Musings of a VC in NYC

Free Software, Paid Support

There is a thread on programmers.stackexchange.com that asks the question "Why do programmers write applications and then make them free?" The top answer right now is:

Because I don't want to feel obligated to provide technical support or offer refunds.

I have always found the free software approach to be instructive. There are many forms of creative expression out there and most of them involve a paid model. But there is a very vibrant community of software developers that build things and then make them available to anyone who want to use them for free. The key is that they don't offer any ongoing support or maintenance.

If you dissect the model, you'll see that the one time effort of building something is something many software creators are willing to do for free. But the ongoing time and effort of supporting and maintaining the software is not something that can be done for free.

This is, of course, the insight that provided the open source business model. Build software, give it to the community to maintain, and charge for ongoing support. There have been a number of successful businesses built using this model including Red Hat, MySQL, and hopefully, our portfolio company 10gen.

Having worked with software driven startups for many years now, I recognize the cost model all too well. The initial founding team can often build the product in three months. That team is often two or three developers. But once the software becomes popular, it requires dozens of developers to maintain and enhance the code base. It takes a team of tech ops people to keep the software available if it is a web service. It requires a team of people doing support via email. The cost of building software pales in comparison to the cost of maintaining, enhancing, and supporting it.

This approach can be mimicked by anything that is made of bits not atoms. It can be applied to writing. It can be applied to music. It can be applied to film. It can be applied to photography, anime, cartoons, etc, etc.

This does not mean that the paid model of writing and selling software is a bad one. It works and will continue to work. This does not mean that the paid model of recording and selling music is a bad one. It will work for some. This does not mean that the paid model of writing is a bad one. It will work for some.

But it does mean that the free model is very powerful and should be considered by anyone who like to create things but does not like to deal with hard work of maintaining and supporting the work. It is the model behind this blog in fact. You get the content for free. Anything else, you have to pay for with equity in your company.

Monetizing Mobile Audio

I'm going to the gym in a few minutes. I'll bring my android and stream some music while I'm on the treadmill. Maybe I'll listen to my soundcloud dropbox, or maybe I'll check out the popular tracks on hypem, or maybe I'll listen to some fredwilson.fm. I stream music on my mobile phone all the time. I don't have a single mp3 on my android and I don't have any desire to put any on it.

This is the future. We won't be buying files, moving files, and listening to files. We'll be streaming audio from the cloud onto our connected devices in our homes and offices, and onto our mobile devices at the gym, on the bike, in the car, etc. And I think mobile streaming audio is going to be huge.

How will the mobile audio streaming services make money? Some will charge a subscription. But I believe, like the radio industry for the past 50 years, most will make money by running commercial messages in the stream once or twice an hour.

And yesterday, our portfolio company Targetspot, launched the first mobile audio ad network. Initial mobile streamers include AOL Radio, Yahoo Music, CBS Radio, and Radio.com.

Targetspot built and operates the largest streaming audio advertising network and has been the leader in this market for the past three years. This move into mobile is very exciting to me because it will allow advertisers to reach music and audio listeners when they are out and about. Imagine combining mobile audio advertising with geolocation and time of day targeting.  Imagine hearing a Starbucks audio ad on your morning run alerting you to a discount on expresso drinks at the store a block away?

But most importantly, this mobile audio ad network provides a much needed monetization system for mobile audio apps (and actually any mobile app that wants to run audio spots). I believe Targetspot's mobile audio ad network will allow developers to build and launch innovative new streaming audio apps and make money from them.

If you have a mobile app that streams audio or that you would like to run audio advertising in, please contact the Targetspot team and they will give you the tools to build audio advertising into your mobile app.

Tracking Audio Advertising

Our portfolio company Targetspot announced something pretty interesting today. They are calling it Targetspot Analytics and the announcement is here.

When you run an ad campaign on the web, you can track its performance. That's been a vital part of the online advertising value proposition from the early days of web advertising. We can argue about what metrics are worth tracking, and we do, but the ability to measure online advertising is a key reason it is growing and other forms of advertising are in decline.

But it has been hard to measure the "performance" of video and audio advertising, particularly "in stream" advertising like pre-rolls and mid-rolls. That is because users don't click on the ads and leave the stream.

But we know that radio and video advertising works. People see and hear things and they remember them. I listen to WEHM on long island all summer and I know where to get outdoor furniture, get a tennis court resurfaced, and where to get my bike tuned up because I listen to the ads in between the music.

So back to Targetspot Analytics. This is how it works:

TargetSpot Analytics tracks the unique and total visits to any advertiser-designated destination website along with other data, following the delivery of an online radio ad. This information gives agencies and advertisers the ability to measure a true return on investment and optimize the performance of their online radio campaigns.

