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November 29, 2005
Seven Common Tactical Mistakes Entrepreneurs Make in their Initial VC Pitch which are Simple to Fix
There are a number of great blog resources out there which offer great advice for entrepreneurs giving their initial VC pitch, most notably Allen Morgan’s Ten Commandments for Entrepreneurs. This is a must-read series detailing the context surrounding and strategy for an entrepreneur’s introductory VC meeting. He summarizes the purpose of this first conversation,
“The goal of your first meeting with a VC IS NOT to get a funding commitment. The goal of your first meeting IS to get a second meeting.”
In the year since Allen Morgan wrote the initial post of his series, I’ve seen many entrepreneurs make a number of easy-to-fix mistakes in their first pitch to Masthead, many which were covered in his posts, along with a few others that were not. In continuing my “Sevens” series (Seven Questions Employees Should Ask Before Joining a Startup, Seven Reasons To Become a Founding Entrepreneur, and Seven Founding Sins), I wanted to enumerate some small but significant tactical mistakes that have been partially covered in the blogosphere, but aren’t completely organized in one specific place (to my knowledge).
As Seth Levine wrote, “Treat capital raising like a sales process.” Keeping that notion in mind, the following are seven common tactical mistakes entrepreneurs make in their initial VC pitch which are simple to fix:
1. Not clearly stating in the beginning WHO the customers are, WHAT problem is being solved, and HOW the company’s product/service accomplishes it. I’ve been in more than a few initial pitch meetings where a half-hour into the meeting I still didn’t know the basic facts of the business. Indeed, there is some benefit to framing the opportunity with context, but an entrepreneur should get to the point sooner rather than later.
2. Not controlling the timing and pace of the meeting. This time is the entrepreneur’s opportunity to shine and his/her chance to communicate. Spending too much time in introductions, small talk, and the name-game detracts from the opportunity to convey the primary message. Likewise, mid-stream questions are helpful and a useful way to allow a VC to understand, but the entrepreneur should proactively balance time spent on less-relevant topics with others that are essential in communicating his/her full agenda. A VC’s mind will wander, but it’s the entrepreneur’s job to refocus the conversation when it drifts.
3. Worrying about the demo/pres that doesn’t work. Murphy’s Law often comes into play more often than not with demonstrations and on-screen presentations. If possible, entrepreneurs should find out if s/he can get their laptop hooked up to a projector in the room before the meeting starts. S/he should always have a backup paper copy if the on-screen presentation fails. And if a product demo doesn’t work, it’s best to try again once, then move on. Wasting ten minutes to attempt to fix whatever isn’t working isn’t helpful.
4. Not knowing who you are talking to ahead of time. Different partners in a VC firm are different. Entrepreneurs should know their audience, and most importantly, how savvy it is about the company’s particular market segment. If the partner involved is on the board of an online ad network, spending ten minutes of the conversation presenting an argument about the explosion of the online spending ad market isn’t necessary. When a meeting is confirmed, it’s best to ask then who will be included in it. This situation may change, but the answer will be a guidepost.
5. Not following up. Entrepreneurs should check in with their primary contact a few days after the conversation. No news isn’t necessarily bad news, but it’s helpful to keep the company top of mind.
6. Attempting to force feedback immediately. It takes a few days for VCs to “process,” consider, and think about what’s been presented to them in the context of what they already know. If there was more than one person in the meeting, they need to take some time to reconvene to assess.
7. Inauthenticity. Entrepreneurs should present themselves and their businesses genuinely as they are. Attempts to “dress up” or “massage” their own individual backgrounds or the current company situation which aren’t a true reflection of reality will be either immediately recognized or discovered later in the due diligence process. Obviously, in any introductory meeting, one should put his/her best foot forward, but never at the expense of the truth.
