Ariel Diaz

There has been a lot of buzz recently about Twitter. Just a few months ago, it was a techie network that was difficult to explain to an existing user, let alone anyone that had never heard of it. Not, it’s a mainstream phenomenon that everyone is talking about. This came to head with all the ridiculous Ashton vs. CNN race to a million users (Ashton won), and Oprah’s first tweet. The explosive growth is a result of reaching a critical mass of users, getting celebrities started, and having a wide range of support tools (e.g. TweetDeck, Nambu).

As a result of this growth, Facebook has been reacting, or possibly over-reacting, as evidenced with their recent redesign. The controversial redesign is trying to focus more on status updates, and copied a lot of Twitter (and FriendFeed) features. Given the explosive growth, Facebook is certainly justified in their fears.

Lead Users

Facebook is worried about the Lead Users, the early adopters. Among my tech friends, we all are spending more time interacting with Twitter than we are with Facebook. I do this is mainly because it’s much easier to actually interact with Twitter (with the tools I referenced earlier, my favorite is Nambu). And on top of that, I’ve found that Twitter is more useful and relevant for what I need.

Chasing the Wrong Problem

Twitter is winning the status update wars. But that’s ok. Facebook is caught up in this because it thought that status messages were such an important part to it’s value proposition, right from it’s initial conception, inspired partly by AIM status messages. (On a side note, other sites need to get over the status update issue and stop trying to force users to update their status, yes I’m talking to you Plaxo and LinkedIn).

Facebook = Identity

Facebook right now is so much more than a fancy way to update your status message. It’s your IDENTITY. Facebook is trying to win back status messages and real time conversation. Instead, it should just realize it’s about identity, and focus on that. Facebook Connect is important, and if they neglect that, it won’t become what I hope it becomes.

Twitter = Communication

Twitter is leading in real time communication. Ironically, it’s also going back into the era of random user names that I was hoping Facebook has ended. That’s not as bad as it once was because there are more ways to map the random names to names that make sense to you, i.e. real names. But the implication of Twitter’s usernames is that it makes it much less likely to become a standard login protocol (as TechCrunch is implying).

Facebook’s use of real names and validation makes it well suited for a global identify management, and Twitter’s open standards make it well suited for real time public conversation. I don’t mind some overlap, as long as they each don’t lose focus on what makes them valuable.

Web 2.0 companies often focus on growing very aggressively, ignoring short term revenue. Part of this is due to the face that many Web 2.0 models offer free to use, ad-supported products, which inherently needs to get to an incredible scale before generating meaningful ad revenue.

However with the current economic environment, companies are being pushed to generate revenue and get to cash flow positive sooner than they previously expected. As a response, in the coming months I expect to see a lot more previously ad-only websites and services to begin moving to premium or freemium models.

37Signals has been preaching this philosophy all along, encouraging developers and entrepreneurs to create something valuable that people are willing to pay for. Despite looking prescient now, they have been mocked by the tech community, including a post from TechCrunch, who half-jokingly blamed them for driving a company to the deadPool. We’ll certainly see more companies headed to the deadpool, but as a result of having ad-only models, rather than following 37Signals’s advice.

The irony of this entire situation is that companies are trying to start charging customers as consumers are slowing spending faster than they have in decades. However, it’s still the right move, especially considering that Internet users are getting more comfortable paying for services they use, and that many internet services, even if they charged, would still be cheaper than their offline or other alternatives.

At YouCastr, we have always had a two pronged business model that relied on advertising and paid services. Reflecting the current economic state, we have focused our product development and marketing efforts towards accelerating our paid services. It’s a move we are all certainly excited about, and a decision that was easy to make.

On a fun closing note, I would characterize the previous attitude towards revenue for web startups as similar to Allen Iverson’s disdainful attitude towards practice in his infamous press conference. I can almost see it now, a Web 2.0 CEO at a board meeting saying:

“We’re talking about revenue. We’re talking about REVENUE! We’re not talking about the company. We’re talking about revenue. When you come to our offices, you see see us code, you see us getting users, you see us giving it everything we’ve got, but we’re talking about revenue right now.

Well those days are long gone, and the crop of companies that survives is going to be better for it.

(For a fun diversion, read the entire transcript of Iverson’s press conference, but replace “practice” with “revenue”, “Coach Brown” with “The Board”, and “game” with “company”.)

