Just a quick note to inform all of you Olson’s Observations readers out there that I will be making some observations on WGN radio this Friday from 9pm – 11pm on Extension 720 hosted by Milt Rosenberg. Since I am unsure if a lot of you out there are listening to AM radio (and because a lot of you are located outside Chicago) I want to point out that you can listen live online as well.

This show has had a lot of prestigious guests over the years and Milt Rosenberg is known as one of the top interviewers around so I am very excited, honored and humbled to be asked to come on the show. I should note that this is a panel discussion though, not an interview, so I will be on with a few other top notch guests making the show that much more interesting.

This will be my first time on the air since I stopped doing a radio show with my friends back in high school on the local college radio station (95.1 FM WNRC baby!) and I am looking forward to it. I have always loved radio as a way to communicate and talking about what Web 2.0 has done in terms of revolutionizing communication via one of our oldest communication technologies will be a treat. Who knows, maybe we can even get Milt to start podcasting his shows!

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Editor’s note: I have bee lax in writing on this blog lately due to my new gig, TECH cocktail and my studying for the GMAT. That said, I plan to overhaul the site over the next couple months and start writing more frequently again so stay tuned and thanks for your support over the years.

Happy Thanksgiving everyone! I for one am looking forward to a relaxing day of eating, eating and more eating (why hasn’t someone created a web app for that yet?). I thought I would pass along a couple posts I caught today that I think are worth your time during the holiday. Here it goes!

Todd Vernon on Scaling Your Web App

Todd wrote a great post on scaling your web app today. Most of the points he makes are common sense and yet so many startups don’t do any of the things he talks about. If you run a startup and your product is a web app then you should give Todd’s post a read and make sure you are doing everything he says. Don’t be a green bean. While they are good vegetables you shouldn’t aspire to be one.

Don Loeb & KommonKraft’s New Media DoucheBags Video

I am so happy Don posted this video as I had yet to see it. Check this one out while you’re in you tryptophyan stuper because then it will be even funnier. Also, as Don points out, this could be a fun video to show when someone at the dinner table asks you what you do for a living.

I knew there were some folks out there that had more of a contrarian view on Facebook and they are now emerging in force thanks to Kara Swisher’s latest post over at AllThingsD. The post, and reason for outcry, all centers around the valuation numbers being floated around Facebook these days.

Supposedly Microsoft is seriously considering an investment in Facebook that would value the company at around $10 billion. Yes, you read right, that’s billion with a B. And as if that wasn’t somewhat crazy in and of itself the Wall Street Journal article mentions that Facebook might actually be holding out for a $15 billion valuation (this valuation craziness caused Om Malik to create a Silicon Valley Funding Advisory graphic akin to the Homeland Security warning – if he can get this into a widget it’ll be on Olson’s Observations in a second – hilarious!).

Those are some big numbers for sure and there is no doubt that Facebook has a lot of potential but let’s take a quick look at their revenue numbers to date. Swisher has them pegged at around $30 million in profits on $150 million in revenue (not sure on the time frame for the numbers). If we look at those numbers and then apply a 10x revenue valuation, which is what a lot of folks initially look at when thinking about acquiring a company, that puts Facebook’s valuation right around $1.5 billion.

The $1.5 billion valuation is an order of magnitude away from the $15 billion valuation that Facebook is supposedly looking for (side note: every deal doesn’t follow the 10x “rule” – it is just a good benchmark to use in this post – in fact, a lot of IPOs go for more than 10x including Google’s). Again, Facebook does have a ton of potential but, as Swisher points out, we have seen this story before. That is to say a company with a huge valuation and a lot of potential that fades away.

That said, some of the examples she gives (like Geocities, Netscape, AOL and Yahoo!), don’t seem to help her make her point. Both investors, founders and employees cashed in big at all of those companies and stock market investors were also able to cash in on them for a while before the companies became cash cows as opposed to rising stars (any BCGers out there – did I get that right?).

