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UW Guest Lecture Deck - MKTG 555

Here is the deck I used for the University of Washington School of Business class  (MKTG 555 - Entrepreneurial Marketing and Management) I guest lectured at yesterday. It's part of their Center for Innovation and Entrepreneurship program, and I spoke about "marketing your small business across the new landscape of the Web -- Online Marketing v2.0".

UW Biz School Lecture - Fall 2009

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Others Online Acquired by the Rubicon Project

On September 15, 2009, the Rubicon Project announced the acquisition of Others Online, a company I founded in 2006, the 3rd company I've founded, and the 4th startup I've built up.

Others Online was founded on the vision of advertisers being able to reach people, not pages. When I had looked at the revenue growth of Internet advertising revenues from 1997-2007, I noticed two clear growth trends. The first growth trend, from 1997 through 2000 (v1.0), was primarily fueled by content targeting -- Web sites and content were the proxy by which advertisers reached people.

The second growth trend, starting in roughly 2002 (v2.0) was primarily fueled by keyword targeting -- search and context keywords were the proxy by which advertisers reached people.

My belief, and the bet we made with Others Online, was that the evolution of the Web would result in a third growth trend (v3.0) -- the ability for advertisers to reach specific audiences directly, thereby supplanting the use of proxies. Indeed, the industry is seeing tremendous growth in the area of audience targeting. However, the ability to correctly identify specific audiences is dependent on two things:

1. Lots of audience attention data, representing what we're devoting our precious attention span to online.
2. Technology to aggregate, process, score and summarize the audience attention data.

Audience attention data is everywhere. Every online media company has a fragment of attention data, and we've seen a number of companies form in the data space, each offering valuable data for sale to advertisers. Not just "behavioral" data either -- contextual, demographic, purchase intent, location, search keywords, etc. But that's the problem; no one has a complete picture, merely fragments. The true market growth opportunity can't be realized unless/until there's an aggregation point for audience data, coupled with media inventory, and the mechanism by which advertisements can be targeted based on the multiple facets that define us as people, at scale.

Others Online built a powerful technology platform to aggregate, process, score and summarize audience attention data, with services that helped publishers better understand, segment and target audiences. In our discussions with the Rubicon Project, we quickly realized the power of combining their global reach and scale (45B monthly impressions to 500M users, across 30K Web sites) with our technology to not only provide incremental value to everyone connected to the Rubicon Project platform, but also to fuel the next growth trend in audience-targeted online advertising.

As with all announcements though, there are bound to be misconceptions. Though future press releases will certainly add clarification, I thought I'd at least try to dispel a few potential misconceptions upfront!

• This acquisition does NOT make the Rubicon Project a "data exchange". We do not resell publisher or 3rd party data, nor will we. We provide a platform through which 3rd party data providers are developing an incremental distribution and sales channel.
• The Rubicon Project (still) does NOT sell media directly to advertisers. We remain 100% focused on providing value to premium Web publishers, helping them make more money, protect their brand and save time.

The Others Online team couldn't be more excited to be a part of the Rubicon Project. But mostly, we look forward to adding value to their publisher partners and in doing so, hopefully realize the market opportunity at hand.

Entrepreneurial Online Marketing

For the 3rd time now, I guest lectured at the University of Washington -- at a class on Entrepreneurial Marketing taught by my good friend Deb Hagen. Whereas in previous classes I covered SEO, search engine marketing, social media marketing and online advertising in general, this time I focused mostly on online marketing. And I covered both "paid" online marketing (advertising) and "earned" online marketing (social media).

For the latter, I gave two local examples, plugging Seattle 2.0 and Meteor Solutions. Marcelo has done an outstanding job using social media and SEO techniques to expand the Seattle 2.0 audience, pageviews, etc. As for Meteor Solutions, I really like how Pete and Ben have teamed together to create a truly unique service for helping marketers measure the sharing of URLs across an online audience.

Anyway, here's the presentation I used in the classroom:

University of Washington Guest Lecture - Entrepreneurial Marketing

View more presentations from Jordan Mitchell.

Don't Count Your Chickens ...

When I read today that Jimmy Wales was shutting down Wikia Search, my mind immediately recalled the Fast Company article in their December 2007 issue. He was on the cover, and the tone was very cocky and arrogant: "Google's worst nightmare". I'm not sure they'd even launched yet!

I don't care who you are, or maybe it's merely "not my style". I just don't think it's wise to make such a big splash PR-wise in a market that is clearly dominated by one player. Growing a start-up and being an entrepreneur is so much about the art of the pivot -- maneuvering around myriad market factors. In my opinion, it's so much more important to immerse yourself in the market and quietly make a difference *before* you make loud claims.