This week we launched a completely new website, including a complete redesign, a range of new features, and improved overall usability. Our development team has been working extremely hard on this update for the past 2 months, culminating in a final, all-night 30 hour homestretch to get the site live. Their dedication and hard work has paid off.

Overall goals

The main goal of the update was to make it easier for our users to do what they love doing on YouCastr. We also put a lot of effort making it clearer to organize and schedule live broadcasts for non-mainstream sporting events, such as high school and non-covered college sports that we’re seeing on the site. Because we focus on sports, we can create a much better way to organize sports broadcasts across all different levels and leagues.

New Design

The first thing existing users will notice is the new design. We have been working on the new design for the past 2 months, and the final result is the most concrete impact of our full time Web Designer, Fred Yates. He’s done a great job with the design, and constantly tweaking and improving it. The design is a lot sportier, crisper, and tighter, and creates a great framework for us to continue developing great new features.

New Features

Aside from the redesign, the major new feature is the ability to upload audio and video content. This is our first foray into video, where people can upload entire sporting events, highlight clips, or pre-recorded sports shows. The ability to upload audio now allows people to upload their previously recorded and produced podcasts, for those users that are more familiar with that medium. Before this update, users could only stream the content live, and it would automatically be archived for playback or download. There are more, so you’ll want to see all of YouCastr’s new features

Usability Improvements

We rethought all of the key processes to make it easier for our users to do everything, including creating live content, uploading content, writing articles, and navigating around the site. We’ve applied all of what we’ve learned over the past year since our private beta launch, and applied it to our current focus.

Result of Changes

These changes put us in an even better position to continue revolutionizing the way fans, parents, and alumni follow non mainstream sports. As we move forward, we will be introducing new features to make YouCastr better and better. I’m really excited about where we are and how far we’ve come, and there are a lot of great new things in store.

Today I went to the MassTLC unConference. It was an interesting structure for a conference, where the entire agenda is created by the audience on the day of the actual conference. It brought together a great mix of entrepreneurs, investors, and technologists for a day of interaction. The structure (or rather unstructure) allowed anyone to create a session on any topic by simply writing it up on a card, picking a time and a room, and posting it on the central board. Then people could review the “agenda”, and pick the topics that they were interested in. It worked better than it sounds, and better than I was expecting.

In the morning I went to a session on digital video on the internet. We talked a little bit about the technology, but ended up focusing on business models and monetization. The biggest challenge right now for web video is monetization. One investor specifically commented that they are staying away from web video currently for that reason. One of the biggest challenges is getting ad buyers to understand and get comfortable with the new mediums. It’s a dollar to dimes issue that the video industry will have to come to terms with. The newspaper industry is already dealing with this. Essentially, for every dollar of revenue that newspapers (and soon broadcasters/cable companies, video producers, etc.) are losing, they are only seeing 10 cents of revenue from their online equivalent. There are two ways to address this: lowering production / overhead costs to make that 10 cents more valuable, or increasing that 10 cents through innovative advertising channels. There is a lot of creativity going into that space now, but Madison Ave. hasn’t caught up yet.

We also talked about the monetization potential of different content types. Niche sites generally have more loyal audiences and higher CPM rates, but are harder to scale. Premium content with higher production value has a larger total audience potential, but needs much more advertising revenue to support that higher production cost and higher paid actors.

At YouCastr, our sports focus makes our web video addresses many of the concerns with distributed video. For one, large brand advertisers like Nike and Coca-Cola will be comfortable associating their brands with high school and college sporting events, which are safe. Second, sporting events are long and have natural breaks, meaning people are willing to sit through a short pre-roll if they are going to watch a 2 hour event, and ads during timeouts and halftime are generally accepted. And third, we are not planning on producing the content, which means we can monetize an audience of 1, versus ESPN which needs tens of thousands (if not more) viewers to pay for the production cost and opportunity cost of showing something on a cable channel (fixed distribution inventory). Fourth, sports fans are LOYAL. I can go on about the business merits of focusing on sports, but maybe I’ll have to devote an entire post to that.

I also had a couple of interesting lunch sessions. The first was with James Geshwiler from Common Angels. We talked about angel fundraising, key challenges, and the key differences between angel and VC financing. The second lunch session was with George Bell of General Catalyst. He was truly energetic, offered short but insightful feedback, and gave us all a good inside perspective about the impact of the overall economy on VC’s investment strategy. Generally, new investments are down in order to reserve cash for future deals and existing portfolio companies. The environment is definitely tough right now, but that’s also the topic for another post, this one’s already getting long.