One of Swisher’s other main points is that Facebook is not Google. This is dead on. She likens Facebook to Yahoo! which is a good analogy. The basic thing to remember is that Facebook is far more dependent on eyeballs than Google. Ah, but Google is all about ads and eyeballs seeing those ads so isn’t it one in the same with Facebook? Not at all.

Google places ads on many publishers websites (and many other places for that matter). If a publisher starts to wane and receive less eyeballs then another one comes along to fill the gap and Google will probably have ads on that site too. Facebook on the other hand only has their property. If eyeballs begin to go away Facebooks begins to lose revenue immediately.

Basically Google is far more broad than Facebook will probably ever be.

Now, let’s go back to valuation numbers for a second and see if Facebook is really that far off in their self assessment.

I took a look at where Google was right around its IPO. Those numbers were as follows: $105.6 million in earnings on $961.8 million in revenues (2003 fiscal year numbers – source). If you take the 10x approach here that would have put Google at a $9.6 billion dollar valuation.

Google actually IPOed between a market cap of $29 and $36 billion which is significantly more than the 10x valuation. Of course it isn’t an order of magnitude larger though (that would have put the valuation at roughly $96 billion). It was about a 70% premium to the 10x valuation or so. Also, when you look at valuation to earnings you’ll see that Google was about 307x while Facebook, at a $15 billion valuation, is about 500x (disclaimer: these are just quick semi-useful/interesting comparisons and not by any means a rigorous financial analysis).

However, the real question is how did Google grow post IPO and can Facebook grow as fast or faster? We’ve already shown that Facebook seems to be valuing itself higher than Google did back in the day. Of course that seems off due to the fact that Facebook is far less broad than Google was and is. So, how has Google grown? Here are the EPS (earnings per share) numbers:

2005 – $5.33

2006 – $10.19

Partial 2007 – $6.22

2007 Full Year Estimate – $13.20

The first thing I noticed was that if you bought the stock right after the IPO, and you look at current EPS numbers, you are in for around 10x earnings which isn’t too bad at all. That said, the growth is pretty obvious. Even though it is slowing down now EPS grew about 92% from 2005 to 2006 and it is on track to grow 30% from 2006 to 2007 year.

Can Facebook experience that kind of growth? It will for a little while perhaps but I don’t think it will for as long as Google did simply because, again, Facebook is far less broad. In other words it seems to have less potential than Google did. Again, Swisher makes that argument but I didn’t buy it fully until I did the numbers.

So perhaps Facebook is being pretty aggressive on their valuation compared to their revenue numbers and to where Google was at when they IPOed and how they grew post IPO. In fact, it appears they are being even more aggressive when you look at where a lot of their revenue actually comes from – a deal with Microsoft for ad serving that, according Swisher and her sources, is currently not profitable for Microsoft.

With all that said we should all remember that something is worth what someone is willing to pay for it so if Facebook can get $15 billion than they should. It seems they are making a lot of moves that may justify such a large valuation down the road as well which makes the valuation a little less harsh.

One of those moves was the Facebook lending application. Apparently that application is doing very well and, as we all know, you can make a lot of money in lending so perhaps this is the thing that will propel Facebook up to Google’s level or perhaps even beyond it. Or maybe the propellant will come int the form of their own, in-house, apps in general which can take many forms like P2P lending and selling virtual gifts. Of course there are two issues with that approach:

1. The apps are diversified which means that Facebook could end up in the trap of doing a lot of things but doing none of them well.
2. The eyeballs still matter. If there are no eyeballs the apps won’t be used and no money will be made.

We’ll have to wait and see what the future holds for Facebook. While I do think they are being aggressive with their valuation this early in the game I do think that people shouldn’t bet against them quite yet. They have shown they are strategically smart and have the incredible team needed to create a world class company with the nice big valuation that goes with it. As big a Google? Maybe not, but it could still be pretty big.