November 27, 2005
VCs and Bipolarization: What Hasn’t Happened - Yet
In the Bipolarization of Internet Acquisitions, I put together a chart below counting the number of acquisitions in various price ranges by the top players in the category this year. It showed a lumping of acquisitions in both the under $50M range and in the over $500M category, with minimal in between. I summarized by saying,
“There just aren’t that many companies in the $50M to $500M range being acquired by the big guys – they’re either gobbling them up early or waiting (perhaps to a fault) until these startups are too valuable to pass up.”
Fred Wilson expanded upon my post,
“Buyers are either picking things up before they have a business model, scale, and significant VC investment, or much later. The middle ground (between $50M and $500M) is where the effect of VC comes into play.If an entrepreneur chooses to raise $10M of venture capital and take significant dilution, then the price at which he can sell and make a decent return goes up. And the price at which the VCs will want to sell goes up too.”
I completely agree with his assessment of the situation. (By using the word “bipolar,” I didn’t mean to imply that large Internet companies were acting irrational in any way; I was merely using the term as a descriptive one to reflect the spread of the data).
Moreover, this “VC effect” is actually showing up less in the acquisitions that have been born to date, but rather in the ones that haven’t.
Take the twenty-two acquisitions by AOL, eBay, IAC, Google, News Corp, Viacom, and Yahoo which I included in my original data-set. Of these, only one company I would consider followed a “traditional” VC cycle – Skype. It raised $20M from Bessemer, DFJ, and others and sold for a hefty return for investors.
By contrast, let’s examine the rest of the group. 12 didn’t raise institutional venture money at all, according my research on VentureWire professional (Weblogs, Urchin, Ludicorp, Neopets, Upcoming, Dodgeball, Mailblocks, Gumtree, Android, Konfabulator, WhereOnEarth, Blo.gs). I do, however, realize that many of these did raise some form of “professional angel” funding, but that’s the subject of a future post along this line of thinking. A few were bubble-era leftovers who raised significant funding years ago and clearly didn’t return in line with original expectations (iFilm, Xdrive, Dialpad). Wildseed (formerly GITWiT) had raised an undisclosed sum from Ignition Partners in stealth mode. Others were already public (or part of a public company) and had already provided some liquidity for original investors (Shopping.com, IGN Entertainment, Ask Jeeves, Verisign Online). And finally, Intermix (MySpace) had a unique situation with a recent $4M investment in the entity from Redpoint.
So with all of these acquisitions, only one was a classic traditional venture deal? At first glance, this distribution doesn’t look like a positive one for the venture industry.
What this data doesn’t show, however, is all of the VC-backed deals-in-development that are going to happen in the next 18-24 months. As Fred wrote, if an entrepreneur raises $10M, the price that will make both him/her and his/her investors happy is then well above the “under $50M” threshold. Taking in VC money inherently raises the stakes in the game significantly by increasing the expectations for an exit scenario. My hypothesis is that we will see this bipolarized distribution continue, as new germinating companies are picked up before VCs can get to them and as additional larger post-bubble VC-backed exits-in-waiting ripen fully.
(Note to self, subjects for future posts: Emergence of Professional/Celebrity Angels, VC Investment Only a Binary Proposition - $0M or $10M?)
November 22, 2005
Friction is Multiplicative
We’ve been meeting with (and investing in) a number of online and mobile consumer-facing services startups recently. A lot of our due diligence questions when exploring these potential investments surrounds customer usage – after all, you can’t have a successful consumer-facing startup without the consumers.
A key component (and risk-area) in most of these businesses is in generating a critical mass of users utilizing the service. One of the lessons that I’ve learned through my own experience with web-based consumer-facing services is the importance in reducing friction between and before desired actions. Any element of a service that would cause a user to either hesitate or initiate an extra step in the process before a desired action should have a solid reason why it’s incorporated. Of course, this rule manifests itself a product strategy level – is there a download to initiate, registration to complete, or new behavior to learn in order to use a service? But this guide also governs granular tactical decisions – how many inputs fields should be included or how is a page laid out?
