Shack Strikes Again
  maybe we should do our monday meetings at the Shake Shack - Peanut Butter Ripple Custard - wow
  (tags: nyc food)

Comscore Measures Blogs

I am an investor and board member of Comscore, which owns Media Metrix, and is also owns the largest web measurement panel in the world with over 2 million panelists.

Nobody, not even Nielsen NetRatings, can hold a candle to Comscore when it comes to web measurement.

So I was thrilled to hear that Comscore is starting to measure blogs. 

At this point, it's just a research project to figure out how best to measure what is a very fragmented and dynamic market.

But they did showcase some data at the WOMMA event on July 13th in Chicago.

Here is their data on the top blog hosting services.  Note that blogs.com and typepad.com are both hosted by typepad.

But possibly even more interesting is the difference in the way the "youth" blogging platforms like Xanga and Live Journal and the "mature" blogging platforms like Blogspot and typepad are used.  Here is a chart showing visits per visitor.

Clearly the "youth" blogging platforms are "stickier".

As Comscore starts drilling down into the specific blogs, even more data will come out. 

Hopefully they'll publish it and we can start learning more about what is going on in the blog world.

Bouncing Emails

I've got a bunch of emails and comments from blog readers who have had their emails to me bounce this week.

The email address I publish on this blog's about page is down and has been since last Friday.

It's going to be back up soon, hopefully.

I just need to get Verizon to show up and fix a dead circuit.

But in any case, please be patient, and if you got a bounce message, you can resend.

I've set up a spooling service that should eliminate the hard bounces.

If you use my most current email address, you won't have any issues.

Tracking is Good

When I drive around in my car listening to the radio, I find the ads annoying. Unless they are about something I care about. Then I listen intently.

When I watch TV, I experience the same thing. For the most part, I fast forward through the ads on the Tivo. But if it’s an ad for something I care about, I slow down the Tivo and watch the ad.

The same is true with email. I hit the delete button pretty quickly for most email marketing messages. But if an email comes in with information about something that matters to me, I read it carefully.

Advertising is content when its relevant and its an annoyance when its not.

Walt Mossberg started a recent column this comment:

Suppose you bought a TV set that included a component to track what you watched, and then reported that data back to a company that used or sold it for advertising purposes. Only nobody told you the tracking technology was there or asked your permission to use it.

You would likely be outraged at this violation of privacy.

To the contrary, I’d be overjoyed. Because tracking consumer behavior is the best way to deliver relevancy. And I want relevancy in my advertising. Badly.

I am not suggesting that the tracking should be done without my consent and awareness, but honestly I’d prefer that over no tracking if it means that I’d get some relevancy in the ads that come my way.

Unfortunately, the first attempts at tracking consumer behavior on the Internet were made by companies that messed with our computers. They threw ads at us in new browser windows (pop-ups and pop-unders). They put executable software on our computers that slowed them down and in extreme cases made them unusable. And so the process of tracking consumer behavior has unfortunately been married with the term “spyware” in the minds of many consumers.

But the bad guys are getting shut down and/or coming clean and the good guys are starting to embrace behavioral tracking as a way to target advertising. But these efforts by the good guys are getting slammed by privacy advocates trying to establish tracking as something that is bad.

That is something that needs to change.  Because if we are ever going to get more relevancy in our advertising systems, something I crave and I suspect most people crave, then we need to allow tracking to flourish.

Obviously we need rules about what is acceptable and what is not.

Does anyone get upset when Amazon makes recommendations based on past purchase behavior? I think not. My guess is most people love that.

Does anyone get upset when you get ads from Google that match the search term you just typed in? I think not.

Does anyone get upset when the NY Times runs travel ads at you on the front page when you’ve recently visited their travel section? I doubt it.

These are all examples of using consumer behavior to provide relevancy in advertising.

It’s the future of advertising and it’s great for everyone.

Marketers love it because it makes their ad spend more efficient.

Publishers love it because it monetizes their pages better.

And consumers love it because the ads become content instead of noise.

