Enterprise Android Adoption: A CIO’s Big Dream Or Worst Nightmare?

Neil Florio

Editor’s note: Neil Florio is responsible for global marketing strategies and demand generation programs for Fiberlink’s MaaS360 product. Follow him on Twitter.

It seems we are living in an Android-dominated world, as the leading mobile open-source OS owns 60 percent of the consumer mobile device market. However, as Bring Your Own Device (BYOD) gains rapid momentum, the same cannot be said of the enterprise space. Many CIOs find themselves in a catch-22 position of satiating employees’ thirst for using the Google-based juggernaut while addressing the very real concerns of protecting corporate data and providing standardized management.

This is supported by the fact that there are now more than 550 Android device types, 48 manufacturers, and a multitude of carriers worldwide. To complicate things further, many of these manufacturers and carriers have installed custom variants of the OS and added software to differentiate their offerings from the rest of the continuously growing Android herd. This is great news for consumers as it offers them choice, but it sends chills up the spines of CIOs who have relied for years on efficient management through standardizing only a few devices.

Each version of Android has improved management and security capabilities, but the vast array of devices on the market means it’s unlikely that enterprises will ever deal with only one device type. This doesn’t negate the prominence of Android in the enterprise, it simply means CIOs must arm themselves with the right protective measures. The heterogeneity of the Android platform means that enterprises looking to run the OS have a multitude of management uncertainties, such as device controls, data usage and encryption — something that all CIOs dread.

When a CIO makes the decision to adopt Android, one of the first issues he faces is user management. There is no inherent capability in the Android platform for extending and revoking privileges to individuals, tracking their usage, or notifying IT when devices violate policies and action must be taken. This is a stark contrast to the standardization offered by Apple iOS Exchange ActiveSync (EAS) Support. Android natively does not support many of the EAS policies, leaving the responsibility to the device manufacturer and the CIO to figure out what does and doesn’t work.

In addition to managing users, the CIO now has to handle increasing volumes of data, spread across various parts of the business. The more recent versions of the Android platform support 4G networks, which consume data with a voracious appetite. However, because many carriers charge by gigabytes consumed as well as minutes of talk time, the business can be liable for significant overage charges if a device surpasses the limit. Users are often unaware of how much data they’re using. Additionally, many devices can be used as mobile hotspots, effectively acting as a Wi-Fi modem for other devices, giving away data to all who come in range.

But perhaps the biggest concern to CIOs when considering Android adoption, above data and user management, is encryption. Encryption of data is a key requirement for enterprises, from the standpoints of corporate policy as well as industry compliance such as PCI-DSS. Prior to the release of Honeycomb (version 3.0) in February 2011, Android devices did not have any kind of hardware encryption. Sadly, Honeycomb was solely for Android tablets. A year later, close to 80 per cent of the existing Android phones on the market are running Android versions that do not support encryption, with the most prevalent being versions 2.2 and 2.3. This presents a substantial risk for email, calendar, and contact information being compromised by prying eyes.

The latest version of Android 4.0 does support device encryption and runs on both tablets and smartphones, but because it was released late in 2011, it’s not running on most devices. As a result, with more employees bringing Android-enabled devices into the workplace, CIOs must take extra measures to encrypt Android devices. Certain CIOs are already exploring a more flexible approach to enterprise application management, which lets them automate security rules, continuously monitor devices and detect any threats. It also provides them with dashboards highlighting compliance metrics, as well as granular information on device and network use.

Android is here to stay, especially as BYOD programs pick up speed. We have already seen certain manufacturers, such as Samsung, adding additional enterprise features to support with their SAFE program, allowing IT administrators to remotely manage mobile applications and overall device functionality.

In order to remain secure and compliant with industry standards, CIOs need to refer to examples such as mobile device management when looking for a more agile way to protect and manage the wide range of available devices, versions, and idiosyncrasies. Only then will they have any hope of ensuring that enterprise adoption of the world’s most popular mobile operating system turns into a dream and not a nightmare.


Gift Guide: Jabra Solemate

solemate

I use the Solemate. That’s the highest recommendation that I can give a product. I use the Solemate around my house. The sound easily fills rooms. I travel with the Solemate to compensate for hotels’ lowly clock radios. With Bluetooth and clever storage for a 3.5mm cable, it is always ready for an impromptu party. Plus, it charges from microUSB. This is the best portable speaker for the money. Period.

Features

  • Bluetooth/3.5mm connectivity
  • Integrated 3.5mm cable
  • Tough casing
  • 8 hour battery
  • $199 MSRP
  • Product Page

What is it?

The Jabra Solemate is a “me two” product in a category first made popular by the Jambox. Like the Jambox, it’s a small speaker with integrated controls, Bluetooth, and a speaker phone. But it’s a bit deeper than the Jambox. It’s about twice as thick and heavy as the Jambox. That’s a good thing.

The sound of a speaker can often be estimated by the weight of the speaker. The heavier the speaker, more often than not, the better it will sound. Heavier speakers often have more dense casings and larger magnets powering the speaker. In the case of the Solemate, it weighs 2.4 lbs, which is much heavier than any other speaker in its class. And it shows. The Solemate sounds great.

The Solemate employs four speakers. There are two tweeters and a mid on the front and a rectangle woofer on the back. An integrated amp powers the whole thing.

How does it work?

The sound will fill a room. The highs and mids are a tad bright but that’s to be expected with a small speaker. There’s a surprising amount of bass. The Solemate can make a table vibrate. Best of all, the bass doesn’t clip at high volumes, although it does take a back seat to the mids.

The clever cats over at Jabra devised a way to store a 3.5mm cable on the Solemate. There’s a little track within the “sole” of the speaker in which a small 3.5mm cable can stand ready. Sure, the speaker has Bluetooth and it works well, but there’s nothing like the simplicity of a dedicated cable. And with the Solemate, there’s always one on hand.

Recommendation

The Solemate costs $200 — a good chunk of change for a small speaker. But compared to other speakers in its class, it’s the smart buy. I find the audio quality to be superb from a small speaker. Highly recommended.


Teenage Gamers Better At Simulated Surgery Than Medical Residents

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Forget AP Biology and Latin class: get those pre-meds hooked on Call of Duty. The University of Texas Medical Branch at Galveston found that teenage video gamers were better at simulated surgery than medical residents.