Swing for the Fences or Focus on 1st Base?

Who is more likely to produce long-term shareholder value -- the entrepreneur who raises too much investment capital, or the entrepreneur who funds growth through profits alone?

First time entrepreneurs often have skewed visions of "how it all works". Their perceptions are often shaped by the numerous successes that get touted about the media, rather than by the 1000-fold number of failures. It makes the "accidental success" of YouTube appear reachable, or at least "just as likely" as any other startup.

One of the things that entrepreneurs usually believe is that once they have an idea, they need investment -- that's just how it works, right? Once they start to talk to investors though, as well as advisors and other folks in the startup community, the questions usually come up ... is this a lifestyle business or a "swing for the fences" big market opportunity? A "lifestyle business" is one which you intend to keep running for a decade or two -- like my Dad's optometry practice, for instance, or my brother's event audio/visual recording business -- typically an owner-managed business in which the profits are used solely to support the ongoing lifestyle of the proprietor.

Then there are the "swing for the fences" big market opportunities. These are the startups with big goals, where the entrepreneurs focus on a market opportunity >$100M. To get there, most companies on this track sell ownership in their company at some stage of their business to raise the capital necessary to build their company. Some companies even raise huge amounts of venture capital, at a hefty dilution mind you, before they even arguably HAVE a business. (Twitter comes to mind ...) Investors are compelled by visions of a healthy return on their investment, and in the latter case also by extremely savvy entrepreneurs.

For whatever reason, I'm NOT a "lifestyle business" kinda guy. I'm only interested in building a company with a compelling market value and resulting shareholder ROI, but as a founder I'm ALSO uninterested in immediate dilution down to single digit % ownership. I want as much equity in the company as possible.

I learned long ago that the best way to build personal wealth and shareholder value is through "bootstrapping". Bootstrapping is the art of building companies with very little outside capital/investment. I'm proud of my bootstrapping skills actually, which I've developed over four startups now, yet I've also realized that outside capital is also essential to developing/realizing a substantial market opportunity.

The reality is that there is a middle ground. Bootstrapping your way 100% to IPO, while honorable, is very difficult and uncommon. If the market opportunity is truly there, being under-capitalized will usually result in missing the market window of opportunity. Conversely, raising too much capital too early rarely results in long-term shareholder value. In other words, given a large market opportunity -- a startup that raises too much investment capital is just as likely to fail (to generate shareholder value) as a startup that doesn't take any investment capital. 

I've been building Others Online based on what I thought to be an appropriate balance of equity financing and bootstrapping ("sweat equity" financing). Unfortunately we're still not profitable and thus reliant on investment capital at a time when the market opportunity is large and we're landing large customers, but market conditions are unstable and investment capital has dried up. And the other day I was talking to one of my investors, who literally wrote the book on bootstrapping, about our status as a company. He insisted that there "has to be a way" to generate more cash from our pipeline immediately. The only way I can see to do that is to shift our business model in the short-term, and I worry that doing so may negatively impact our ability to achieve the "big market opportunity".

I keep thinking about this. Is it possible to "swing for the fences" (big market opportunity) at the same time as focusing on 1st base (getting to cash flow breakeven)? Or are the two incompatible? I suppose it depends on the market opportunity, but I'd argue most high-value windows of opportunity in the market are open for a limited period of time. Rarely do you not have competition eyeballing the same opportunity, and sufficient funding is generally a prerequisite to nailing these windows of opportunity.

Market leadership positions are always attained as a result of execution. Financing is not execution. However, financing provides the means to develop the necessary components to execution: team, timing, marketing, and product development. Since paths to success are rarely a straight line, financing also helps recovery from bad decisions (on any of the above). Under-capitalized companies are therefore at greater risk. That said, bootstrapping is also essential. It teaches you to make your mistakes quickly and therefore least costly. Bootstrapping is good execution.

2009 is going to be a difficult time for companies who are "swinging for the fences" but aren't financed for the next 12-18 months.  If you're one of them, like we are, it seems you can only either change your game plan and just focus on 1st base, or merge your team with a team in a far better position to hit the home run.

