MetaMuse

It's a Good Time to be in Online Advertising

Ok, it's getting pretty frothy in the online ad space, what with the recent $3.1B DoubleClick acquisition, WPP buying 24/7 RealMedia for $650M, and now Microsoft buying aQuantive for an astonishing $6B.

That's over $10B in M&A activity in the last month. Why is this happening? As Phil Wainwright points out:

The same way that the internal combustion engine took the horseless carriage and turned it into something no one had ever anticipated, the Web is turning advertising into something we could never previously have imagined.

The Web [has] provided the context in which you [can] selectively advertise, and a mechanism for tracking response.

The ability to tailor messages and to track and interpret responses depends on having large databanks of past behavior by similar prospects in similar contexts. Scale is a huge determinant of success, and therefore the would-be players are eagerly buying up scale.

Microsoft is woefully late to the party but they have the consumer traction to make huge progress in a very short time. Think of all the Xboxes out there, the 20oM (?) Hotmail users, the 100M (?) users of MSN spaces, Windows Live Messenger, etc. -- all of which pale in comparison to their ownership of the desktop (Windows and Office).

An informative piece I read on the aQuantive merger was the Ad Age interview with Joe Doran of Microsoft, where he points out (regarding ALL of their software I believe):

More and more people will look to those being free and the one primary way of funding those is advertising. We're very committed to building the software and a monetization platform that allows us and others to monetize software services. That'll be critical to us.

I've seen multiple posts, like from Kevin Kelleher over at GigaOM, in which they erroneously think of this acquisition as buying revenue/earnings. In my opinion, Microsoft doesn't care about the revenue stream nor AQNT earnings, and this deal was not valued on that basis. It had to have been valued on the basis of how much revenue/earnings could be generated once Microsoft flips the ON switch for all it's ad serving initiatives, across all its properties, using the capabilities provided by AQNT.

88% of AQNT gross revenues are from services to marketers and agencies -- services. Microsoft isn't a services company! Though this is of value to MSFT in terms of their ability to understand their big budget customers, the real value is the ad network, and in their ability to serve the Long Tail of advertisers. In this acquisition they not only get software which allows advertisers to manage their online campaigns and metrics (not only within MSFT properties but across competing properties as well), but also ad serving, behavioral and auction technology. As Joe Doran points out:

We believe with the volume we have as a publisher and by committing that volume to DrivePM we can build one of the largest, most efficient, highest-yielding ad networks in the world.

Microsoft is in the game and this won't be the last big acquisition they make.

As this guy points out, the lines between software, the internet, marketing communications, and creative execution (in an advertising sense) are blurring rapidly. When I think about Internet ad spend per household (only $217 -- compared to $980 for newspapers, $576 for direct mail and $980 for telemarketing), and the deep profiling/targeting capabilities of the Web, I know we're really only just getting started and now is a good time to be in the online advertising business.

Finalizing our Patent Application

Exactly one year ago today we filed a provisional patent, which I blogged about. A provisional patent gives you exactly one year to finalize your application or else you lose the initial date (which in our case was May 17, 2006).

With only roughly an hour to spare, we got our application in -- with 25 claims to our unique system for social search and discovery! The claims are long and tedious but in short, we're seeking patent protection for 2 unique/novel areas of the Others Online technology:

1. The display of people relevant to you based on multiple shared interests, both implicitly and explicitly defined.
2. The two-dimensional indexing of content viewed by people -- indexing the content by its attributes (the typical search engine approach) and also by the contextual/behavioral attributes of the people viewing that content.

The best way to describe the latter as novel in the area of search is to simply state "the people are the spiders and their behaviors form the indices". Picture a search across the Web where you can apply a behavioral lens/filter to the search results. No, this isn't like the other social search systems in place right now, each of which require a manual vote (bookmark, thumbs up/down, with tags, etc.). Withour system people vote automatically, with their attention and their behavioral profile.

As for the former, I'm excited about the breadth of our claim and the fact that it's application and client agnostic. It doesn't just cover a web browsing user scenario within a toolbar -- it also covers use of any desktop application (Outlook, Word, iTunes, etc.) and any client (be it a downloadable client, HTML embedded, bundled, etc.).

For those of you shaking your head and thinking "wait a sec, what about [insert company/product here]?", please understand there's a lot more to the patent than I've described here!