While I was managing the marketing of our e-mail newsletters at About.com, it always surprised me how minor changes in UI could significantly affect our conversation rates. Taking it one step further, considerable changes in a user workflow had dramatic changes in adoption and usage. In this experience, I learned the lesson that friction is multiplicative. Barriers towards a desired consumer action aren’t additive; they’re compounding on top of each other. Conversation rates in a several step process multiply across the entire sequence as a whole.
Obviously, this message has tactical execution implications. But it also has strategic ones which we consider as investors. Friction points inherent in the service’s usage should be overcome with a compelling value-proposition. So I always ask, “Is it worth it?” And the failure to reduce obvious tactical friction-points in a service signals a lack of in-house expertise (and culture of understanding) about the subtleties of marketing to the consumer.
The goal, however, isn’t to eliminate all the friction. Just the unnecessary portion. Then we ask if what’s left can be overwhelmed with the value proposition to induce adoption.
November 21, 2005
Bipolarization of Internet Acquisitions in 2005
In the context of recent discussions of Yahoo’s biz dev folks stating that the company is directly competing with VCs for deals, Paul Kedrosky says of Google,
“It's just that rather than buying some of the equity of early-stage, pre-revenue companies, in typical venture fashion, Google's always buys all the equity. It is a de facto and targeted form of financing for many companies, albeit narrowly available, but let's still call it what it is: venture capital.”
Yes, it appears that a trend has emerged this past year, not just with the Yahoo/Google, but with companies in this industry as a whole – the bipolarization of internet acquisitions. We’ve seen it happen over the past twelve months, so this statement is not a revelation by any means. But to crystallize it, I put together a chart below counting the number of acquisitions in various price ranges by AOL, eBay, IAC, Google, News Corp, Viacom, and Yahoo this year.
If one assumes that nearly all of the “undisclosed” prices are also under $50M, we can clearly see this bipolarization emerging. The internet acquisitions have been either small “venture acquisitions” (to Kedrosky’s point) –or– pricy purchases of companies with demonstrable viable business models (Shopping.com, ASK) or expansive reach (MySpace, Skype). As such, there has been a dearth of everything in between. There just aren’t that many companies in the $50M to $500M range being acquired by the big guys – they’re either gobbling them up early or waiting (perhaps to a fault) until these startups are too valuable to pass up.
(I’ll post some of backup data in the comments below.)
Posted by David Beisel at 4:35 PM | Permalink | Comments (3) | TrackBacks (0)November 18, 2005
Your Ad-Supported Mobile Content
This past summer I posted a piece entitled, After the Garden: Mobile Carriers Opening to Off-Deck Content, in which I wrote,
“In the last few months, many have begun to predict that the U.S. industry will eventually emulate Europe’s model in which the carriers’ remove their walled-garden in favor of an off-deck distribution… [T]he potential end of the walled garden creates opportunity for innovative content and applications from startups that have only begun to proliferate under the current industry structure.”
It looks like this scenario is starting to come to fruition. Yesterday Cingular announced its “Media Net” service which, according to Wireless Week,
“…not only reduces the number of clicks, it lets subscribers personalize their phone by allowing them to put their most important information on the phone's home page… [T]he new Media Net service will allow consumers to develop their own deck. "We are handling over control to the user," [Vice President of Consumer Data Products at Cingular, Jim] Ryan says. "It's not our decision to limit who is on the top deck. The individual can construct the services as they like."”
In other words, Cingular customers will be able to put links to any WAP site on their mobile home page, not just carrier-promoted ones. And as Wireless Week editorialized, “This revamped strategy is great news for content providers.” Indeed. Rather than being limited to vying for on-deck carrier placement or buried in a WAP browsing experience, content providers should now find that the ease in which they can directly reach the end-user significantly increases. This move places more choice in the hands of consumers, and is bold strategic move for the company.