The study used machines that simulated live surgical techniques, such as needle passing and suturing, and found that high schoolers who played an average of two hours of video games a day did “slightly better than our physicians in training,” said UTMB Dr. Sami Kilic (in a delightfully thick accent). “Our physicians in training have already participated in actual cases. It tells me that this computer games helps a lot to transfer the knowledge and skills gained from the computer games.”

The preliminary research corroborates a decade’s worth of evidence that playing recreational video games improves visual intelligence. The promising results have inspired video game-centered charter schools, such as GameDesk in Los Angeles, to find more productive ways of implementing video games into curriculum than replacing recess with Mario Kart.

Watch video of the study below:




How Mobile Can You Go? A Mobile Take On Q3 Tech Earnings

JayJamison

Editor’s note: Jay Jamison is a Partner at BlueRun Ventures and is based in Menlo Park. He focuses on early stage mobile, consumer and enterprise opportunities, and he serves on the boards of AppCentral (acquired by Good Technology), AppRedeemFoodspotting, and Thumb. You can follow him on his blog and on Twitter.

In August, I wrote about how the Mobile Era was upon us and how the Mobile Wave was impacting Facebook and Zynga. I wrote about how mobile represented a big shift, and the giants of the social web needed to show that they could jump onto this wave or risk being disrupted.

Wall Street is basically demanding big public tech companies to answer the question, “How mobile can you go?” And based on a read of the big tech companies’ recent Q3 earnings reports, they all got the memo. Here’s my take on their mobile strategies.

Facebook

First up, Facebook had a busy quarter, having welcomed its billionth member. Where was mobile in Facebook’s earnings announcement? At the very top, Facebook co-founder and CEO, Mark Zuckerberg was on mobile about 10 seconds in to his remarks. And his prioritization and story was so clear, simple and strong that any fifth grader could understand it, let alone Wall Street analysts. To summarize his pitch, mobile enables Facebook to reach way more people. Mobile Facebook users open Facebook more frequently—mobile users are 70 percent likely to open Facebook on a given day, versus 40 percent if you’re a PC-only Facebook user. And with the recent launch of Facebook’s native iOS app, Zuckerberg showed that time and engagement on mobile Facebook was increasing.

More users, more engagement, more money. Simple. On top of that, they’ve ditched HTML5 for a native iOS app that rocks. The Instagram acquisition has closed (and quadrupled users to >100 million), and has more traffic than Twitter on mobile in the U.S.

Google

With nearly $57 billion in current assets on its balance sheet, a horde as large as Apple’s and nearing Microsoft’s, Google is, in poker parlance, one of the big stacks, sitting behind a mountain of chips. And with a big wall of chips in poker, there are basically two strategies. One, hang back, play safe, and let weaker players beat themselves up. Or two, get even more aggressive, making big, audacious bets that, if wrong, could hurt but also raise the bar on the competition. Google’s clearly chosen the aggressive route. Purchase Motorola Mobility. Drive Android to unit share leadership. And waiting in the wings, Google Glass, which could well be the breakthrough product of this decade.

Wall Street dinged Google’s most recent announcement, fretting about the continuing integration challenge of Motorola Mobility and worrying about the lower per-unit economics of Google’s mobile ad revenue.  I’m more bullish long-term. Integrating a hardware company like Motorola Mobility into an Internet company like Google is a big challenge. Totally different cultures, timelines, etc., but at the end of the day, I don’t see the integration as make or break.

Monetizing mobile ad revenue is, however, make or break. And getting to an $8 billion run rate on mobile alone (nearly double of Yahoo!’s entire revenue in 2011), shows that Google knows a bit about monetizing mobile. More broadly, with the assets it has in place — Android, Chrome, maps, its ad products, etc. — Google is positioned well. While it might take some time to bring per-unit economics on mobile in line with the web, with the elements of location, real-time, always on/always connected nature of mobile, I’m bullish on Google in our mobile future.

Microsoft

And what’d Microsoft have to say about its mobile future in its earnings announcements last week? With the coordinated launches of the Windows 8 platform (for PCs and tablets), Windows Phone 8, and the new Microsoft Surface, it’s getting into the game in a manner that suits its strength as the central point of the PC ecosystem.  Microsoft’s advantage has always been its broad ecosystem — from chipset manufacturers (Intel, AMD), hardware OEMs and peripheral makers to software developers — that could create a vast array of product offerings and price points. A PC on every desk and in every home, with a broad selection of printers, scanners, joysticks, and software that usually basically work. And this worked great, until consumers started getting way more mobile, and smartphones and tablets exploded onto the scene.

As a former owner of both an HP-based PocketPC from Microsoft in the late 90s and an HP-based Microsoft Windows Tablet 10 years ago, I’m perplexed regarding where Microsoft finds itself in mobile today. It’s not like it didn’t try to get there 10 years ago. It did. The offerings just weren’t good enough.

And that’s really the key question this time around: Are the offerings good enough? Despite the very cool look and feel of Metro, XBOX Music, etc, it’s too soon to call the future one way or another here. Will consumers adopt en mass? Will developers look to and start developing against Windows 8? Will the vast bulk of the profit pool of laptops, tablets and mobile continue to get hoovered up by Apple, Google, and Amazon? No wonder Microsoft called Windows 8 the most important launch since Windows 95!

Amazon

If the always amazing, always innovative ecommerce leader were a sports team, I’d compare it to the New England Patriots. Both are innovative, consistent, and winners. And listening to an Amazon earnings call is like listening to a press conference of New England Patriots Head Coach Bill Bellicheck. Both are great at responding to questions with answers that don’t really say anything concrete about how things are going.  When asked on the earnings call about how the Kindles are selling, Amazon SVP & CFO, Tom Szutak basically says, yep, we’re selling a lot of them, and yep, users are consuming content through them. That’s Classic Bellicheck.

Similar to Apple, Amazon understood very early and executed on great bets that the shift to mobile represented a great opportunity for commerce. For Amazon, these Kindles are like mini checkout terminals for its massive digital storefront. Cha-ching. So remaining focused on driving unit share of the Kindle devices and the storefront is a great offensive strategy.

Apple

With a market cap as large as Microsoft, Amazon, and Google combined, Apple is the super heavyweight of the bunch. The initial reaction on Apple’s earnings announcement is that growth is slowing and there’s concern around cannibalization of the iPad with the iPad Mini. Also there was hand-wringing on declining gross margins.