TargetSpot Analytics is easily implemented: An advertiser simply adds a small snippet of code to their destination website that corresponds to their TargetSpot ad campaign. TargetSpot Analytics can then provide information on each visit to the advertiser’s website, even if the consumer arrives there later through a search engine or by typing the website directly into the browser.

The bike store on long island doesn't know that I showed up to get my bike tuned up because of their ad on WEHM but if they ran that ad on WEHM's internet stream and I went to their website to look up their location before heading over, they would. That kind of tracking and measurement is the power of internet advertising in action and I am excited to see it come to audio and video in stream advertising.

Is Momblogging The New Radio?

Momblogging is one of the fastest growing categories in social media. Here is some data I got from a friend who just completed a study on momblogging:

• Mom blogs are growing like wildfire.  Moms primarily blog as a "family journal".  Just like every family has a physical home, there is a growing feeling that every family should have a "home page". 
• Mom blogs are incredibly social.  They love to link to each other, display each other's "buttons", and participate in and hold contests.
• Mom blogs are very visually oriented.  They love big bright headers.  4 of the top 6 Mom blogs have a photography theme.
• Mom blogs love to review and giveaway products.  If they find a great product, they want to help other moms by sharing this product with them.
• The vast majority of mom blogs use Blogger because it is simple and free.  Among the top 50 mom blogs 50% use Blogger and 50% use Wordpress. 
• The top 50 Mom blogs generate about 30 M Pageviews / month.  The real strength of Mom blogs lies in the long tail.  There are hundreds of thousands of mom blogs that generate > 10k Pageviews / month.

If you want to see some momblogs, here are some popular ones:

My Charming Kids
dooce
c jane enjoy it
Bring The Rain
The Bloggess
The Pioneer Woman

But how does all of this have anything to do with radio? Well, radio used to be the way a new musician was introduced to the world. And in many cases, it still is. But the innovators in the music business have adopted online media as the new way to break artists and we have quite a few success stories to point to including The Jonas Brothers and the Arctic Monkeys.

The person who initially broke The Jonas Brothers on MySpace using viral videos is my friend Steve Greenberg who runs the innovative record label S-Curve Records. In the spirit of full disclosure, the Gotham Gal and I are small personal investors in S-Curve.

And now Steve has set his sights on the mom bloggers to introduce the world to Diane Birch, a wonderful singer songwriter who I think of as Carol King meets Norah Jones and Joss Stone. In fact, Diane's first record, Bible Belt, which was released today, features the same production team as Joss' initial record.

Here's a track from Bible Belt called Fire Escape that is available for free at RCRDLBL:

Diane Birch - Fire Escape

This spring Steve was at the tech part of SXSW and met a bunch of mombloggers. He realized that Diane's music was perfect for this community and so he called Diane and told her to get on a plane and fly down to Austin. They did a lunch for the mombloggers and Diane played her songs for them. It was love at first sight and sound.

And so as part of the launch of Bible Belt, Diane and S-Curve have teamed up with the mombloggers to get the word out about Diane and Bible Belt and also raise money for charity. They've created a series of  widgets that mombloggers can run on their blogs introducing their readers to Diane's music and linking to Amazon and iTunes so people can purchase the record. And each momblogger will select one of several charities to get $1 per record sold. That's most of S-Curve's profit on the record which is priced at $6.99 for digital download. Here is the widget in case you want to run it on your blog.

I love so many things about this story. I love that Steve and S-Curve continue to look for novel ways to leverage social media to launch new artists. I love that they've connected so deeply with the momblogging community and are leveraging them to get the word out. I love that they've incorporated good and needy causes into the campaign. And I love that Diane's music is going to get heard far and wide as a result.

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• Download Diane Birch Free Itunes Single of the Week, Win an Ipod Nano! (rockandrollmama.com)

The AVC Music Meetup

I posted a few weeks back about a great music blogging experience with a new band called The Rural Alberta Advantage. The band is from Canada and had never been in the US until this week. Last night they played their first show in the states, here in NYC at Pianos. I was there and the cool thing is so were about half dozen (maybe more) members of this community. I met a bunch of readers for the first time last night. Thanks everyone for coming up and introducing yourself.

For those readers who came out, we got to hang out with the band before and after the show and were treated to a fantastic set. The only bummer was Fraser did not get to hear his favorite track off the new record, called In The Summertime. The band promised to play it when they are back in NYC next friday in Brooklyn at Union Hall.

Here's a shot of the band at work.

There's just three of them, Nils is the lead singer/guitar/piano, Amy (who emailed me to start this whole thing off) plays a bunch of fun instruments and sings backup, and Paul is a crazy good drummer. They make a much bigger sound than you'd think. Here's the first song of theirs I ever heard. Click on the first play button, not the second one.

The Ballad of the RAA - The Rural Alberta Advantage

At the end of the show, instead of an encore, the band walked out into the middle of the audience and sang a song called Goodbye. You'll probably see a few AVC community members in this photo. Too bad we can't all tag ourselves in it.