This change also opens the door for unique and innovative WAP sites to reach consumers in a way with much less friction that just wasn’t possible previously. It is my thesis that as new content emerges, so will an advertising infrastructure to support this content which isn’t being sustain by carrier agreements. As I argued in Opportunity on the Third Screen, mobile advertising is coming to your mobile phone. Many have worried (with legitimate concern) that mobile ads will be unduly intrusive and annoying. But if people are choosing free content in a WAP browser on their mobile, just like they are choosing free content in a PC-based Internet browser, then the ads aren’t completely unsolicited or unwarranted. Just like all other media channels and types (television, print, web), models have evolved so that content can be “paid for” with subscriptions, pay-per-use, or ads. I don’t see strong reasons why the last option shouldn’t be one for mobile as well.
November 16, 2005
Tracking Traffic
I’ve been thinking about web traffic lately. And yes, I know that the traffic graphs of MySpace and TheFaceBook have been circled around the blogosphere a million times, but I am going to repeat them anyway:
Two years of data. Let’s compare them with two other more recent startups which are looking “successful” (from a traffic standpoint, that is) but are not social networking sites. Here are the graphs from vertical search sites Kayak and Indeed one year after they’ve launched:
My impressions when I compare the two sets:
1. All four of these graphs are “pretty,” but clearly the first two are prettier (linear vs. geometric growth).
2. The social networking sites don’t exhibit break-out traffic behavior early in their existence.
3. There is clearly display a magical inflection point when the network effect of all the users in a social networking site causes a dramatic shift towards geometric growth.
Obviously there are many examples of both vertical search sites and social networking sites where the traffic launches flat/limited and continues along those lines.
My gut conclusions (based on limited set of data with selection-bias, etc., etc.) from all of this:
1. The success of a social networking site is difficult to discern from its early traffic pattern. It isn’t until later in its life if the traffic usage will really ramp after the network effect has kicked in.
2. Vertical search sites which will be successful display early traffic patterns signaling this future growth.
3. From an investor point of view, be patient with social networking sites in the beginning, but cautious with vertical search ones which haven’t demonstrated immediate traction.
November 15, 2005
Fear (and Loathing?) of DRM
I buy a lot of music. That’s right, I buy a lot of music.
Recently, however, I’ve become frustrated with the increasing limitations placed on the music which I’ve legally purchased that includes restrictions from Digital Rights Management software incorporated into it.
My perspective is that all technology, including DRM, is not inherently good or bad. It is the uses of that technology that make it so. Yet when the policies enforced by the content producers/distributors significantly constrain my personal use of music, it significantly detracts from the value I derive from it. In other words, when my flexibility for normal personal use is infringed upon, I become an unhappy customer.
So, no, I don’t unilaterally dislike DRM per se. Rather, I am scared of DRM and the policies which aren’t consistent with my expectations and that can be retroactively enacted. It’s this anxiety in the face policies that are emerging and may be grandfathered into existing music which I am purchasing and have already purchased that have pushed me away from accepting new technologies.
For example, I haven’t upgraded my iTunes from version 4.7 (Apple has now released version 6) out of fear from further inhibitions of limitations on the music that I already listen to. After buying one album (The Black Keys’ Rubber Factory) last year and subsequently soon realizing that I couldn’t have it accessed on more than five personal PCs, I have never purchased anything on iTunes again in their proprietary format. I literally have and continue to purchase all of my music on physical CDs from Amazon (whose service I love). My thinking has been that if I owned a physical CD, I could always use it as an archive master for ripping it DRM-free into whatever format I decide to use in the future.
But now that approach is not even safe. Recently I purchased Black Rebel Motorcycle Club’s new album, Howl, and had trouble even importing into my own iTunes once because of the “Content Protected” technology that’s incorporated into the CD.
In this New York Times article from yesterday, the Chief Executive of the Recording Industry Association of America, Mitch Bainwol said that,
“[Copy-protection technology] is an answer to the problem that clearly the marketplace is going to see more of.”