I’m not worried about this stuff. If I were an Apple exec, I’d be laser focused on how to continue to drive market share in tablets for a few reasons. First, the tablet market continues to explode. Indeed, in a recent presentation, Kleiner Perkins Caufield Byers general partner Mary Meeker forecast Q2 2013 as the date when the installed base of smartphones plus tablets will surpass the installed base of PCs. Second, tablets will continue to be great consumption devices, with users purchasing books, movies, music, TV shows, apps, and all kinds of stuff that Apple provides seamlessly and profitably. So Apple has a lot of strategic interest in continuing to drive market share leadership in this category, even at the expense of short-term gross margin pressure.

Critics may argue that if there were any clouds on Apple’s very broad, cash-rich horizons, it’d be the question of the company’s next big thing — a TV perhaps? While this critique may sound too “what have you done for me lately?” keep in mind this industry moves fast. Apple owned the last decade, with the iPod/iTunes, the iPhone, and the iPad. But winning last decade doesn’t necessarily assure anything (just ask RIM). Given the time Apple spent in the wilderness, it very likely understands this better than most.

Apple is working on a next big innovation. They’re just keeping it a secret.

Yahoo

Trying to get out of the wilderness is Yahoo, which stunned the tech world with the hiring of Marissa Mayer as CEO. If you want to get out of a hole, stop digging. Hire Mayer.

Yahoo’s Q3 earnings call was notable as the first for Mayer in the CEO chair. A slight beat of expectations led to a nice bump in the stock. And listening to Mayer, it’s pretty clear that she’s got a crisp idea of the strategy and execution Yahoo needs. But she also realizes that job No. 1, namely getting the leadership, culture and team set up for success at Yahoo, has to be her core focus. The leadership vacuum and churn that preceded here had an impact.

Mayer has an extraordinary track record as a product executive. In reading her remarks in full, she sees opportunity at Yahoo around search, mobile and elsewhere. Her pointing out that Yahoo has 76 different applications on iOS and Android underscores this. I thought this comment was also spot on:

As the world becomes increasingly mobile, the way we all consume content has dramatically shifted. Interestingly, when you look at the most frequent uses of smartphones, they include checking the weather, checking sports scores, checking stock quotes and other financial information, watching videos, sharing photos, getting the latest news and playing games. Does that sound like any particular company that you know?

So Mayer clearly gets mobile and the prioritization at Yahoo here is likely high. When you read her comments more broadly, however, you do realize that she’s still up to her arms in terms of getting the culture and the team right. She points out in her comments that in business the best teams win.  Great start. There is till work to do. Stay tuned.

Investor Scorecard

Here is how I would score if I were going to invest purely based on these companies’ mobile strategies:

Buy: Facebook, Google, Amazon, Apple; wait and see: Microsoft, Yahoo. As to what it means for the mobile-centric startup community:

The war for mobile talent will continue. Mobile developers are in crazy demand these days. With the ever-increasing focus on mobile by all these companies, this war will continue. I’d expect that we’ll continue to see these large public companies being active in M&A activities, especially to bolster their mobile talent.

Leveraging native across different platforms is a huge plus. Facebook walked away from HTML5 and released an awesome iOS app, with Android coming. Although there is tremendous potential and excitement around HTML5, it seems crazy to not follow Facebook’s lead. User expectation on the quality and responsiveness of mobile apps really demands that you go native. With the increasing share we’re seeing in Android (and with the growth of Kindle), mobile companies that can crank out and innovate across iOS and Android have a lot of potential.

Anticipate growing opportunity in tablets. Apple CEO Tim Cook is on the record consistently and over time with the vision that tablets will overtake PCs. And we’re going to see an explosion of devices, on iOS, Android and Windows. As tablets go more and more mainstream, I’d anticipate opportunities for new disrupters to enter, leveraging the browsing and discovery experience available there. There’ve been great generation 1 tablet-centric apps—Flipboard, Pulse, and other emerging companies like Pickie. But I think we’re only just getting started here.

Stay tuned for more big moves by the big players. It was once unthinkable for Microsoft to build its own PC-hardware; now it has the Surface. Similarly, it was hard to visualize Google choosing to buy Motorola Mobility to crank out mobile devices. Who knows what’s next? There’ve been rumors of Amazon planning a smartphone and Apple releasing a mind-blowing next-gen television. I forecast that this will be an era of big steps by big players. No one can really afford to sit back.

 Thrilling times indeed.


Why MoviePass Is Bringing Subscription Moviegoing To Theaters

MoviePass-Logo

MoviePass hopes to do for the theatergoers what Netflix did for DVD renters and streaming movies, which is to let them pay one monthly fee and enjoy as many movies as they want during that time. Moviegoers can watch up to a movie a day, or 30 movies a month — that’s not bad for a membership fee that costs on average about $30 a month. In an interview with TechCrunch TV, Moviepass CEO Stacy Spikes said the inspiration to do so came about after seeing how subscriptions worked in other segments of the video entertainment market.

“We’ve been looking at the theatrical industry for a while and had noticed that home video window is subscriptionized, the cable window is subscriptionized, and we believe that given the slight decline in going to the movies, that it’s a great opportunity to help drive traffic back to theaters, by introducing a subscription service to it,” Spikes said.

But wouldn’t users just watch way too many movies as a result? How does the company plan to make money in the face of potential overuse?

“We ran our beta trials, and you have people who definitely overuse, and those who underuse, and then you have seasonality built into it,” Spikes said. “What we’ve found was our business model actually worked, that there’s slight overall underusage, but there’s seasonality built in as well.”

And the service is not just good for consumers, it’s also good for movie theaters, Spikes believes. That’s because users go to the theaters more and end up spending more on concessions — where the real money is made by exhibitors. “What we saw was a 64 percent increase in going to the movies, and they increased their concessions by 123 percent,” Spikes said. Check out the entire video above.


Here’s How Spotify Scales Up And Stays Agile: It Runs ‘Squads’ Like Lean Startups

Spotify Daniel Ek

What’s the secret to staying fresh, lean and mean when you’re a hot tech company on a fast growth trajectory? A fascinating document brought to our attention today today by Andrew Mager, hacker advocate at Spotify, answers that question in some detail by telling us how the music streaming juggernaut does it: by dividing up its business into small clusters — which it calls ‘squads’ — and running each like a startup in its own right. We’ve embedded the document below.

The information here is all the more relevant since this week we saw that Spotify is now finally making a move on to the web. When that is fully live, it could open Spotify up to another big growth boom from a whole new population of users beyond the 15 million early adopters (4 million of which pay) who currently use its mobile and desktop clients.

Written by Henrik Kniberg, an agile development consultant with Crisp, and Anders Ivarsson, an agile coach at Spotify, the document details how the company has restructured its organization over the last year to help the company scale better.