You guys probably thought I was abstaining from writing about Facebook apps but you would be wrong. I had a post brewing the whole time. What can I say? It is a big trend and I was practically compelled to start thinking about it and you know what happens when I start thinking. No, my head doesn’t explode… A blog post comes out of that thinking of course.

Anyhow, it seems that everyone I know has started thinking about Facebook apps and they are all wondering how you turn them into a business (some have ever turned them into a business already). Of course the two simple models that emerge immediately are:

• A consulting/development firm for Facebook apps
• Creating a Facebok app or apps that can generate money by selling virtual goods (or even advertising in the app although that may be frowned upon by Facebook)

Those models are definitely good ones although I have issues with both.

The consulting/development firm angle is more of a short term play. Those types of companies could be likened to the web development firms back in the Web 1.0 era. The first players will generate a lot of cash because they were first to market and beause there are a lot of companies who want Facebook aps but have no idea how to go about creating them.

After a while others will see how much cash these firms are generating and enter the market themselves causing slimmer margins up to the point where a lot of folks start taking their Facebook app development internal. This is the point where the consulting/development firms will need to start thinking about other offerings (one successful example of this in the web development space is 37 signals – they turned their business into a picks and shovels business actually – oooooo… foreshadowing).

Creating Facebook apps that will generate cash is a whole other ballgame. There is a lot of risk in this approach since the volume of Facebook apps is simply massive (i.e. barriers to entry are low) and you’re essentially trying to develop something that will go viral. If you are able to get something to go viral then you are looking for attention to your app and, as that attention eventually fades, you will need to develop new “sticky” apps that will keep your company in business.

In many ways creating Facebook apps to generate cash is a lot like a content business. Pure content plays make me nervous because you constantly need to bring eyeballs in. That said, there are a lot of people that have built amazing and very successful content businesses so there is certainly a lot of money to be made and many sustainable businesses that will be created (in fact, I have friends that are successful in this area – they are great at creating content). Basically, I am just not sure I would be good at creating a pure content play.

Again, the issues above are just personal issues as many people have been and will be successful with both approaches. The approaches just don’t suit my personal style.

My style business is typically a scalable platform of some sort. I am more of a picks and shovels type guy. I like creating tools that will underpin revolutionary ideas and allow those ideas to spread (and also to allow people to make money from their work).

Creating a platform is exciting to me because you can leverage it across many clients quickly and efficiently which also means you can keep your company very lean and nimble (one of my reasons for joining FeedBurner a couple years back should be pretty obvious now).

That said, I began thinking about a picks and shovels related business for Facebook apps and the first idea that came to mind was a platform that anyone could use to quickly and easily create a Facebook app (think Yahoo! pipes).

This platform would eliminate the use of code so that anyone could create a Facebook app quickly and easily but it would also allow advanced users to create more advanced apps by diving into the code a bit.

It would essentially be the geocities of Facebook apps.

Of course to make the platform really useful you would need to allow someone to create a Facebook app and a host of other widgets (because after all a Facebook app is really just a widget specific to Facebook) for things like iGoogle and Netvibes all at once.

I know what you’re going to say now. But, Eric, isn’t there already is a company that does that for widgets called Clearspring? Well, yes, but I don’t think that Clearsping currently creates Facebook apps although I am sure they are probably working on it.

So, why did I write this post if the idea was essentially already out there? I figured it was a good exercise in terms of thinking from a picks and shovels perspective. The next time you see a big trend bubbling up I challenge you to think past the obvious and try to figure out what type of picks and shovels type solutions might make sense to serve the growing need.

Always remember what the gold rush taught us. It is a very valuable lesson and one that, if taken to heart, can help you create a company that has a good shot at being profitable (of course success/profitability is all in the execution but that’s a whole other post).