I understand why the content producers/distributors are doing what they are, but I don’t agree in what and how they are doing it. Now I don’t know what to do. It looks like I’ll stop purchasing music with this “Content Protected” insignia on it, which is surely not the intention of the labels.
So now what music I am buying and how I am buying it is driven and limited by fear.
What am I missing here? Perhaps my concern is partially out of ignorance, but I as a customer don’t feel adequately informed about what rights I am actually buying when I purchase new music. Thoughts?
November 14, 2005
Mobile Phones: Computers or Something Else? It’s the Social Software and Content that Matters.
In the summer I wrote a quick entry entitled, The Mobile Phone: "Social Computer", in which I said,
“Until now my mobile telephone has been a two-way radio capable of playing a few mildly-amusing games and taking a few crude pictures. It is now becoming a portable input & connecting device initiating meaningful connections with people I know and people I don’t yet know.”
Om Malik and others strongly disagreed with the assessment of the mobile phone as a social computer,
“Mobile phones have a different behavioral relationship with their users… But mostly - phones are not computers - they are terminals on the edge of the network, they lack the complexity of a PC, and are managed. They are devices that help people communicate, not compute. They let you consume bits some of the time, not all the time.”
Since I wrote that piece, I’ve been spending a lot of time thinking about social mobile content and software, and have come to realize that looking at the mobile phone “through the eyes of a PC” was and is limiting.
The intention of my original post was not necessarily to strictly liken mobile phones to computers, but rather to point out their transformation from a mere telephone to a more sophisticated and rich device. I see the argument between “computer” and “not a computer” as a semantic question which I will leave to others. (Perhaps I mistakenly interjected myself into that debate.)
My evolved perspective is now that mobile phones are increasingly resembling computing devices (richer OS’s, flash memory cards, more sophisticated applications), but they are also fundamentally different and should be treated as such. This changed viewpoint rests on the recognition of the mobile device as a uniquely personal one – not for computing per se, but rather used first for connectivity and increasingly for social networking and a specific set of information retrieval.
Of course the obvious differences between a PC and a mobile phone are the input ability/interface and display screen limitations. Those have been highlighted numerous times by many others. However, I view the essential dissimilarities between a mobile phone and a PC as the same reasons why I believe there are tremendous opportunities to come on the mobile platform. The four defining characteristics of a mobile device being location-aware, portable, immediate, and understanding give socially-enabled mobile content and software the ability to transcend the functionality of a PC.
The device in your pocket is always with you. Soon it will know where you are, who you’ve communicated with, and if you are currently available. If you need any specific incremental information, you can get it immediately. Immediately. And more importantly, as Jon Turow and I recently discussed, this device will increasingly an understanding of what you are doing. Are you eating at a restaurant? Are you taking pictures? Are you by yourself or with other people with their devices? A mobile device will “know” more about you than a PC ever could, and that information can enable valuable services that are far beyond anything that we’ve seen on a PC.
Consequently, the way that users interact and connect with the “content” that is available on mobile phones is fundamentally different from that of a PC. That is not to say that we cannot derive lessons and learnings from the history of the PC and web platforms which can be applied to the mobile device. But it does translate into the notion that a web or PC experience cannot be directly transferred to onto the mobile. Just as offline producers couldn’t just easily repurpose their content onto the web, web content and software producers won’t and shouldn’t be able to do the same on mobile.
So Om was right – I was mistaken about thinking of the mobile phone in the same manner as PC. But I still agree with Trip Hawkin’s assessment that the highest value media types on mobile phones are going to be ones that “provide access to a social network,” which was the true intention of my post. And whether or not you call that device a computer is secondary. To me, phones trending towards social mobile devices signal the unique convergence of connectivity and content into one platform. This union creates an opportunity for exciting new services (many potentially made by start-ups).