It’s also a nice complement to another insight into startup scaling we came across some months ago, from Mike Krieger, co-founder of Instagram.

At Spotify, to start with, the smallest grouping unit is called a squad. At present, there are 30 squads, covering 250 people in all in three countries — and each behaves like a lean startup in its own right.

Each focuses on a specific function — say, radio — and iterates on minimum viable product, releasing updates early and often. Those squads, it notes, have their own workspaces, and flat management structures, although each has a product ‘owner’, too, who leads on making connections with other squads. That has its pros and cons it seems:

“Ideally each squad is fully autonomous with direct contact with their stakeholders, and no blocking dependencies to other squads. Basically a mini-startup. With over 30 teams, that is a challenge! We have come a long way, but there are still plenty of improvements to be made.

The interaction between those smaller groups is done by way of three other structures. Related squads are grouped into tribes — say infrastructure, or music player tribes. These behave as “incubators” for the startup-like squads. Kniberg and Ivarsson say that tribes will never have more than 100 people, to keep them small and agile.

Tribes, too, attempt to remain autonomous of each other, although because there is some clear interaction needed between them, especially for specific projects, they do. Grouping together for projects is called “creating scrums.” Like in sport Rugby.

For further working together and communication, there are larger groupings, called chapters and guilds, which are detailed more in the document below.

There are definitely some ups and downs to this method of working.

Introduced over the past year, “people are still getting used to it,” the authors note tersely. (They don’t mention what parts are harder to do than others, but perhaps one part is the flatness of the structure and how that might impact prioritizing one thing over another; or whether regular meetings and assessments ever get in the way of just keeping your head down and working.) But they also point out that in the regular surveys they carry out — also part of the agile working process — they have found that “Despite the fast growth [of Spotify] employee satisfaction has continuously increased; in April 2012 it was 4.4 out of 5.”

Spotify, led by CEO Daniel Ek (pictured), is having a bumper 2012 so far. We’ve heard revenues could be as high as $500 million this year as it moves closer to profitability, and continues to expand to new markets. As of this week, Spotify is now live in 17 countries.

Image: Flickr


Gillmor Gang: Sinofsky Falls

Gillmor Gang test pattern

The Gillmor Gang — Robert Scoble, John Taschek, Kevin Marks, Keith Teare, and Steve Gillmor — served up the Sinofsky firing as the main course of a dissection of the Microsoft playbook or lack of it. Who knew that it would be Steve Ballmer to announce just how screwed Microsoft is. Windows 8 solves the wrong problem, while Android keeps several steps ahead with its Nexus platform.

And the iPad Mini is like a flu shot, protecting Apple from the worst of Android’s disruption while giving the crossover market a BYOT device for the trip to and from the office. As Office attempts to treat each platform as peanut butter, eventually they’ll realize they’ve been jammed. The final firewall: PowerPoint.

@stevegillmor, @jtaschek, @scobleizer, @kevinmarks, @kteare

Produced and directed by Tina Chase Gillmor @tinagillmor


How Institutional Limited Partners Can Avoid Limited Returns

John Frankel resize

Editor’s note: John Frankel is founder and partner of ff Venture Capital and has been an early-stage venture investor since 1999. He has served and/or now serves on the boards of 500px, Adcade, Apparel Media Group, AppyCouple, Alerts.com, Centzy, ClearPath Immigration, Infochimps, InteraXon, Gobbler, Klout, Patents.com, Parse.ly, Phone.com, Quigo Technologies, StrongTech, The Goldman Sachs Trust Company, Track.com, VolunteerSpot and Voxy. Follow him on Twitter

Having spoken with many limited partners, it is clear that there is a lack of access to the research out there that compares return generation from different venture classes and, in particular, compares angel returns with those of venture funds. I finally have had the time to collate the research we have found, and am happy to share it. This post is quite technical, but the bottom line is simple: angel-stage funds outperform.

Venture capital funds, in aggregate, managed an anemic 4.41 percent end-to-end pooled return over the last 10 years.[i] Despite the risk and illiquidity of the asset class, they haven’t outperformed public markets.[ii] As one Kauffman Foundation report sums it up, “since 1997, less cash has been returned to investors than has been invested in VC.”[iii] Return dispersion for the asset class is high, however, with a mean difference in internal rate of return (IRR) of 12.6 percentage points between the 75th and 25the percentile funds from vintage years 2000 to 2006.[iv] This means that the best funds do much better than the average in this class; or simply that top performers are still generating impressive returns and that it is worth putting the resources to work if they can improve performance.

End-to-end pooled return, net to limited partners

Source: 2012 U.S. Venture Capital Index, Cambridge Associates

There are diverse views as to why venture funds have struggled—in part because it is difficult to isolate causes of failure, and in part because the funds’ returns are measured over a decade-plus. The existing research, however, is quite informative and gives us a sense that misalignment of incentives and overcapitalization are highly contributory.

Angel investing is hard to scale, so most angel investors scale simply by adding more capital. Large funds allow them to lock in high levels of fee-based personal income.[v] Indeed, a typical firm now makes two-thirds of its revenue from annual management fees rather than performance-based carried interest.[vi] The larger the fund, the more likely it is that income is tied to fund size rather than performance. The incentive becomes raising larger funds rather than generating stronger returns.

Venture capital fund characteristics (94 funds)

Source: The Economics of Private Equity Funds, The Review of Financial Studies

What’s more, the preponderance of evidence indicates that large funds are generally at a disadvantage in generating strong returns.[vii], [viii] It is not only individual funds that have grown too large; the industry as a whole may have absorbed too much capital to produce reasonable returns.[ix] To achieve 3x gross returns on $25 billion of committed capital, exits would need to accrue $150 billion (assuming that half the companies’ equity is held by venture firms).[x] Venture-backed exits peaked at $88 billion in 2000, and haven’t come close since.[xi] As this logic would suggest, increased capital commitments did indeed lead to a collapse in performance.[xii]

Source: Dialing Down, Kauffman Foundation

Angel groups, on the other hand, have done exceptionally well.