Generativity – or the ability for all people, some with no qualifications at all, to use and share a technology – is the both the best and worst thing about the PC and internet combination. This open access allows for unparalleled participation and innovation but it also means the system is vulnerable. Let’s open up by taking a look at the good side of generativity.

Disruptive innovation is crucial. Without it human progress stalls. For disruptive innovation to happen the innovators need to be able to reach users with their new products. With PCs and the internet the user is easy to reach since the user controls what programs they will run and what products they will use. This leaves the door open for crucial new technologies and applications of technologies to permeate.

Generativity also allows smaller firms to emerge and grow. Without generativity there would be no start-ups since large firms, who would own proprietary systems in a world without a generative internet and generative hardware, would effectively be able to block out smaller entrants into their markets. Without those smaller entrants – a.k.a. the disruptive innovators – progress is stalled.

In a June 2007 Harvard Business Review article (I am telling you, you need to read HBR – very, very good stuff) entitled “Saving the Internet” written by Jonathan Zittrain uses some great examples to describe the disruptive innovation made possible by a generative system.

For example, Zittrain looks at online auctions and posits that the market would have been ripe for the picking for someone like Christie’s or Southeby’s but eBay beat them to the punch. There are also a host of other applications (web based e-mail, personal web pages, IM software, etc.) that may have never been born if the internet and the PC were not generative.

Of course that is what is so exciting about technology, and in particular, the internet. A level playing field (systems wise) has been created where a few guys in a garage with an idea can disrupt large corporations who, by nature, are typically unwelcoming of new ideas created by outsiders or even their customer.

While it is great that the system is open and users can try new things at their leisure the issue remains that there any many computer and internet users who do not know enough about PCs and the internet to know they are doing something wrong or harmful. Essentially users are in control of what code they ultimately run which leaves them vulnerable to unknowingly running bad and harmful code.

Due to this unfortunate byproduct of open and generative systems we have experienced a large influx of what Zittrain refers to as “appliances” – or devices and systems that are not generative. Some examples of appliances are TiVo, hand held devices, etc.

Users enjoy the fact that these devices are convenient and will limit the damage the user can inflict. That said, it seems that users are not valuing the ability for them to modify and add new functionality to these devices like they can with their PCs. As Zittrain mentions, this turn toward appliances is a slippery slope. Once the PC goes out in favor of devices the ability for new software, like skype, to emerge is far less likely.

Zittrain also mentions that:

A shift to smarter appliances, ones that can be updated by – and only by – their makers, is fundamentally changing the ways in which we experience our technologies. They become contingent: Even if you pay up front for them, such appliances are rented instead of owned, subject to revision by the maker at any moment.

Unfortunately this is also true of APIs. While they are an agent of generativity their generativity is at the sole discretion of the company that created them. It makes complete sense that a company who created something and put APIs in place to allow for generativity would want to control the APIs use in some way. However, the company that built the API is not the only thing standing in the way of the APIs generativity. Back to Zittrain (he uses the Google Maps API as an example):

But this puts within the control of Google, and anyone who can regulate Google, all downstream uses of Google Maps – and maps in general, to the extent that Google Maps’ excellence means other mapping services will fail or never be built.

Zittrain goes on to make another interesting point this time around Web 2.0 and generativity:

… what some have applauded as Web 2.0 – a new frontier of peer-to-peer networks and and collective, collaborative content production – is an architecture that can be tightly controlled and maintained by a central source, which may choose to operate in a generative way but is able to curtail those capabilities at any time.

Of course this situation has been covered before. The MySpace and Photobucket example comes to mind where MySpace temporarily disabled the ability for Photobucket widgets to run on their platform. Facebook is another great example.

Facebook is a closed system which recently opened up by allowing people to create applications that live inside Facebook. However, those applications have to be built in Facebook’s framework and Facebook could potentially limit the applications they accept at any time including turning off applications like MySpace did to Photobucket. I hope Facebook will remain open but we’ll have to wait and see how it plays out.