In the afternoon, I led a session about attacking the Long Tail, which in our case means reaching long tail content creators (high school and college sports broadcasters) and content consumers (the small niche audiences for each sport). We had some interesting dialog about the challenges to reach them, and some effective ways to actually do it.

Overall, the day was great. Got to meet some really interesting people, and to experience a different type of conference that was very refreshing and created a lot of opportunities for chance encounters and casual conversation.

But I did say it.

RIM’s 28% drop today ties perfectly into my last post. What is weird is that all the analysts were “shocked” that RIM had to spend more money on advertising to fend off the iPhone, spend more on R&D to make better phones, reduce profit margins to compete on price, and cut margins to go after consumers.

The writing was on the wall folks. If you expected RIM to keep those silly margins, you are blind. RIM makes cheap hardware, but because they were competing with Windows Mobile and selling to business customers that are not sensitive to price, they could keep those margins and sales growth.

Good luck RIM, see you when your market cap is under $10B.

Here are some fun links:

• Jim Goldman’s Tech Check: Apple IS the Issue at RIM - Tech Check with Jim Goldman - CNBC.com
• Bloomberg.com

I have been meaning to post this for a while, got sidetracked, then ended up holding off as my prediction seemed to be coming through. Yet given RIMM’s recent resurgence, I feel my window has reopened.

Let’s look back a bit to understand the Palm parallel. Shortly after its IPO, Palm went on to have a peak market cap of about $85B and was the darling of handheld computing, perched to lead the revolution. But then they made crap for years, and the market cap is now hovering at around $800M. Today, RIM has a market cap of about $73B. It’s NOT a $70B company. The writing is on the wall, and here are some reasons:

The iPhone

This one’s easy, but the biggest threat to Blackberry’s ongoing growth is the iPhone. The application infrastructure and user interface are without question the future of mobile computing.

RIM is a one-trick pony

Let’s be clear about one thing, RIM’s value is based entirely on one service it provides: push email. That’s it. It doesn’t make the best phones out there, they aren’t particularly sexy or usable outside of the core emailing functionality, and push email isn’t that defensible.

RIMM vs. AAPL Stock

It’s incredible but true that RIM has been outperforming Apple for the last 3 months, 6 months, 1 year and 5 year periods. Is that sustainable? RIMM today is worth half as much as Apple. Think about that. To use the venerable Chewbacca Defense “IT DOESN’T MAKE SENSE”. Apple makes the best computer operating system, the best computer hardware, the best music players, and the best phone.

RIM is on the wrong side of the innovator’s dilemma

I feel strongly that RIM will not reinvent its way to ongoing relevance because of their focus on the physical keyboard.

BlackBerry’s Quest: Fend Off the iPhone - New York Times: “THERE’S a reason that R.I.M. is averse to the iPhone’s glass pad. ‘I couldn’t type on it and I still can’t type on it, and a lot of my friends can’t type on it,’ says Mike Lazaridis, R.I.M.’s co-chief executive and technological visionary. ‘It’s hard to type on a piece of glass.’”

Note to Mr. Lazaridis: as the actual act of typing becomes a smaller percentage of the total time spent interacting with a particular device, the incremental speed benefit of having a full tactile qwerty keyboard is reduced. And that’s not even talking about the fact that in many cases, people type faster on the iPhone’s virtual keypad (myself included, I’m much faster on my iPhone than on my recently-retired BlackBerry Curve).

So good luck RIM, but you’ve peaked.

Disclaimer:I do own a (small) amount of Apple stock, a MacBook, an iPhone 3G, and until recently, a Blackberry Curve. Also, I am NOT an investment adviser, and the information in this column does not represent a recommendation to buy or sell stocks.

I just wrote on the Fantasy Sports Trade Association Conference in Chicago that I went to. Overall it was great to help spread the word about YouCastr, and to meet other people in our industry. Outside of the panels, I went to a Cubs game with Pete Vlastelica, CEO of Yardbarker, and DJ Burdick and Mike Sroka from One Season, and Terry Neofitos from The Fantasy Sports Forum. We had some good clean fun at the game and after at the bars in Wrigleyville.

We also were able to compare notes about our various funding, startup, sports, and marketing experiences. Even brief informal conversations provide a great opportunity to get a feel for what you are doing. Yardbarker is about a year and a half further down the path from us, and Pete had some great insights about heading down that path.