Signs You're Probably an Entrepreneur

Saw this at BizLaunch.ca and WOW did it resonate! Here are 15 signs that you're probably an entrepreneur:

   1. You business is your life and hobby
   2. You often do and then think
   3. You don't like being told what to do
   4. You often have dreams about your business
   5. You constantly find ways to innovate everything
   6. You hate small talk
   7. You don't REALLY read long contracts even though you say you did and recommend people should
   8. You’re very impatient
   9. You hate standing in lines to buy something
  10. You hate meetings
  11. You look forward to Mondays
  12. You have a short attention span
  13. You don't read long emails
  14. You send out short emails and sometimes people think you’re rude
  15. You hate being told you’re wrong

I am an entrepreneur (by anyone's definition) and only two of these aren't applicable to me (#11 and #15). But I'm curious, are there any people out there who don't consider themselves to be entrepreneurs and yet for whom most of these signs apply?

Best Year Ever for Others Online!

(Cross-posted from the Others Online blog.)

I've never been one to think in terms of calendar years starting/finishing -- rather I view new years just as I do new days or months, as simply a progression of time. I suppose it's because of this that I've never embraced either resolutions or predictions. But I do like to recognize achievements now and then.

Others Online started building our core technology in 2006, and the company pretty much flat-lined for most of that year as we dealt with an emotionally upset and litigious [former] consultant. So 2006 pretty much sucked. In 2007 we got back on track, added some amazing investors, launched consumer services and grew that user base nicely by the end of the year. But by January 2008 it was apparent that our affinity profiling technology was more valuable to online media companies (B2B) than online consumers (B2C). So 2008 was the "year of the pivot" for us.

As I look back on 2008, I am extremely proud of what Others Online has accomplished, notably:

• Successful shift from B2C to B2B, earning valuable customers, real revenues and an AMAZING pipeline for 2009!!
• Quietly launched our Affinity Profiling Platform in mid-July, moving our data center infrastructure from our own servers to an elastic, cloud-computing infrastructure -- thereby allowing us to scale much more rapidly to meet demand.
• Since July, expanded our cookie footrpint to nearly 80M.
• Since July, developed over 52M rich profiles comprised of over 3B individual affinities, based on almost 300M Web searches and well over 1B page views across nearly 1M sites.
• Drove targeting for >500M ads, resulting in an increase in eCPM rates exceeding 50%.
• Added Sam Tingleff to the Others Online team.
• Added a half-dozen incredible angel investors -- the caliber of people whose accomplishments humble mine.

All this despite the declining economic conditions in 2008! So while I'm not one to generally congratulate ourselves on a job well done -- rather I'm much more inclined towards the "only the paranoid survive" school of thought -- I am quite proud of what we've done as a team in the last year, and I'm ready to face the challenges of 2009. In fact, I believe 2009 will be a much better year than 2008!

Actual vs. Perceived Progress

When you spend all your time at a "low altitude" elbow-deep in code (or similar deep effort), it's easy to lose site of the difference between actual progress and perceived progress. External stakeholders are often only  concerned with perceiving progress, not measuring ever little detail of actual progress.  And in many cases, it doesn't matter how much actual progress you've made if the critical stakeholders can't SEE it -- even if what they see is completely trivial and/or simplified. In fact, oftentimes the more trivial the indicator the better off you are. Simple visual indicators are the best indicators of progress, especially when the individual components to progress are complex.

For instance, check out this simple visual of an evolutionary algorithm evolving the design of a car (in Flash) to traverse the landscape without the red circles touching the ground. It's a simple visual demonstrating what I'd guess to be a complex set of code. (Evolutionary algorithms are optimization algorithms designed to evolve/mutate on their own, using mechanisms inspired by biological evolution: reproduction, mutation, recombination, and selection.)
In business, one thing you can count on is that everyone is extremely busy. Therefore, it's important to apply the fruits of your efforts to visual metaphor, so that stakeholders (investors, customers, partners, etc.) can empirically see their progress without even caring about how it was done. For board meetings, they're called KPIs (key performance indicators). It gets harder though when software engineers and business people need to communicate. This is why I think it's so important for engineers to learn to SHOW their progress, instead of simply achieve progress. No one else is going to care what you did or how you did it, until/unless you can demonstrate it. The perception of progress, therefore, is much more important than the actual progress.

What It's Like to be an Entrepreneur

I thought this video provides a very accurate picture of what it's like to be an entrepreneur.

When you're an entrepreneur, the #1 goal of every day, week and month is to NOT DIE.  You're continually dodging bullets, and must continually look out for and focus on every risk -- running out of money, losing a key customer, pissing off an investor, losing a critical member of the team, etc. When you have no momentum (and even if you do have momentum), there are hundreds of ways to screw everything up and be done as a company.