November 10, 2005
Better than Average
I love numbers. When someone or a company has a rich set of data that’s meaningful, I like to really dive in. And so I am sometimes disappointed when the only figures that are presented are “averages.” Usually that translates into people presenting or writing about an arithmetic mean. But I often crave more, as an average figure tells you nothing about the distribution of the dataset.
Wikipedia explains further,
“[Mean] is used for many purposes and may be abused by using it to describe skewed distributions, with highly misleading results. A classic example is average income. The arithmetic mean may be used to imply that most people's incomes are higher than is in fact the case. When presented with an "average" one may be led to believe that most people's incomes are near this number. This "average" (arithmetic mean) income is higher than most people's incomes, because high income outliers skew the result higher (in contrast, the median income "resists" such skew). However, this "average" says nothing about the number of people near the median income (nor does it say anything about the modal income that most people are near). Nevertheless, because one might carelessly relate "average" and "most people" one might incorrectly assume that most people's incomes would be higher (nearer this inflated "average") than they are.”
Examples like the one cited above are just the beginning. I often see statistics quoted in the popular media using “averages” which are incomplete at best, and misleading at worst. To me, averages are like snapshots as compared to a whole movie; they reveal a moment in time, but they don’t tell the whole story.
November 9, 2005
Boston Web Innovators Recap
Last night’s Boston Web Innovators meeting turned out to be a success. We had quite a turnout, and a good mix of people. First-time and serial entrepreneurs, VCs, long-time bloggers, techies, MIT PhD computer science students, and many others all joined the crowd. It was refreshing to see the enthusiasm to gather this many like-minded individuals with the same interests here in the Boston area. The centerpiece included three demo presentations from the founders of the early stage startups Blogniscient, reddit, and Kiko.
The event and discussion was not lost for healthy skepticism however. With all of the excitement for innovation happening in the digital media space, many of the conversations included questioning voices about the viability of some of the startups emerging from nice services to strong profitable businesses. Impromptu questions for the speakers included, “What is your business model?” and “How are you generating revenue?”
Peter Caputa, the founder of WhizSpark, commented on his blog,
“For the first time, I feel like I am a part of something happening in the web space in New England… there were some very smart people there last night, that are doing some very smart things. And I had no clue they existed.”
Peter also has a more detailed write-up of the event here. And Ray Deck shares his thoughts as well.
A few photos of the crowd and the presentations:
My plan is to organize another event similar to this one in the next month or two. I am open and welcoming of suggestions to the format and location which you think would improve it. Please comment below or e-mail me with your thoughts and reactions.
Finally, thanks to everyone who attended.
November 7, 2005
Between the Valley and Everyone Else
In response to Dion Hinchcliffe's list of issues and problems facing Web 2.0 today, Paul Montgomery comments,
“How about Thinking The Whole World Is Like Silicon Valley? ... Web 2.0 is still a very small, insular movement. There should be far more attention paid to what people who aren't impossibly well-connected and highly technologically savvy will want from these new services.”
As others have also agreed, I believe Paul’s comments are extremely valid. And I think along two levels: location and community. First, and more superficially, location – Web 2.0 companies are clearly Valley-centric. A perfect example is Yelp.com, a local reviews and social networking site which just raised financing. The site only covers the San Francisco area, just as many other emerging services have narrowed their scope in a similar manner.
But the heart of Paul’s thoughts is really centered towards the community. There’s no question that there’s an echo-chamber effect of discussion and excitement surrounding Web 2.0. I know many internet-savvy people who aren’t completely “plugged in” who consistently ask me what this buzz is about. Take the poster-child Web 2.0 startup, delicious. Its widespread acceptance in the digerati crowd has put it at the forefront as the strongest and most accepted platform for social bookmarks. I personally use it because of this fact. But its reception outside that circle isn’t as favorable. Take this PC magazine round-up which rates it the worst (1 ½ out of 5 stars) of an entire field of social tagging related services. Clearly there is some disconnect here. (Other upstarts like Clipmarks have a compelling offering, and the “mainstream,” or at least one indicator of it in this case, notices and promotes that fact.)