Back to the question at hand: should we sacrifice generativity for safety and security?

I would argue based on all of the information above that we absolutely should not. What we should do is look for create ways to create security without compromising generativity. Zittrain lists four things in his article that we can do to keep the web and PCs generative while working to better secure them from threats.

Netizenship: Allow small groups of people to moderate (i.e. Wikipedia). It’s like neighborhood watch for the web.

More help from ISPs: The end points – ISPs – can become safety valves.

Network neutrality for APIs: The network should of course remain neutral so disruptive innovation can happen but the companies who offer APIs should also allow the APIs to remain neutral in that anyone who wants to can build on top of them (of course their are cost implications to the company offering the API that would need to be considered).

Virtual Machines: Technology that allows mission critical apps to be cordoned off from other apps essentially creating two separate machines in one is on the horizon. This will allow for a test bed to be created on a PC and that test bed, if infected, would not be able to harm the other crucial apps on the PC.

I’d like to jump into a little more detail on the last item – virtual machines. I just read yesterday in the latest edition of MITs Technology Review about an even more interesting idea around virtual machines. Ivan Krstic, one of the 2007 Technology Review Top Innovators under 35 (he’s only 21! – I feel like such a slacker), developed a system for the OLPC project called Bitfrost. Here’s TR’s explanation of the system:

Instead of blocking specific viruses, the system sequesters every program on the computer in a separate virtual operating system, preventing any program from damaging the computer, stealing files, or spying on the user. Viruses are left isolated and impotent, unable to execute their code. “This defeats the entire purpose of writing a virus,” says Krstic.

Fascinating stuff. The system is not quite ready for consumers yet but Krstic is working on helping programmers write “wrappers” for their programs that will allow them to communicate with the Bitfrost system. That is the first step toward getting something like Bitfrost out to the general public.

I’ll close with a quote from Zittrain’s HBR article that I think is quite fitting:

… for the generative Internet to save itself, it must generate its own solutions.

Fortunately it looks like we’re well on our way to doing just that.

Side note: Zittrain’s book on the generative Internet will be released this fall by Yale University Press and Penguin UK.

I just made the official TECH cocktail Boston announcement over on TECHcocktail.com and I have to say it was pretty exciting. Ever since Frank and I founded TECH cocktail in Chicago back in May 2006 I have always hoped it would eventually lead to one back in my home state and specifically my favorite city on Earth and now it is only a few weeks away.

Below is the rest of the post from the TC blog. Looking forward to coming home and TCing it up in Boston!

Here are the details:

Venue: Tequila Rain on Landsdowne (right behind the left center field wall of Fenway)
Time: 6:30pm -9pm
Date: Thursday, September 6th
Cost: $0 plus free drinks – yup, it’s free!

RSVP here: http://techcocktailboston1.eventbrite.com/

Yes, you read right. The event is free and will include free drinks and other great stuff which is all made possible by our outstanding sponsors that include (in no particular order):

Compete.com – Geezeo – ZoomInfo – Northbridge Venture Partners

I would also like to send a big thanks over to the guys on the ground in Boston who are getting things done for TC Boston. Again, in no particular order, they are:

Peter Glyman – Geezeo

Shawn Ward – Geezeo

Jay Meattle – Compete.com

Brian Balfour – ZoomInfo

These guys have really done it all including raising the money, choosing the venue, negotiating the deal with the venue, etc. Without them TECH cocktail Boston would not be possible.

So, there you have it. We’re bringing TECH cocktail to Beantown and I am have no doubt it will be wicked awesome! See you in Boston on the 6th.

Side note: You must RSVP and be 21+ to attend. Space is limited to RSVP as soon as you can.

VentureBeat ran a post today on a new service from a company called Techrigy which could cause the amount of people getting fired for writing blogs to increase dramatically.