Every large angel return study has mean angel IRRs ranging from 18 percent to 38 percent.[xiii] Since the angel space has one of the widest return dispersions available to investors, individual investors are likely to see variation from the mean. Even so, detailed exit analysis has revealed that angels have robust rates of “home run” (5x or more) investments, while maintaining a decisively lower level of risk.[xiv], [xv]

Source: Historical Returns in Angel Markets, Right Side Capital Management (and other sources)

It is informative to know that amongst angels, top performers conduct more due diligence before investing and are subsequently more actively involved with ventures.[xvi] Compared with venture funds, angel investments are less distributed by stage (with a decided focus in early and seed stage companies), but more distributed by geography.[xvii], [xviii], [xix]

Source: 1H 2012 Halo Report, Silicon Valley Bank/Angel Resource Institute

The above is the sum of the research we have found on the sandpit we play in. It argues that smaller funds, focused on the angel space, with deep resources for due diligence and an ability to help their companies get to the next level, should outperform. Our objective is to stay in the top decile of fund performance. Strangely, our strategy is one that very few others follow.

ff Venture Capital is an institutional player in the angel space. After all, the firm grew out of my personal angel investing, and, rather than grow into a standard venture firm, we have taken the stance of hacking the venture model by staying in the angel space. We invest in early stage companies all over the country as well as internationally, combining the rigor and resources of a venture capital firm with the market strategy of an angel. We deliberately run relatively small funds.

As noted above, it takes time to prove out a strategy, but we have performance validation over the past 12 years, as well in our 2008 and 2010 funds.  The irony is that most institutional limited partners feel constrained by having too much capital to consider investing in funds of our size, despite the performance characteristics of the space. Until that changes, it keeps capital out of our space and maintains high returns for funds such as ours.

Thanks to Matt Joyce and Yong Kwon for help researching and drafting this.


i Q1 2012 U.S. Venture Capital Index, Cambridge Associates

ii Q1 2012 U.S. Venture Capital Index, Cambridge Associates

iii We Have Met the Enemy…and He Is Us, Kauffman Foundation

iv Q1 2012 U.S. Venture Capital Index, Cambridge Associates

v We Have Met the Enemy…and He Is Us, Kauffman Foundation

vi The Economics of Private Equity Funds, The Review of Financial Studies

vii Dialing Down, Silicon Valley Bank

viii We Have Met the Enemy…and He Is Us, Kauffman Foundation

ix The VC Math Problem, Fred Wilson

x The VC Math Problem, Fred Wilson

xi 2002 Venture Backed Exit Activity Report, Thomson Reuters / NVCA

xiii Historical Returns in Angel Markets, Right Side Capital Management

xiv Angel Investor Performance Project, Kauffman Foundation

xv Ongoing Research, Harvard Business School

xvi Returns to Angel Investors in Groups, Kauffman Foundation

xvii The Angel Investor Market in 2011, Center for Venture Research

xviii Yearbook 2012, NVCA

xix  1H 2012 Halo Report, Silicon Valley Bank / Angel Resource Institute


Ugly Men Don’t Get Clicked On

moon

Editor’s note: James Altucher is an investor, programmer, author, and entrepreneur. He is Managing Director of Formula Capital and has written ten books. His latest books are I Was Blind But Now I See and 40 Alternatives to College. Please  follow him on Twitter @jaltucher

Ugly men don’t get clicked on. Every week for three years, I interviewed four prostitutes, drug dealers, criminals, potential dates (for me), and homeless kids. I have written about this before but my job was to go out on Tuesday nights at 3 in the morning, find out who was roaming the city, for what purpose, and photograph them and interview them.

I learned a useful skill: how to build a quick rapport within seconds with potentially violent criminals and their closest friends. On more than a few occasions we were chased and bottles were thrown at us. In other words, I learned the exact skills that would later become useful to me as an entrepreneur.

Guess which one people clicked on.

After the interviews, I would transcribe the results, get the photos, and I got designers to compete to design the web page for each interview. But on the front page I would experiment. Who would get the most clicks? Men, women? Black people? White people? People with glasses? People without? By a factor of 3:1, I realized the secret: slutty blondes were No. 1. No. 2 were slutty looking transvestites. It’s as if hookers gave off a specific look that made you want to click on them. They knew how to work it. No. 3, but further down, were blonde models. Didn’t matter how pretty they were – they were No. 3 even after the ugliest but slutty-looking blondes.

So it was an experiment. I make use of the results of that experiment almost every day. If I were to put together a family album, I’d put slutty the slutty looking transvestites front and center.

Another experiment I did: In 2006 I wanted to start a website company. I created over a dozen websites. Dating websites, content websites, information websites, etc. The one website that took off: a financial media site called Stockpickr.com, which I sold to thestreet.com a few months later. Because I viewed it as an experiment, I had no problem shutting down the ideas that weren’t working.

One of the sites that failed: a dating site for smokers. Why not?

Another experiment. When I was dead broke, separated from my wife, and first entering the craziness of the dating world, I had to experiment to see how to keep sane, how to get motivated, how to find someone I loved, how to learn who I was for the first time in a dozen years and then how to take that “self” and get off the floor in order to succeed and flourish. I was depressed. And only through an attitude of “let’s experiment” was able to take the bad events and learn from them to get better experiences in my life. To get a better life.

Every day, wake up and see what you can experiment with. Foods, lifestyle, exercise, people you associate with and how they make you feel, methods of meditation and self-improvement, methods of feeling contentment when everything seems to be falling apart around you. It’s all an experiment.

Scientists don’t fall in love with an experiment. Neither should entrepreneurs. You have an idea, you test it with customers, with investors, with your friends. You modify the product. You test again. The business life is an ongoing experiment. There is NO GOAL.

When things don’t work, you don’t get disappointed. You come up with 10 more experiments to do that tweak of your initial experiment.

In your current business you can test:

  • Your sales pitch.
  • Your method of reselling products to current customers.
  • Your design (A/B testing so some users see one design and other users see another design)
  • Where do eyes go on the page? There is software to test this.
  • Using analytics to determine what marketing strategies work. It may seem basic but it’s amazing how many companies don’t do this simple testing.
  • If you are a content company, what titles get the biggest traffic. Which titles get the most comments.

[In the comments, please share other experiments you’ve done in your companies].

And don’t just do it with your business. To be the true scientist and entrepreneur, cultivate the feeling of experimentation in everything you do in life. Then it will naturally and seamlessly carry over into your business. The immediate benefit is that you don’t fall in love with the results. You don’t get obsessed with the goals. Your goals transform from finite end points into themes. A theme of enhancing the lives of your customers, investors, employees, partners. Business is not about making yourself rich. It’s about enhancing the lives of everyone around you.

If you become fixated on any one goal, then the theme of enhancement can drift away until it is impossible to recapture. But focusing on experimentation allows you to easily back up without getting disappointed so you can try new things. Try again and again.