All of the above said, there’s no reason to throw the baby out with the bathwater in taking this critique to far. By definition, early adopters come first. We are in the period of experimentation with new technologies and models, and the natural people to play with these new services are the “well-connected and highly technologically savvy.” (And on the whole, most, but not all, of those people are in the Valley.)
Delicious is geeky for a reason, and will undoubtedly work on its UI as it shifts towards a mainstream site. Likewise, in announcing its funding, Yelp also revealed that it will be expanding to other cities. Web 2.0 as a movement will grow out of its Valley-centric techie roots, and that process is starting, but it needs/needed time in fertile soil to germinate.
November 5, 2005
The Magic of Advertorial Content (Part II: "How To")
In my last post, I wrote about advertorial content: content which is both advertising and editorial simultaneously. With many successful analogies in the real world and in the online world to use as a guide, current web innovators have a lot of opportunity to experiment with new models facilitating advertorial-based businesses. However, advertorial content is effective only if executed correctly. Without careful consideration and implementation, it can easily alienate readers and discredit the publisher of it.
Last night, I went to see Warren Miller’s Higher Ground movie to gear me up for the upcoming ski season (trailer here). This film is a perfect example of advertorial – it profiles skiers driving to ski resorts (Copper, Vail, Aspen) in their Jeeps, wearing Obermeyer jackets, and snacking on Nature Valley Granola Bars. Other product placements are abound in the movie, yet a whole theatre of us paid to go see it. Why? Because the movie met followed the three lessons about expectations, context, and packaging that all successful advertorial content does. We wanted to go watch expert skiers ski with all of the products and services promoted within.
Expectations. Last night, the audience expected to see advertorial content. Just like a job seeker expects to see job listing ads in the newspaper classifieds and at Indeed.com. Or when users pull down an RSS feed of sale items content from a specific online merchant, they anticipate advertising. Advertorial content should never surprise a reader or viewer. It informs and/or entertains, along with promoting the interest of the advertisers, but the perspective presented shouldn’t shock (like pure editorial can). Often these expectations are set beforehand with a type of transparency that allows the consumer to make an informed decision about how much to “trust” the content, given its source.
Context. Advertising that is content should be surrounded with an appropriate context. It is an advertisement, yes. But first it has to be content, and must be treated as such. The coupon leaflets in the Sunday paper are included within the other merchant catalog advertisements, not in the features or editorial section. Accordingly, readers aren’t confused who is promoting what viewpoint, nor are they put-off by the blatant advertising; many welcome it.
Packaging. Finally, successful advertorial content is packaged effectively. At Sombasa Media, all of our bargain content was packaged into an opt-in e-mail newsletter which was individually customized and personalized for every single one of our readers. eBay packages it’s advertorial content well with buyer ratings and easy navigation – it doesn’t force one specific seller onto its buyers, but rather enables people to find the best one. How the advertising is presented plays a key role in enabling the consumer to decide whether the content should be dismissed as merely an ad or whether it contains value beyond just a promotion.
I believe that as both web companies and individuals innovate, we’ll see new ways that content, especially user-generated content, emerges. However, it is imperative that they follow the guidelines outlined above, as bridging the divide between advertising and editorial can be perilous. Without a mindful approach to expectations, context, and packaging, advertorial content can be easily dismissed of both its advertising and its editorial value.
November 3, 2005
The Magic of Advertorial Content (Part I)
In the past (here and here), I’ve written about advertorial content: content which is both advertising and editorial simultaneously. In these cases, the content is the advertising, yet it still delivers value to the end-user. There is something magical about content which falls into this category because it’s uniquely integrated and pleases all the parties involved – the reader/consumer, the advertiser, and the publisher. Because the content itself is inherently monetizable – as it is advertising per se – and the value of it creates an (economic-speak) surplus for everyone.
