LBS - Location Based Stalking

Brad Feld has a truly frightening post up today

Go read it (and all the comments) here.

It got me thinking about Foursquare and the location based movement that has arisen over the past year - and the debate over privacy most recently espoused by Chris Poole in talks at SXSW.

The question in my mind is this: what is the benefit of location based services as they exist with foursquare, Gowalla, Facebook Places etc... Is it a shout out to the crowd - a digital "Hey I'm here, anybody else around?" or is it more of a message to friends - "Here I am, come and join me" or is it more of a digital roadmap to your life.

Obviously foursquare and other services have real applicability to retail establishments - allowing for deals as well as loyalty to be measured and rewarded - but as Brad's post points out - there are downsides (stalking, Facebook has been used to target people who are out of homes etc...)

Also with the new breed of group text systems - GroupMe, Text Free, Tiger Text, etc.... you can send the digital shout out to the people who are going to really matter to you at the time. Yes you may lose some serendipity, but you gain a lot of control and more immediacy, as everyone has their cellphone on - but not everyone is checking in on Twitter, Foursquare, Facebook, etc... at all times.

So is privacy the be all and end all? Or should we be living out lives out in public?

Seems like we are going to be public - but perhaps there will be a leaning toward keeping some anonymity in the system.

Perhaps foursquare can embargo check-ins for an hour if you so choose. Maybe there are looser affiliations in the group text world - some people connected all the time like an AIM chat and others getting the text a little later.

Who knows which way it is going - but it seems to me that the first shots in the LBS war have been fired, and group text is answering back. It's early days. Guess who really has all the power and data in the equation - its the cellphone operators - talk about a treasure trove of location based data. Soon it may just be "No only can I hear you now, but I know exactly where you are standing and who you are chatting with!"

Now that's real Location Based Stalking.


Discipline In The Good Times

I'm sick.

Really sick - as in I have a cold for perhaps the first time in 2-3 years (not bad with 2 kids in the house)

and like most guys - I don't do well sick - give me pain, but leave off the misery of congestion and poor sleep.

And it reminded me this morning that when you are sick you realize how much you take health for granted - and how when times are good - you just coast along and assume they will always be that way.

And it got back to a conversation I had with a friend over dinner Wednesday night - when things are bad and there is seemingly no way out - it is very hard to motivate people to do their best work - as there may be no real light at the end of the tunnel (or another train coming at you). It is when things are at their best when you need to show discipline in your business. Discipline in cash burn, in hiring, in your work - because you never know when you will wake up one morning with that sore throat.

How Political Campaigns Are Like VC Backed Start-Ups

Last night I was meeting with a few friends and one of them put forth the supposition that political campaigns were like VC backed start-ups.

His logic was as follows:

The candidate has an idea and starts doing research about whether or not he or she should run for office. This is the proverbial guy in a garage - or sitting at his job wondering how to get out.

He starts to talk to other people about the idea - and some of them are enthusiastic - enough to form an exploratory committee - i.e. Angel financing.

The exploration leads to a decision to enter the primary - more backing is needed, but there is social proof and users(supports) are climbing. This is early stage venture.

You win the primary, but there are others in the category (i.e. you have a well financed competitor). This is round B financing which hopefully will get you to the election.

Looks like the election is a close one and you are running low on cash (how many times have people either heard or claimed that this is the last round of financing). Another round comes in for a final push. Series C? Bridge Round?

Election day comes and the market decides - do you live or die? Do you gain wide acceptance - or do you go down in flames?

Are you Facebook or Friendster?

Interestingly, there are second acts in politics just as in VC. Ronald Regan lost his share of elections - but learned every time and kept coming back. same with Bill Clinton and just about every other politician of note. Founders do the same - dust themselves off and live to fight another day.

Not a bad analogy.

In Game Marketing - Maybe There Is a Way To Compete With Zynga

Two weeks ago I moved from a job moonlighting as a VC to the full blown title - and so far, it's been like drinking from a firehose.

And the primary taste I get is that of game companies.

Clearly, the success of Zynga has not been lost on anybody - and competitors are popping out of the woodwork to take them on.

The pitches seem somewhat similar: a group of smart guys with some game experience would like to take on Zynga - if only you would invest $5M for the development and marketing of their new games. Game development is not all that expensive - but marketing to players is - and cutting through the clutter is getting more and more expensive.