Here are the benefits:

1) Improve the world. Why do scientists experiment? Why do they try different cancer drugs on rats? To see which rats get cured. To see how humans can get cured. To increase life. To increase quality of life. To improve the problems they see in the world. It’s rare that a scientist experiments to see how quickly they can destroy the world (although that happens). Mostly, people develop a theory about life and want to know if it holds true. Your experiments in your life can improve the world around you. The lightbulb inside of you will shine brighter and cause other people to see the results you found through your experimentation. It is also rare that a scientist experiments purely with the goal to make money. These experiments seldom turn out well.

Always be experimenting.

2) Curiosity. You are curious about something. Will a girl like me if I compliment her dress? Or if I compliment her smile first? If I’m polite to the officer who pulls me over for speeding as opposed to being argumentative, is he more or less likely to give me a ticket. I’m curious. You find out answers to the questions and problems life throws at you every day. What do you need these answers for? See below.

3) Self-improve. Is it better if I call the girl right after the date? Or wait awhile. If don’t eat carbs for a week will that do better than if I don’t eat meat for a week. If I smile at people, will my day be better? If I throw out a price first, will the negotiation be better. Maybe I should wait for her to throw out a price first. But as you learn, your life will improve. Every day, every moment, you can think of the things you will experiment with that will improve your life. That will improve your business. Exercise: Write 10 things you can experiment on your business this week.

4) Detachment. It doesn’t matter the results. A scientist tests because he doesn’t know if the answer is “A” or “B.” He might guess it’s “A” but he doesn’t know. This gives you some detachment from the results of your efforts. When you get too attached to the results, to a future outcome, you can get disappointed and frustrated. But detachment allows you to say, “ok, that didn’t work in the past so I will try something new in the future.” You stay in the present, reformulate the experiment and begin again. That’s how Thomas Edison failed 9,999 times on the lightbulb but succeeded on bringing cheap light to the world on the 10,000th try. That’s how musicians fine-tune their greatest works until they produce masterpieces.

I want my life to be a masterpiece. But in order to do so I can’t let my brain get limited. It has to be plastic and molded and grow with each new experiment. The more experiments, however big or small, the smarter I will be.  This has deep consequences. See below.

An experiment often takes you through what you thought was impossible.

5) Share the Results. Once you know something works for you, you can share it with others. It may or may not work for them. But if they trust your abilities as a scientist of life, they will try and see if it works. Buddha did this. He said, “don’t believe me. Try it for yourself.” He was an entrepreneur. What a better sales pitch than this:  ”All I know is, it worked for me.”

6) Focus. When you view life, or your day today, or your moment right now, as an experiment, you are able to focus on what you are doing. If you do the experiment wrong everything can blow up! So you have to focus. This keeps you from getting lost in the future or the past. In past regrets or future anxieties. “What if my business fails and everyone hates me!” If you get lost in what you hope to be the results, it might skew the experiment. Being a good scientist requires impartial focus.

A friend of mine just had a deal blow up. He was going to sell his company. He got screwed at the last moment. It’s ok to mourn such a loss. A loss like that is sad. But after a day or two of mourning, view it as an experiment. What happened? Find the experiment in the experience so that your mind expands and your life improves.

7) You Can Change Contradictory Beliefs. For instance, if you grow up believing owning a house leads to happiness, you can look at people who own houses and those who don’t and develop a metric for determining who is happier and less stressed and test to see if the hypothesis you grew up with is true. Again, the key is not getting attached in advance to the results (“I MUST own a house to be happy!”) but to have a detachment about it. It’s an experiment. And you TRUST that the results will help you form newer and more accurate beliefs.

8) Keeps Me Grounded. When I used to be a day trader I had two choices. I could form complicated opinions about companies and the economy that may or may not be true. Or I could experiment. I wrote software that would ask questions like: if MSFT went down for five days in a row after their earnings announcement, what was likely to happen next. If 99 percent of the time MSFT would go up the day after from 9:30am to 10:30am then I would buy. Then I could forget all about the past and future of Microsoft and all about my stupid arguments as to Microsoft’s viability. I would trust my experiment. And that kept me grounded so I wouldn’t get too emotional in the trade.

Similarly, when I get paranoid now about a person I could say to myself: after hundreds of times I’ve been paranoid about people, none of my fears have come true. That is an experiment that I can tell myself next time I’m feeling very paranoid. It grounds me in the truth. In my own experience. It takes me back to the moment instead of getting me lost in the distant past or the far away future.

Claudia and I are experimenting with flying.

9) Mystery. If you treat each action as an experiment, each thought as an experiment, each business idea, each marketing pitch, every emotion, each day and moment as a secret still waiting to be discovered, then you will begin to see all life as a mystery. A treasure waiting to be discovered inside of each moment. How do we unlock those treasures? By experimenting, observing, and then observing who is observing. You can’t experiment enough.

Every entrepreneur and every artist experiments. With colors, ideas, styles, business models, everything. Now all life is your canvas. Make it a beautiful work of art.


Gift Guide: The Cygnett Icon iPhone 5 Case

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Short Version:

When I first wrote about the Cygnett Icon case for iPhone 4/4S, I called it the perfect case. It wasn’t rugged like the LifeProof case, and it didn’t come with any extra tricks like a fish-eye camera lens, a bottle-opener, or a swiss army knife-style assortment of blades and tools. It did, however, maintain the iPhone’s slim profile, it was comfortable due to a soft touch rubber finish, and it protected my phone against many a drop.

Today, I’m glad to report that the Cygnett Icon case for iPhone 5 is the same caliber of iPhone case perfection, and most certainly worth considering when shopping for holiday gifts.

Long Version

Features:

  • Snap-on design
  • Soft-touch finish
  • Designed by real artists
  • Super thin plastic case

Info:

  • Available: Now (Some models are out of stock)
  • MSRP: $29.99
  • Product Page

The Cygnett Icon is…

… quite simply, the best everyday iPhone 5 case I’ve seen so far. Cygnett pulls in work from artists like animators to graffiti artists and everything in between to adorn their plastic Icon line of cases. Each one is finished with a soft-touch coating that feels great against the hand, and they easily snap on and off.

The most important part of the Cygnett Icon collection, however, is just how thin and unobtrusive the cases are. There’s only a slight ridge that juts out over the screen, keeping it protected (the case comes with a screen protector, too, if that’s how you roll). The Icon case doesn’t bulge, or add any girth to the phone, which is one of the big annoyances with buying an iPhone case. They’re always muddling up the iPhone’s beautiful design.