Keeping Potential Investors Interested

I’m raising money, and I’ve had quite a few angels and VCs complement me on my ability to keep them informed and interested, even if they're not ready yet to put in money. For the people who show interest and are in the pipeline, it’s my job to keep that interest alive. If you don’t, then your pipeline will go stale. Here’s what I do.

First of all, a couple of my beliefs about investors:

• They rarely invest in companies without getting to know the people and the market opportunity first. Those two factors (in that order) are largely what they’re betting on.
• They frequently don’t know the market as well as the entrepreneur, and usually won’t invest until they are confident that a market opportunity truly exists.
• They need to get comfortable with how the CEO works and thinks. They’ve already dealt with every insufficiency known to man, and you’re guilty until proven innocent.
• Building a company is fundamentally about making progress with very little resources, so they love it when you get a lot done with almost no resources.
• Their biggest fear is little or no information, or getting sunshine continually blown up their ass. They know building a business is hard, and they want to see full disclosure and transparency.
• Operational analysis and metrics are everything. If you had a dashboard for your business, what would it show?
• They’ll tell you when they’re ready to take the next step. Until then, update them with information, not the same question “so, are you going to invest yet?”.
• They’re busy, smart and suffer from ADD.

So I keep a list (Outlook “group”) of everyone who’s even remotely interested in my deal, and send the group an email update on a regular basis (BCCing everyone). It’s not just potential investors actually, but also key employees, potential employees, vendors, current investors, advisors, etc. Anyone who has a stake in the business (or who you’d like to see have a stake).  I don’t always send the update to everyone either; I hand-pick when appropriate.

There are also the matters of format, content and frequency. As for format, I start out with a bulleted list of the key takeaways, then expand further below. I create a section for each of the bullet points and title it in all caps.  This gives recipients a quick at-a-glance summary, and the ability to page down for more elaborate info.

As for content, I focus a lot on market education – highlighting different trends or events in the space and what that means to us, competitive tidbits, articles of interest, etc. If you’re in tune with the market (which you should be) then you should publish your awareness. If you have an opinion (which you should) then you should publish that too. Other content I like to focus on includes our business challenges and how we’re going to address them, status on milestones and metrics (sales, ops, product dev, etc.), feedback from customers, and any other traction. I particularly tune into any common concerns or objections that folks have, and try to address them. Or more importantly, if they’re right about something and it’s just taken me some time to come around, they see that I’m actually listening. I try to keep the content very short and to the point – like 1-2 paragraphs for each bullet point.

As for frequency, I generally send updates no more than 3-4 per month, and include 3-5 bullet points in each update. Sometimes it’s only once per month. The more active I am in fund-raising, the more time I spend on updates -- it's marketing communications. You don’t have to manufacture the news, you just have to give them a glimpse inside your head. Thinking about your current biggest problem? Explain it, and describe how you plan to approach it. Just read about a competitor that was acquired? Assume they already know, tell them why it happened, and what that means to you. That not only gives them insight into the market, but also insight into how you think.

It’s really hard to get people into your investor pipeline. It’s even harder to get a check from them. But if you can keep them tuned into you, your business and the market over time, you not only keep them reminded of your existance (live vs stale), you also have the best opportunity to engage them further and further into your project until at some point, they pull the checkbook out.

Best Barbeque in Tennessee

Ok, so I never knew what "pulled pork" was before. And I don't frequent barbeque restaurants all that much (obviously?). So in early April when our family was in Tennessee visiting my sick mother-in-law, and someone suggested we eat at "Leo's Pulled Pig" in Lenoir City, I said Leo's Pulled WHAT? Sure, why not!

This place rocks, and I am now a pulled pork fan. Later in the month, when we all went back to Tennessee for the funeral, Kevin and I offered to pick up a bunch of food from Leo's Pulled Pig and bring it to the wake. To my surprise, they still remembered us (three weeks later!) and even threw in 3 pounds of pulled pork for free. Not only great barbeque, but nice nice people. We gave them a helluva tip.

And this time I also tried their Smoked Corn and their Ribs -- damn, it was good. A couple nights later we went to another restaurant which claimed to be the most famous or best barbeque in Tennessee, and it was horrible compared to Leo's Pulled Pig.

Leo's Pulled Pig is about 2o minutes southwest of Knoxville, in Lenoir City on 312 West Broadway, only probably a few minutes off of I-75.