The Real World. We can see examples of advertorial content in the offline world. Of course, the first thing comes to mind is infomercials. Millions of people watch these late-night programs not only to learn about the products showcased, but also for some sort of entertainment value. But offline advertorial content extends further. People search through the Sunday newspaper coupon section for just the right deal, and this “hunt” also provides an entertainment value beyond the coupon itself. Not a coupon clipper? How many times have you “read” the J.Crew or Pottery Barn catalog that was delivered to your doorstep? Or passed the time with the SkyMall catalog while bored on a plane? All examples of advertising that literally becomes valuable content to the consumer.
Traditional Online. Advertorial content emerged digitally during the previous era on the web. At Sombasa Media, a company that I co-founded, we had a series of e-mail newsletters which published advertorial content from advertisers. For example, our flagship product, the BargainDog, delivered an opt-in personalized e-mail newsletter for millions of consumers. We continuously received feedback from our users telling us how they looked forward to hearing about the best deals and specials at online merchants.
I’d also argue that the entirety of eBay is advertorial content. The listings themselves are advertisements that consumers find as valuable. Likewise for Monster job posts. Companies pay to have their jobs included in the database, but the job-seekers themselves derive great value out of inventory. The list of online advertorial content goes on and includes services like shopping comparison engines and e-saver plane fare e-mails.
Emerging Advertorial Content. There is additional opportunity in this realm of advertorial content as web innovation continues to transform how we interact with each other over it. Some examples of companies that are experimenting with new ways of advertising-based content are music recommendation engines and job vertical search sites. In effect, local event listing sites could turn advertorial as venues look to promote their events on the web.
I think that the rise of user-generated content provides for new and creative cases of advertorial. Aren’t professional blogs nothing more than an advertisement for the creator of them? Yet readers do derive (sometime significant) value from them. What about when consumers post about their favorite music or products on their blogs or on sites like MySpace? I, along with others, think that there should be a “sell-side advertising” mechanism to allow for those reviews and citations to be monetized by the individual publishers that also further benefits the product manufacturer/advertiser as well. Accordingly, as the web evolves, I believe that we will see more novel and effective instances and models enabling advertorial content emerge.
(Advertorial content is indeed effective, but only if executed correctly. If it isn’t, it can easily turn off readers/users and discredit the publisher of it. In my next post on the subject, I’ll enumerate my thoughts on how effective advertorial content is created.)
November 1, 2005
Startup Offices Are Like Faces
I love when I have an opportunity to visit entrepreneurs in their offices. After an initial pitch, and as we are getting to know a company, we nearly always visit the startup at their own site.
To me, startup offices are like faces – they communicate what is going on in the inside. Of course, they convey an intentional outward expression, like a face does. But they also reveal subtle cues about a company’s core, just as a face does, too.
The importance of picking up on these indications helps us as VCs get to know companies better. Don’t get me wrong – there isn’t one “right way” that companies’ offices should look. Quite the contrary. Just as all startups are different, their offices should be different as well. I think that the key is that the environment in which start-up employees work should match that of the company’s story and culture.
When I’ve seen companies who claim to be extremely frugal and their surroundings match that proposition, my expectations are perfectly aligned with the situation. In the same vein, I’ve visited gaming entertainment companies that have had vintage gaming and arcade paraphernalia strategically-placed as apropos decor. Also, I’ve visited firms poised for explosive growth have empty desks and room to spare, which makes a lot of sense. And finally, I’ve seen young startups just getting off the ground sharing space with other startups in an effort to leverage common resources and share knowledge/expertise. All of these are just examples demonstrating how the current internal situation of a company is appropriately and authentically reflected in its external work environment.
A startup’s office directly speaks to prospective & current employees, customers, and investors. Not only does it communicate an outward and explicit message, but like a face, it provides insight into what’s going on underneath the surface.
Posted by David Beisel at 11:37 PM | Permalink | Comments (1) | TrackBacks (0)