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Olson’s Observations

Technology. Innovation. Science. VC. Media. :: by Eric Olson

Archive for March, 2006

World Changing Content Delivery Advances Aren’t Just for Start-Ups

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I, like many people, have logged into my computer during March Madness to watch some of the games on demand. Upon logging in I received a great product and the reviews of the service have been all around positive. However, I did notice something that seemed a tad out of place. I saw this logo on the video player:

MLBAM

That’s right; Major League Baseball Advanced Media (MLBAM) was distributing the content. MLBAM, launched in 2001, was brought to life for one purpose: to run the operations of all MLB’s franchises. Since it’s birth in 2001 it has done that and much more. PaidContent.org reports that, on the same day March Madness began,

in addition to managing the streaming of those 16 games for CBS, MLB.com also handled four spring-training games, the U.S.-Mexico World Baseball Classic match up, an NCAA volleyball tournament, two NCAA baseball games and the NCAA wrestling championships.

This is an incredible feat for a company that just started streaming its own video in 2002. The transition MLB has made from licensee to vendor is nothing short of remarkable. They have truly changed the public’s perception of what the web can deliver. MLB.com’s core competency in streaming video is apparent and they can now utilize this technology they have already paid for in other markets to reap large returns. It was a brilliant move and one that could be indicative of where the content industry is going.

With the advent of feeds and better streaming technologies content producers will be able to become efficient content vendors. Think of the MLB like today’s radio DJ. The MLB used to need a content partner or partners to distribute their games for them (sure, they still use these partners today but envision a future where they may not need to). Now, with the advent of efficient streaming online video, they can easily distribute their own content and may be able to phase out the middlemen or use different middlemen (MLB.com is a middleman for March Madness). The same could be true of the radio DJ. They used to need the radio station to get their voice out there. Now, if they are a big enough personality, they could presumably start a podcast or their own streaming radio show and easily distribute their own content.

The technology is also bringing more obscure sports (and presumably other content as well) to people who want to see them. For example, MLB.com is working with (and invested in) the World Championship Sports Network who’s mission is to bring the World Championships of many sports (skiing, snowboarding, bobsledding, cycling, etc.) to users desktops.

I, for example, love cycling but it is very hard to find coverage of the world championships or the mountain bike championships or even the recent Amgen Tour of California. The TV coverage is out there but it is often sparse and on at inconvenient times. I don’t blame the TV folks though. Cycling just doesn’t have the audience in the US that other sports, like baseball, do and a lower audience means lower ad revenue.

The problem is that the TV stations are distributing the cycling coverage (in this case) to a mass audience. There is a small, but passionate group, who wants to see this coverage. Streaming video would allow this group to get the content while freeing up the mass media for shows with mass appeal. The other benefit is that the content producer ends up with a very targeted audience which means higher ad rates. So, they now have a choice of three business models that would be presumably lucrative:

1. Support the content through a subscription. People probably will pay since it beats the alternative of little or no coverage.

2. Support the content through ads (my preferred method) since you are able to get the content out at a low cost and are able to charge a high ad rate since the audience is very targeted. Also, users mind the ads less (and may even appreciate them) since they are targeted and, therefore, more useful.

3. Use a mix of both or allow users to choose whether or not they want to pay for the content or view ads and receive the content for free.

The winds of change are blowing in the content industry and MLB.com is one of the companies leading the way. I am very excited to see where MLBAM and other content technologies go and how they change our lives. Really though, that piece was just an excuse to say: Go Red Sox!!!

Written by Eric Olson

March 29th, 2006 at 10:55 pm

Archaeology and Tech

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Those who know me well (and those who have read the “about” page on this blog) know that I love archaeology and ancient civilizations. I especially enjoy advanced ancient civilizations. It amazes me to see the technology that was developed far before we would have expected it to emerge. I also get very excited about current technology and how it can help archaeologists in their search. I read an article yesterday on one of my favorite blogs about such a technology. No, its not brand new or super advanced, it’s actually satellite imagery.

As many of you may or may not know, a lot of the worlds untapped archaeological resources lie around what one was known as Mesopotamia and is now known as the Middle East (roughly speaking). In fact, a lot of potential dig sites are in the war torn regions of Iraq making it virtually impossible for archaeologists to dig there. This fact lead a Harvard anthropologist to think outside the box when trying to explore the canals at Nineveh, a 3,000 year old Mesopotamian village lying near the turbulent modern city of Mosul, Iraq. He used satellite imagery to virtually explore the ruins. Through this virtual exploration he was able to gain insight into how the ancient people of Nineveh used irrigation to support agriculture.

The interesting thing about the use of satellite technology in archaeology is that we can all be armchair archaeologists simply by utilizing Google Earth. In fact, an Egyptian crater recently found by a scientist using satellite imagery was also spotted by a handful of people using Google Earth. I know I am going to be using Google Earth a lot more to search ancient Mesopotamia and my favorite of all ancient civilizations, Egypt. Who knows, maybe I will discover an anomaly that may just be the next big find and all from the comfort of my apartment. I love technology!