Buy the Cygnett Icon for…

… anyone who just got an iPhone 5 and still needs a case. At least, that’s the obvious answer. Your niece, nephew, brother, or sister are all good answers, too.

It’s also not a bad idea to piggyback if you know that a family member is getting the new iPhone 5 from your parents or grandparents. The Icon case is a good way to show that you care, but with a budget in mind.

Because…

… anyone lucky enough to receive the Icon case for the holidays will learn quickly just how valuable it is. At first glance, you wouldn’t think the Icon can protect much. But then you drop your phone, and you drop it again, and again. No scratch, no dent.

After a few drops, the recipient of this case will surely have a new (albeit slight) appreciation for your thoughtfulness. The Cygnett Icon isn’t just an average iPhone case. It’s a great case.

Click to view slideshow.


Something Someday Will Kill Facebook, But We’re Not There Yet

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Two years ago I wrote a post entitled “Can Anything Stop The Facebook Juggernaut?” in which I marvelled at the fact that Facebook was then worth a whopping $35 billion, according to Second Market. Today, after its much-touted stock price “collapse,” the company is worth roughly $51 billion. It’s a strange world when a market-value increase of $16 billion/~45 percent over a two-year period is somehow perceived as a crisis.

My answer then to that post’s titular question was a grudging no. (My assessment of Facebook as “relentlessly mediocre” remains unchanged today.) Which remains true, in the short term. Lately, though, I’ve been thinking about the medium and long term — by which I mean 5-10 years and 15-30 years from now; the tech world changes so quickly that anything beyond that is sheer guesswork — and trying to imagine when, how, and if Facebook will wither away.

Warren Buffet always advises investors to buy a company with “moats” defending them from competitors, and Facebook has one of the deepest and most dragon-laden moats in the world. First, of course, there’s the network effect; with a billion active users, everyone goes there because that’s where everyone is. (Of course, there are individuals and subcultures who avoid FB — perhaps quoting Yogi Berra, “Nobody goes there any more, it’s too crowded” — but whether they like it or not, they’re a tiny minority among the networked of the world.)

Second, their Open Graph strategy means that Facebook isn’t just Facebook; they’re woven into the bones, and in some cases arguably the DNA, of millions of other apps and web sites. Every “Log In with Facebook,” “Share to Facebook,” and “Like” button across the Web and within every app store is Facebook territory. They don’t just own all the end users: Developers, executives, marketers, startups — they all want access to the Facebook empire, which means, to a considerable extent, becoming part of the Facebook empire.

Third, they’ve already seen off the most immediate threat, that of a direct assault by their most dangerous competitor. I refer of course to Google+. Which isn’t dead, but could hardly be described as thriving. Knee-jerk Google defenders tend to say things like “Google+ can’t possibly fail, it’s just a social layer on top of Google,” which may be true but it’s also nonsense. G+ was clearly intended as a social network that would supersede Facebook as the place where most people go to share their lives and thoughts with friends and followers, and it failed at that.

Finally, they seem to be incredibly paranoid, which is a good thing. Consider Intel, arguably the longest-lived successful company in the history of technology. That’s at least in part because of Andy Grove’s motto, “Only the paranoid survive.” I strongly suspect Facebook spent more than half a billion dollars to buy Instagram — a company with 12 employees! — because they’ve already imagined one way that they could die.

I call it “Creeping Defection.” If all their users also join another network, even one that focuses on a niche, then that competing network could conceivably grow into a full-fledged social network, and Facebook’s users might find themselves spending less and less time on Facebook itself. In the end, they would leave Facebook without ever really consciously intending to do so. That was Google’s hope, but unfortunately for them, G+ never really took off. Instagram seemed to be on that kind of trajectory, so they had to be dealt with. Just in case.

This leaves, I think, only three ways that Facebook’s dominance could be shaken.

The first is in some ways the most obvious, but also, to my mind, the most unlikely: that their users turn away. There’s no shortage of reasons propounded by the anti-Facebook crowd. Because they gnaw away at their users’ privacy more and more with every passing year. Because they’ve sold their soul to advertisers. Because they’re anti-pseudonym and pro-censorship. Etcetera, etcetera, etcetera.

The sad truth, though, is whether they’re frogs in a slow-boiling pot of heavy-handed, anti-privacy water or whether it’s only Internet activists who think that these sorts of things really matter on social networks, most users really don’t care. Absent some kind of melodramatic revelation that Facebook is selling its data to al-Qaeda, or that Mark Zuckerberg and Sheryl Sandberg are really Kang and Kodos from The Simpsons, Facebook user revolts will be temporary and limited as long as Facebook backs off of its crusade for “more sharing!” when necessary. They always do — only to relaunch them some years later, of course, when their users are ready.

The next possible doom is more plausible — and actually testable — but the data required is data that only Facebook has, and last I checked, they aren’t sharing. It’s possible, though, that social networking is something that people get bored of; that after the first few years of watching your friends share memes and cat pictures, it becomes more chore than joy, and people find themselves drifting away to more tangible pursuits. Facebook knows the answer to this one; they can tell if there’s a negative correlation between how long someone’s been a Facebook user and how often they visit and interact.

If so, then it’s possible that Facebook use might wither away as people do grow bored of it. Maybe they’d potentially be driven away by desperate Facebook attempts to bring them back. Or maybe a few competitors might attack the social network’s last line of defense: its de facto status as one’s defining online ID. This attack might come from, say, Apple, Google, Mozilla and Microsoft forming an ID service that works across Android, iOS, Chrome, Safari, Firefox and IE. Unlikely, I know, but not impossible.

One attack I don’t think is possible is that long-held dream of Internet activists: a federated social-networking model, where your identity and your data can live at the provider of your choice, communicating with other providers through a common protocol. As an example, imagine if Facebook, Twitter, and Google+ all played nicely with each other, so you could open one and see anything/everything shared on the other two. But federated protocols with many players, by their very nature, innovate more slowly than authoritarian central sites. (To an extent that’s why Twitter has clamped down on its once-thriving ecosystem of Twitter clients.) Such a federated model would never catch up.

So the only thing that I think will actually kill Facebook, in the end, is the same thing that’s slowly killing Microsoft today: a platform shift. Not the shift to mobile; they’re riding that one out nicely. The next platform shift. When it happens, maybe Facebook’s death spasms will finally trigger a long-awaited spate of innovation and creativity from them, as seems to have happened in Redmond of late. If I were a betting man I’d put my money on wearable computing as the platform of the future — something like Google Glass plus Kinect, bearing in mind that each of those is but the Altair II of its field, and I’m talking about their descendants a decade or more hence.