Signal over noise. That’s what we all want. And tracking is the way to get it.

So track my behavior please.

Disclosure:
Union Square Ventures and Flatiron Partners have investments in a number of digital marketing services companies that use various techniques to increase the relevancy of advertising. And we hope to invest in more over time. We are big believers in the power of targeted advertising and are putting our money where our mouth is.

VC Cliche of the Week

I spent some time this week working on financing strategies for some of our portfolio companies. It’s very important to have a financing strategy.

You can’t simply put together a powerpoint deck, set up a bunch of meetings, and expect someone to step up and do the deal. What if things go badly? What do you do then?

So I believe you need to design a financing strategy that aims high but has a well crafted downside scenario.

The cliche about this that I like is “hope for the best and prepare for the worst”.

It’s a bit like applying to colleges. You might want to apply for early admission at your top choice, you might have a short list of three to four places you’d love to go, but you also need a “safe school” that you can live with.

I knew a kid in high school who applied to one college. He didn’t get in. That really sucked.

So how do you go about hoping for the best and preparing for the worst?

I think its best to start with the downside scenario. What happens if your company can’t get anyone to step up and do the financing on terms that are acceptable?

Well there are a couple approaches to this. The first is to do the financing when you don’t really need the money. That’s a great strategy. Maybe you’ve got nine months of cash left in the bank. Maybe you go out and talk to three or four potential investors to see if you can get something done with them on terms you’d like. If you can’t, you stop the process, go back to work, and come back to market in another six months.

If you don’t have that luxury, then you need to turn to your existing investors as your downside scenario.

There are a couple of ways to think about this.

The first is to get the existing investors to tell you on what terms they’d be willing to do an insider round. Get that locked down and then go out and see if you can do better. If you can’t, then you come back with your tail between your legs, but comforted in the knowledge that your company isn’t going to hit the wall.

The second way to deal with this is to put a bridge in place. Get the existing investors to loan the company enough cash to fund the company for say six months and agree to convert the bridge into the next round.

You can even marry these two approaches by getting the investors to bridge a portion of a potential insider round while you go out and try to find a new investor to provide the balance of the round and set the terms.

The only thing I would caution against is using the bridge if you don’t have to. Many new investors will see an outstanding bridge loan as a sign of weakness and approach the deal accordingly.

If you need the cash, take the bridge. If you don’t, then I’d avoid it.

Having a downside scenario is really critical to a successful financing strategy because it gives you confidence. Then you are inviting new investors in, not begging for money. That’s a big difference as anyone who has gone begging for money can attest to.

So prepare for the worst. If you do, your hopes for the best have a better chance of coming true.

Goldspot

So the very first Morning Becomes Eclectic podcast was a big hit with me.

The band that played live in the KCRW studio is called Goldspot and I think they sound great.

Check them out:

Amazon

Rhapsody

Morning Becomes Eclectic Podcast

My Space

Work Life Balance

Seven or eight years ago, when my kids were much younger, I attended an offsite.

One of the speakers was a organizational psychologist who spoke on "work life balance".

Although I didn't know it at the time, it was an issue that I was really struggling with, having just started Flatiron, wanting badly to prove myself to my partners and investors, and also struggling with a family - three young kids and a wife.

The speaker said something that really shook me up.  He said, "if you don't connect deeply with your kids before they turn teenagers, you never will".  My kids were probably seven, five, and two at the time.  I loved them deeply and the idea that they'd turn away from me when they grew up scared me.

So I made a point to "conect with them", them being the entire family, including my wife.

Why do I tell you this?

Because Brad Feld has a great post, one of the best he's ever done, up on his blog right now about work life balance.

Brad tells an even scarier story (and I knew Brad back then and its true).

But he also gives his four five point plan which is similar to a less formal approach that The Gotham Gal and I have used for years with great results.

I love entrepreneurs who work like crazy, but I also like to see a balance in their lives to keep things stable.  Brad's plan is a good way to go if you feel like you need some balance in your life.