Written by Eric Olson

March 22nd, 2006 at 10:29 pm

Posted in Science, Technology

Angelitis

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I read a great post today by Matt McCall of Portage Ventures. The post was titled “The Angelitis Blues” and focused on how seed round deal structures can really affect future professional VC funding rounds. Apparently this is becoming a bigger issue in the new “low cost” start-up market. Matt mentions that he and his partners at Portage had to walk away from three deals recently because of the deal pricing discrepancy issue. Essentially what had happened was the entrepreneurs had priced their previous angel rounds too high and did not want to go through a down round.

This is something that I had not thought of when going through my previous “Fixing the VC Model” posts. I had focused a lot on how cheap it was to build companies, the disconnect between the mega VC funds and entrepreneurs needs and how more angel funded companies could be a good thing for entrepreneurs. In reading Matt’s post the hole in my thoughts (one of them at least) was brought to light. I had failed to discuss how angel funded rounds, if not structured properly, could potentially impede a company’s ability to raise money from a professional VC.

I will quote Matt’s example so you can get an idea of the problem:

The company raises the first $500k at a $5M post-$. They grow and need more capital to ramp sales/marketing, so they raise the next $500k at a $10-15M post-$. At this point, the company is probably doing $1-3M in annual sales and growing linearly. The entrepreneur decides it is time to raise a venture round now, and goes to market with a $5M raise at $20M pre-$ valuation ($25M post-$). This is where the disconnect hits.

A company that is growing linearly (say $1-2m going to $3-5m this/next year in revenue) is going to be valued at a $3-7m pre-$ valuation. (I will write about different pricing approaches coming up.) The revenue often does not ramp as quickly as the entrepreneur expects (plans from two years ago had probably shown revenue of $10M vs. the actual $2M). Angels, being less price sensitive, had been willing to invest at the higher valuations. However, when the company needs more capital to scale (and is tired of living off of $500k rounds), it is forced to go to the professional venture community.

Matt provides one possible answer to this dilemma saying that entrepreneurs should use a convertible debt structure for their angel rounds. This will allow the money to convert to the professional VC round when it is raised. The angels may push back on this for various reasons but if they go for it it will ensure the entrepreneur is not stuck in the future. Entrepreneurs should heed this advice and really think past the dollars when considering their initial funding rounds (and all financings for that matter). Thanks for bringing this up Matt. I look forward to some more posts on Angelitis soon!

Written by Eric Olson

March 14th, 2006 at 10:53 pm

Posted in Fixing the VC Model, VC

Podcasts: Pay to Play?

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I originally began thinking of this post when I read the announcement that Ricky Gervais had gone paid. This was very upsetting news to me as I saw Ricky’s podcast as one that could really bring podcasting to the forefront. Instead, he chose to go with the pay to play model which places a wall around his content, limits his audience and, therefore, limits the relevancy of his content (or “his share of voice”).

I know what some of you are thinking and, no, this is not another rant about how podcasts should not be monetized. I am a podcaster and I happen to think that podcasters should be able to make money on the content they work so hard to produce. I just wonder if charging a subscription is the way to go. Scratch that, I don’t think that subscriptions are the way to go. Giving away ad supported content is the best method and there are two main reasons for this.

1. Your share of voice is preserved and allowed to flourish.

2. People don’t mind ads and, in fact, actually prefer them to paying for content.

The first reason is a no brainer. Since anyone can download your show at any time your show will undoubtedly grow (if you are producing good content of course). Keeping barriers to your content at a minimum makes your content very valuable since it can be easily linked and discussed. For example, we always talked about the latest Ricky Gervais podcast at work every Monday and now none of us listen. Ricky has effectively been erased from our usual office conversation. He no longer matters.

The second reason is a bit harder to prove but I, as well as many others, have always felt it was the case because it is how TV and Radio work and we have seen the success there. With that said, Ad Age put out an article today discussing a study on people and their reaction to ads vs. pay to play for iTunes TV shows which proves ad supported content is preferred to paid (I am assuming podcasts are in the same boat as the iTunes TV shows). Fred Wilson posted about the Ad Age article today and I think he hits the nail right on the head with this comment:

Sure a paid model will work. But its a niche business.

The mass market wants free and ad supported content, the way they get it on TV today.

It is a niche business. I don’t have any numbers on this but I am sure that Gervais’ audience has dropped considerably since he went paid. Now, instead of a widely loved and listened to show that could rival radio he has a niche podcast that a handful (possibly still a large handfull) of people pay to listen to. I suppose the same could be said for Stern going to Sirius. His audience isn’t nearly the size it used to be but he made and makes a ton of money so he probably doesn’t care. I personally would have loved to see him go the totally ad supported podcast route as it would have definitely legitmized the space quickly, still made him a ton of money and preserved his share of voice.

Back to the Ad Age piece. Here is a snippet of what the article gave for stats so you can see for yourself. It is the same snippet Fred posted and I think it tells the story well.

The survey found that 54% of respondents would be more likely to purchase an iPod if TV programs could be downloaded free of charge in exchange for watching a 30-second advertisement.