Inevitably the conversation turns to two basic facts: 1. Zynga has bought up just about anybody with traction and will likely continue to do so and 2. there's no accounting for taste: Angry Birds cost something like $100K to make (maybe less) and has taken in tens of millions.

Truth is - unless you have an already huge audience in place and you are serving up a great game - you are likely to get lost - and predicting who is going to make a splash is anything but easy.

Add to this the distribution platforms like Facebook (who will force you to use FB Credits and take a 20% fee) or Apple with its new 30% vig on distribution and the margins get leaner still. So where to turn and what to do - how do you make this business successful for the developers and the investors.

My thought is in the title - in game marketing.

Every time I see my kids playing Webkinz - they are flipping burgers or making pizzas - or their characters are running around a track or trying on great fashions. Is there some reason why those burgers are not sponsored by McDonald's or Burger King - or the pizzas are not skinned by Dominos or Pizza Hut. Why aren't the shoes Nike's or Adidas? Heck I have a paid of Adidas Barricade III shoes that my kids refer to as Webkinz shoes. Farmville is an absolute sensation. But why aren't the seeds sponsored by Burpee or the tractors a John Deere? Why isn't all of Cafe Society sponsored? And why aren't those sponsorships leading to more engagement in the real world?

What has consistently amazed me is the average time spent playing these games. Sessions can last from 20 minutes to well over an hour - and that is game play with complete immersion - complete engagement with the world you are inhabiting. Only a few % of people are generating all of the revenue buying up items to increase their game play - so why not try and mine the other 99%?

Why not monetize the attention of the majority? Why not let people buy virtual goods and opt out of the advertising if necessary? My guess is that companies like Zynga are so profitable right now - it makes no sense to change things up - but in the social gaming world, my guess is that we are in the 2nd inning - and yeah Zynga scored like 25 runs in the first inning and most people feel like the mercy rule should be invoked - but there is a lot of games yet to be played.

We've seen some innovation - but there is a heck of a long way to go.

Attention Deficit Disorder

Nope - not the scourge of the teenage set - but a more insidious problem for many media companies.

Question: What is it that most media companies have when consumers are partaking of their wares?

Answer: That consumers attention.

And in this world of competing interests - and an always on - multi-tasking world - that attention is a precious commodity.

Which gets me to the second word - deficit.

In general most traditional - and quite a few new media companies monetize this attention through advertising. You generate a certain amount of interest and advertisers pay you according to a CPM (cost per thousand impressions) formula. Depending on the level of engagement - and even more on what the market will bear - and just how unique your proposition is - you will get a CPM of between $0.01 to say $20 - the range between remnant internet inventory and premium television - or some extremely highly specialized keyword searches (mesothelioma on Google comes to mind) or some very premium video advertising.

Now the difference between what advertisers could potentially generate with this attention - and what they do is their deficit.

And this leads to the final word - disorder.

Most media companies are caught in this trap. the have attention - and they monetize it through advertising. And why not? It is simple. It is accepted. It has been done this way for years. there are systems and people set up to help companies out when they look at a business this way. But aren't they just victims of a disorder which anchors them to the past? A disorder that doesn't allow them to break free of the tyranny of the CPM based buyer?

Look at Groupon or Living Social - or any of the other daily deal sites out there. They buy advertising on a CPM basis - and then turn around and use it to generate business on a model that takes 50% of any sales off the top - and tends to keep breakage (those unused coupons that people purchase) - so the actual gross margin is probably higher than 50%.

How many other businesses can you think of that is of interest to your consumer where the marginal cost of providing the service is high and you are not taking part in any of the business - despite potentially driving revenue to the business. If Groupon can sell 1000$80  massages for $40each - and keep $20-$25 of this - that's a CPM of $25,000 - assuming no cost of media - and what do you think it cost them to advertise the deal? Well, since they use facebook and other e-mail lists - the cost is pretty low. But even if they went the traditional media route and bought advertising to do the same - they would be break-even on the deal at a $20 CPM by reaching 1,250,000 people and having a conversion ration of 0.0008% - which would be a pretty terrible job of advertising.

Companies with very specific media offerings have the attention of an audience who has a predilection for the niche they are offering up - and yet the best they can do is give them more Ford ads.

There has to be a better way for media companies to monetize the attention of their consumers - to cut the deficit between what they earn on a CPM basis and what they could earn doing more direct commerce - and break out of the disorder that keeps them from growing like a weed.