Mike, DJ, and Pete are based in the Bay Area. We talked about the benefits of being out there, versus here in Boston. I’ve got my thoughts about that issue, and that is something I will probably dedicate an entire post to. The density of startups out there (especially Web 2.0 companies in SoMa) is really incredible. Where we are in Cambridge is pretty dense, but still doesn’t compare.

DJ and Pete had only been to Chicago once before, but Mike grew up on the north side of the city, so we had a chance to explain to the rest of the guys why Chicago is the best summer city in the country, but they pay for that the rest of the year.

Tomorrow we are presenting at the Web Innovators Group in Cambridge (about 1 block from our offices). It’s also my birthday. I’ll make sure to post something about that, I’ve got a huge backlog of posts.

About a week ago there were a couple of very interesting blog posts about why startups fail, taking different view points:

Why Startups Fail: David Feinlab, Mohr Davidow Ventures

vs.

How “Why Startups Fail” Fails: 37 Signals

Both are very interesting reads, and I won’t go through point by point to comment on them. I’ll just pick one point that both posts agreed with: The need for an Entrepreneur with a capital “E”. Both stress the importance of someone willing to make decisions, organize a clear vision, and help implement that vision. As the CEO of YouCastr, that is a role I am intimately familiar with.

In general, the role of a CEO is pretty amorphous. It is not directly measurable the way that sales (number of customers) or engineering (product progress) are. This is even more true for an early stage startup, where the role and the company are constantly evolving. One of the typical paths for a tech startup is the evolution from a product focus to a marketing focus. Ben Yoskovitz has an interesting post about the Evolution of a Software Startup from engineering and product focused, to sales and marketing focused.

It’s interesting to read about the importance of that Entrepreneur, and it’s something I take to heart. I set a pretty high standard for myself, but not letting my team down is an even bigger motivator. They believe in me, and as Dharmesh Shah says, “Success = Make Those That Believed In You Look Brilliant”.

Does anyone else find it just absolutely inane (I can use a number of other adjectives as well) that Chrysler is offering a $2.99 Gas Guarantee? On pretty much every level you look at it, it’s just silly.

As a promotion, it feels pretty empty, because you can do the math pretty simply and realize that if you’re saving, say $1 per gallon, and use 20 gallons a week (which is a lot), you’re going to save about $3,000 over the course of the three years that the promotion runs.

From an environmental standpoint, it is encouraging consumption of something we all know is bad for the environment.

From an economic perspective, it is deliberately going against the market forces that are pricing gas so high.

From a marketing perspective, is it really sending the message you want? Are customers happy that you’re looking out for them, or are they looking at it as a band aid for more serious problems in the economy and in your fuel efficiency.

When Southwest buys oil futures to insulate them from potential jet fuel price increases, it’s brilliant. When a car company uses the collective national fear of rising gas prices to sell cars, it’s deceptive and evil.

Shame on you Chrysler.

There is a lot of discussion around the web about moving towards a more unified way to manage your online persona. Data Portability has brought a lot of attention to this space, and all of the big players are responding with their own initiatives. It’s exciting to see things moving in the right direction. It’s also interesting that the conversation is shifting to focus on identity, which I consider one of the biggest latent values of Facebook (more on that later).

Identity on the web and why it’s important

In the early days of the web, anonymity was the norm, almost encouraged even. It was portrayed as an alternative world where you could be something else. At the time this was seen as both an advantage, and also as a reason that the internet has too much noise and will never truly rival established businesses.

By and large, the focus on anonymity is dying down. We are moving towards an internet where it is acceptable and encouraged to be yourself. Part of this is people getting more comfortable with the ever present online world, and part of it is that the improved technology and wealth of information on the web makes it increasingly difficult to avoid having an online footprint. And if you already have information out there, it’s better to control and curate that, instead of having someone else do it. We are seeing this move towards identity all across the web, everywhere from personal blogs to social networks, Twitter to Amazon to LinkedIn. People are comfortable sharing more about themselves, but they are increasingly comfortable with a verified true identify on the internet.

Why Facebook can solve this

In its early days, Facebook required people to be who they said they were by limiting registration to people with a .edu email address, which almost invariably was formatted in such a way that your true name was used in that same .edu email. That created a culture of creating your true identity, linking up with real friends, in a safe environment. This culture was so entrenched, that even when they opened up so that anyone could join, people by and large consistently create accurate profiles and use their real full name. It’s nice not to have to mentally map a series of online usernames to people’s actual names.