Techrigy’s new service is called Social Media Monitoring (or SM2) and it is designed to help companies track their employees blogs and wikis. The service essentially works like a custom search product. The company first creates a list of employees, competitors and organizations that they want to monitor and the system pulls back a list of blogs and wikis based on the list. The company can then refine that initial list down to the exact blogs and wikis they want to keep an eye on. After the list is refined SM2 will capture every new post and save it (you can also search the archives as well) at which point the company can run “policy checks” on the content.

Policy checks look at all of the content collected by the SM2 crawler and decide if there are any company policy violations in the content. Companies can search for pretty much anything including, but not limited to, statements that could mean an employee is discontent, political and religious sentiments and comments on company management. As VentureBeat points out SM2 sounds a lot like Big Brother.

There are already a lot of e-mail monitoring solutions out there for employers (see the VenutreBeat article for a nice short wrap-up of them) but this is the first corporate social media monitoring solution I have seen.

Unfortunately this line is one which we should not cross casually but we will probably leap over it without much thought. Why you ask? Well, the answer is pretty simple.

Companies want more control and Techrigy’s SM2 technology will give them that control. In that sense Techrigy looks to be a very promising investment to whatever VC or group of VCs that decide to put up the $2 – $5mm Techrigy is shopping for right now. Techrigy will most likely get funding and then companies, looking mainly at the short term, will probably adopt the technology.

Bottom line: there seems to be money to be made with SM2 so someone will try to make it whether it is right or wrong. In this case it is a very grey area and although it feels ethically wrong to me it may not to others.

This technology seems to be delving much too far into the personal lives of employees. The small fraction of a percent of employees that are looking to harm their employer can probably be found without such invasive actions. As one VentureBeat commenter puts it:

So what this does, at the end of the day, [is] let corporations scan for every stupid photo of you dancing, singing on an online karaoke competition, [and] collect all that info, just in case…. sounds like a military state to me.

SM2 could easily be compared with the Patriot Act in the sense that both give up far too much privacy for law abiding citizens in order to catch the handful of bad eggs. In fact, a Ben Franklin quote comes to mind that sums things up nicely:

Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety.

Employers should look to hire good employees that they can trust to make good decisions outside of work. Of course no one has a 100% good hire rate but companies should be able to find the folks that aren’t doing well by the company without forcing everyone in the company to sit under a microscope.

Wine Library TV’s creator and host Gary Vaynerchuk is going to be on Conan O’Brien tonight which is outstanding news. Gary is both a personal friend and friend of TECH cocktail as he put up the majority of the sponsorship money to make TECH cocktail D.C. happen (he also announced the Cork’d acquisition – he did the acquiring – around TC DC as well).

Knowing Gary I am sure the show will be worth staying up for. He’s a very passionate and animated guy and, when you mix that with Conan, comic gold will undoubtedly emerge.

Now for a little history: Wine Library TV was actually created by Gary as a way to express his passion for wine and also to promote the online store he built a while back which you can find at WineLibrary.com. In turn, WineLibrary.com was actually a extension of a store in New Jersey that his parents had built up over the years.

The WineLibrary story is a great one in terms of what it can teach us about using the internet in an typically offline business and being on the forefront of technology. It is also a fantastic example of applying technology to an industry that wasn’t at the time, and still isn’t, incredibly tech savvy.

So, look out for Gary on Conan tonight and support one of our own. I am sure it’ll be worth your while. If you’re still not sold check out Gary’s latest show on WineLibrary TV to get a taste of what Conan’s interview will be like.

For more on the show tonight and Gary check out Frank’s post and the post on TECHcocktail.com.

Frank and I hosted the 5th TECH cocktail in Chicago last night (6th overall) which marked the one year anniversary of TECH cocktail. It’s really hard to believe that it has already been a year since TC1. That said, I thought I would start out with a little infographic I put together that sums up TECH cocktail’s first year (thanks to Jason Shellen for the inspiration). A picture says 1,000 words right? Plus, the graphic should keep my reminiscent rambling to a minimum.