Among those actually planning to purchase a video iPod, 72% said they would be more likely to download a TV program in exchange for watching an ad. The Magid study surveyed 798 iPod owners between the ages of 12 and 55.

“It appears that the option to download content of choice for free will dramatically increase interest in purchasing a video iPod, thus potentially increasing video iPod sales and penetration,” the study concluded.

Mass media should be free and ad supported. That model works and people are used to it. Even XM Radio is beginning to go partly ad supported. Media wants to be free and it is going to take a lot of work to suppress that urge (if it can even be suppressed). Rather than fighting it we should just embrace it and create the revenue by selling ads. There is no doubt in my mind that there is at least a similar amount of money to be made with ads as opposed to subscriptions (if not more) and, as a bonus, you keep your share of voice by making your content open to anyone who wants to listen.

Caveat: Some podcast subscription models can work especially if there is a value add involved. For example, if the WSJ put out a podcast version of their daily edition where I could signal the sections I wanted to read and have them sent to me automatically in a nicely packaged personal podcast everyday I would pay for that. It would be a huge time saver and would allow me to listen to the news while standing on the el (its hard to read a paper like that). This is a situation where I am now going without the WSJ news because of logistics so the service really eliminates a pain of mine.

Update: Reuters is reporting that iTunes is now allowing users to buy TV shows by season via a “subscription” rather than having them pay $1.99 an espisode. Seems they still aren’t getting the picture but, who can blame them, they are selling a lot of shows and making some good money doing it. I am sure it is hard to walk away from the quick money in favor of the long term.

Written by Eric Olson

March 8th, 2006 at 5:49 pm

Creating Buzz with BzzAgent

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Product marketing has seen many changes over the years because of technology but, as we all know, the best marketing any product can have is word of mouth referrals from its customers. A positive review from a friend, loved one or expert is always far more powerful than any ad could ever be because the element of trust is involved. Lately the word of mouth movement has really begun to take off and I think a lot of this has to do with the world becoming smaller because of the internet. The internet also happens to be a great platform for creating and administering word of mouth marketing campaigns and, of course, there is a company called BzzAgent that is helping marketers to do just that.

Now, I am not just talking about these guys because they are from my beloved Boston and because I really respect the guys at IDG Ventures that have invested in them. I really think they may be on to something. However, the only way to know was to try it out myself and I did so after getting a little kick from Jon Karlen at IDG.

Signing up for an account is incredibly simple. After you get in you can start answering surveys that will give BzzAgent the data they need to start funneling different opportunities your way. Each survey you fill out earns you points. These points can then be used for BzzCampaigns which means free product for you in turn for telling BzzAgent and everyone you know what you think of the product. There are also things in between surverys and BzzCampaigns called BzzBlasts. Since I am fairly new to BzzAgent (and since there are no BzzCampaigns for me yet…) I opted to try out a BzzBlast that was available to me. This particular blast was for the Hershey’s Take 5 candy bar. Needless to say I was very excited since I am a chocolate junkie. So, I took less than a minute to fill out the requisite information and then waited patiently for my free candy.

The candy arrived today, a little more than a week after applying to join the blast. I opened up the package and this was what I saw.

BzzBlast 1

BzzBlast 2

The package included 20 candy bars (look for those Monday in the kitchen fellow FeedBurners!), a note describing the blast for the head BzzAgent, a Take 5 postcard, a postcard describing what a BzzBlast is and my very own copy of the BzzAgent Code of Conduct. After reviewing the paperwork I tried one of the candy bars. Oh, who am I kidding? I was half way through my second bar by the time I started reading over the paperwork!

The Take 5 bar is interesting. It combines chocolate, peanuts, peanut butter, pretzels and caramel into one bar. I enjoyed it but I won’t go as far as saying it is the best candy bar I have ever had (that would probably go to Cadbury). It does satisfy the urge for salty and sweet things in one piece of candy though. Laura thinks that the pretzels need more salt. I am curious to see what my fellow FeedBurners have to say. Nonetheless, this is a very interesting way to do a promotion. Look, I am blogging it and will be sharing the bars with friends who, if they like them, will share their opinions with their friends and so on.

I think BzzAgent may run into some problems with campaign performance though. BzzAgents could come off salesy and may not give honest opinions because they feel tied to BzzAgent in some way. However, I think BzzAgent does a good job of discouraging this type of activity through the BzzAgent code of conduct and because they don’t penalize you for negaive opinions nor favor your for giving positive ones. Marketers also need to accept the fact that not all products are winners and even the best BzzCampaign can’t save everything.

I am currently awaiting my “please go fill out the survey e-mail” which is the next and last part of the blast. In the meantime, I get to share some free candy with friends. I have enjoyed my experience so far and I think that BzzAgent will have no problems recruiting BzzAgents. Whether you love being a trendsetter, having something to blog about or even just getting free stuff being a BzzAgent is for you. I urge you to try it out and let me know what you think of the service in the comments or via e-mail.

Written by Eric Olson

March 3rd, 2006 at 9:00 pm