So what Facebook has created is the largest, accurate, self-mainteined identify validation in the world. On Facebook you can pretty quickly validate if someone is who they say they are through pictures, mutual friends, name, colleges, etc. Notice the focus on accurate and self-maintained. Both of those are important. Myspace is lacking on the former, online directories lacking on the latter.

Facebook connect: Getting closer

A step I have been predicting for a while, Facebook has announced their Facebook Connect platform, basically creating an ability to leverage this identity that they have created, as well as the social graph. The value of this is incredible on a number of levels. As a user, I hate having to recreate my profile and social graph on all of the sites I use. As a founder of a social media company, I want to encourage people to create profiles on my site, while also understanding that it’s a barrier to entry that I wish I could avoid.

In addition to convenience, it has a number of incredibly serious and truly useful applications. Validating identity can address phishing attacks. It can prevent spam email by creating an framework where you can validate the source of the emails. It can simplify online banking, credit cards, and other purchases. It starts entering a territory that moves far beyond simple social networking.

Why others can’t (or won’t) solve this

I’ve laid my case for why Facebook will figure this out, and it’s really built around the nature of their social network being based on real people and real names. However, it’s important to look at some of the other potential solutions, and why they can’t or won’t figure this out.

OpenID doesn’t work

Whenever this topic about identify and single sign-on comes up, people invariable clamor about OpenID and how that’s going to solve everything. But it hasn’t, and it won’t. I understand the technical advantages of using URL’s as the core identify, but realistically it’s too cumbersome right now. I’m a huge techie, and I don’t use OpenID for a number of reasons. First of all, I can never quite remember my AIM issues OpenID. Where does the dash go, is it ‘openid’ or ‘open-id’, where is the slash, etc. Second, not that many sites are actually using it. And finally, even on a site that accepts it, it doesn’t really work that well. I want it to remember me, yet every time I use it somewhere, but instead I have to enter the entire ID and password. My point is that OpenID has created the right conversation, but is not the right solution.

MySpace is irrelevant

MySpace has made some strong moves recently to try to become more open, but realistically, aside from bringing us seizure-inducing profile pages, they are not an innovator. Additionally, MySpace has never had a solid identify backbone, resulting in a ton of spam profiles (Facebook is starting to see this, but has better mechanisms to address it), lack of clarity between people, bands, companies, groups (Facebook has done a good job of having companies create Pages to prevent this), and random user names that are difficult to pin down to the actual person. For Rupert’s sake, I hope the rumors of him trying to cash out are true, because MySpace’s value has certainly peaked.

Microsoft Passport was a non-starter

It failed for two main reasons:

1. Nobody wanted (or still wants) to trust Microsoft with that type of central control to their core informaton
2. It was too aggressive from the start, wanting to force everything to a central database that didn’t even exist

But the Passport history is interesting, because it shows that this is valuable to Microsoft, and was probably a factor in their investment in Facebook. The New York Times had a recent blog post highlighting this analogy:

Can Facebook Build a Better Passport? - Bits - Technology - New York Times Blog: “This is similar to what Microsoft tried and failed to build with its Passport system. AOL tried, too, and no one noticed enough to remember that it failed as well. More recently, there has been a movement towards a standard known as OpenID to allow people to log in to one site with an ID issued by another. But so far, it is too complex to use and hasn’t gotten much traction.”

(Via NY Times.)

Google and Yahoo aren’t moving fast enough
Realistically either one of these have the potential to address these concerns, but neither is moving fast enough to do something. Google is slowly opening up the value of their current sign on. I can use my single gmail account name and password to sign into all of my google services, but it’s still lacking. For example, the tie-in with YouTube is still pretty iffy, and their half way support of OpenID isn’t helping. Yahoo has a huge user base that they are now trying to make more social. But again, I wouldn’t bet on them figuring this out. Plus, realistically, Yahoo users are not on the bleeding edge of the web, and are likely to be the early adopters of this new direction.

Facebook as the Switzerland of the web?

Whoever (if anyone) ends up controlling or brokering identity on the web, will have to be neutral, trusted, and safe. In order to be neutral, it cannot profit directly off of that identity control. It will need to build a deep trust, given that identity will likely be the most valuable online currency. And it will have to create the safe and secure mechanisms to transfer that currency around the world.

Sounds a lot like the Switzerland of online identify management.