Chicago has definitely come together as a technology community over the last year and I think we’ll be able to do even more in the year to come. In fact, TECH cocktail and Chicago have also become trend setters. Other people in other great cities that lack tech events are coming to us and asking us to bring TECH cocktail to them. I see this as a very positive thing since all the technology communities in the U.S. will start becoming closer.

TC5 was the best event we have done to date and it is all because of the great people we have here in Chicago. We drew between 500 and 600 people and a lot of those people have already sent in notes telling us about some of the great people they met and how TC5 will help them going forward with their businesses.

Of course it also takes lots o’ cash to put on an event like TC5 (trust me, I wrote the check) so I’d like to thank our sponsors since we literally couldn’t do it without them. A huge thanks to SingleHop, LinkedIn, Digital Bootcamp, Saper Law Office, Chicagoland Entrepreneurial Center, MK Capital, Origin Ventures, Chicago Micro, Fave Media and LiquidTalk.

Please check these guys out and help make their sponsorship contributions worth it. I know these guys primarily sponsor to help the community and aren’t as worried about their ROI but they have some great products and services and they are local so we should all be supporting them.

Next up I want to thank all of the demoers at TC5. Thanks to myAOL, PollEverywhere, My Open Bar, Braintree Financial, Humanized and Fave Media. We set out to create a platform for start-ups and others to showcase what they do so we’re glad so many great companies are taking advantage of it.

Last, but certainly not least, I want to thank Laura, Paulette and the John Barleycorn’s staff for keeping things running smoothly throughout the night and of course a big thanks to all the TCers out there. You guy make the event what it is and we’re forever grateful for your support.

I’ll leave you with this link to the TC5 pictures and make sure to tag yours techcocktail5 when you put them on flickr. Looking forward to seeing you all at TC6 in a few months!

I was scrolling through the old feed reader the other day (I was a way, way behind on that) and I caught Andrew Parker’s post on the death of the page view. Looks like Neilsen has decided to do away with pageviews in favor of a “time spent” metric. Andrew brings up an interesting point about both of these metrics and what they inherently value which I believe is worth quoting in full here:

But, why would Nielsen replace page views with the “time spent” metric? When everyone focused on page views, it rewarded companies like Myspace for requiring clicking through 10 pages just to update your profile. Now, if time spent becomes the new default metric, then sites like Myspace will be rewarded for their slow, cumbersome interfaces that needlessly waste your time. Whereas, a site like Google would be punished for having a speedy, easy interface that prioritizes getting you where you want to go, not keeping you on Google’s site.

He makes a good point. We need to start figuring out how to measure good traffic instead of just traffic. Advertisers are getting smarter and smarter each day and they are going to demand better from us in the metrics space. I am also sure that advertisers will quickly figure out the major inherent flaw in the “time spent” metric that Andrew points out. That is leaving pages open in general or leaving pages open across multiple tabs in a browser when you aren’t looking at them (which both he and I do each and every day).

Andrew then talks a bit about what we built at FeedBurner (by we I mean our awesome engineering team) and some of the flaws there. He’s spot on since we are really focusing on the feed and our current site analytics are not super useful for people who don’t use a blog platform to publish (but they are very useful for blog publishers). However, I do think the feed will begin to power more and more things for publishers and that is where things get interesting in the way of analytics (see my post “Publish Once” for more).

If feeds are powering widgets, e-mail delivery of content, feed readers, syndication, etc. then we are in a great position to fully measure the audience and its’ engagement and tie things back to the site analytics. We’re a ways out from this of course but it is coming and it should get us closer to the holy grail of audience engagement.

In the meantime, Andrew suggests looking into qualitative methods of measuring the web. That’s an interesting concept and it could add a lot of value to advertisers if qualitative metrics were developed and used in conjunction with quantitative metrics. I am not sure what the qualitative side of things would look like but I’ll keep thinking about that notion.