I doubt Facebook will survive that shift; but at the same time, it’s hard to imagine something else replacing it between now and then. The world is yours for a decade, Mark Zuckerberg. Enjoy it while it lasts.

Image credit: Thos Ballantyne, Flickr.


Airbnb Lights Up ‘Neighbourhoods’, Quartiers And Vecindarios In Europe

Airbnb vecindarios

Airbnb took a while to roll out its international businesses — for example, officially launching Airbnb.co.uk only in February 2012, despite being around since 2008. But in a sign of how Airbnb is focused on its wider business expansion, today the company began to promote its Neighborhoods feature, announced just four days ago, across some (but not all) of Europe. Neighborhoods offers travellers local online guides to help them decide where to stay, and it gives Airbnb an entry into offering services that span the “life” of a trip, beyond just being the place where people go to book accommodation.

When you go to Airbnb’s localized home pages for the UK, France, Spain, Italy, Germany, and Russia, you get links to the new Neighborhoods feature. In most markets, Airbnb has chosen to promote it in the local language:

However, Germany, with Berlin one of the first featured Neighborhoods, gets the U.S.-English “neighborhoods.”

I guess “Nachbarschaften” doesn’t have quite the same ring to it.

The homepage rollout, it seems, is partly focused on countries that have cities featured in the initial list of Neighborhoods.

So, since Italy, Spain and Russia do not, the change might be for two reasons. Either these are already big markets for Airbnb in terms of booking customers who travel internationally; or it could be because Airbnb is planning to add cities like Barcelona, Madrid, Milan, Rome, Moscow and St Petersburg to the list of Neighborhoods soon.

Other local country sites in Europe — for example, The Netherlands, Sweden and Norway – are still getting the old homepage, which looks like the old U.S. home page, including a link at the bottom for Hurricane Sandy relief efforts.

So not so local across the board after all.

Separately, the site also experienced some downtime today, noted by a couple of our readers and others:

airbnb run out of air today and the server went down, in this day and time why don't you go into the cloud airbnb


sirnitti (@synitti) November 17, 2012

hey @airbnb – just a quick heads – i was not able to access the site via mobile. safari error was too many redirects and chrome just spins.


Hasan Luongo (@MistOne) November 17, 2012

An Airbnb spokesperson says that this was just due to some scheduled maintenance.


Overblown Hype About Facebook Ads Versus TV Does Social Media No Favors

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Editor’s Note: This is a guest post by Mat Morrison, Social Media Strategy Director with Starcom MediaVest Group. You can follow him on Twitter at @mediaczar or his blog.

Generally the social media marketing services industry is its own worst enemy. Time and again we think we’re turning a corner into being a useful productive part of our clients’ businesses, when some cluetard guru suddenly pops up from nowhere and queers the pitch.

“70 to 260 times as efficient”

A little background: I more or less spend my work and hobby time analysing social media data, so words like “analysis”, “research” and “data” are music to my ears. So imagine my joy when I first stumbled upon Kirk Cheyvitz’s post on Pando Daily, peppered as it is with references to data (6 mentions), research (5) and mathematical models (2). Together with some people at his agency, (writes Cheyvitz), he:

…created a mathematical model, drawing on recent research and our own experience, to directly compare the cost of delivering brand messages on TV versus Facebook […]
Since, oddly enough, such a model had not been built before, the finding probably bears repeating, so it can sink in: Not twice as efficient. Not four times. But somewhere between 70 and 260 times, depending on numerous variables. (my emphasis)

That’s the stuff to give the troops! Facebook advertising is 70 to 260 times as efficient as TV advertising? Pack your bags, TV advertising, it’s time to go home.

Sadly, as suggested by the post’s headline title (“Resistance is futile. Yet, they resist: How Madison Ave. wastes clients’ money by denying reality”), the marketing industry has cravenly, stupidly and blindly refused to accept and act on these findings (it’s worth noting in passing that in popular culture, at least, those who claim that “resistance is futile” are most often proved wrong.) Cheyvitz cites an ever-so-slightly-dry paper published last year in The Journal of Advertising Research titled The Power of Inertia, Conservatism in Marketing Resource Allocation which proves (in his words), that

Instead of investing ad budgets primarily in the media vehicles and tactics that work the best, managers spend too much on the ad vehicles that have always been the most popular with their pals and peers.

I read the article. It is quite probably the most thorough and well-constructed expression of the frustrated agency man’s cry, “blame the client!” – a cry that is as old as Sterling Cooper. Blaming the client (or a blind and craven marketing industry) is too often the frustrated evangelist’s get out clause. Does Cheyvitz hope to convert them by exposing their stupidity? That would seem to be a weak pitch strategy.

How did he come up with those numbers?

How did Cheyvitz come to those wonderful numbers in the first place? It’s hard to be sure, but he did helpfully publish his methodology in a post titled Ad Battle of the Century: Facebook crushes Primetime TV. It’s a long read, (and I don’t necessarily urge you to read it) but here are what seem to me to be the germane quotes (with my emphasis):

In the UK, using ITV’s “Coronation Street” as the baseline, TV CPMs are roughly 70 times more expensive than social media costs per thousand impressions.

And…

That 15p CPM compares to a £14.97 CPM on UK television (103 times more expensive) and £38.09 on primetime in the States (262 times more expensive).

It should be so obvious that I hesitate to point this out: one doesn’t really need much of a mathematical background to work out a CPM (for those of you who aren’t in the media world, that’s the “cost per thousand ad impressions”.) But all Cheyvitz ever needed to prove the greater efficiency of social media was to:

…directly compare the cost of delivering brand messages on TV versus Facebook

Social Media impressions cost less than TV impressions, Q.E.D. But that’s not really what Cheyvitz set out to prove, is it? On its own, a lower cost isn’t a valid definition of efficiency: efficiency would entail achieving an equivalent benefit for that lower cost. For any sensible advertiser, impressions are merely a means to an end, not the end in themselves. Some impressions are worth more than others for a reason; that’s part of the joy of the media world. Cheyvitz’s circular argument hasn’t really proved anything.

Weasel words

“The facts clearly show” states Cheyvitz, exhibiting all the fervour of a social media evangelist:

that shifting more advertising budgets to online social platforms could significantly reduce corporate marketing expenses while spreading advertising messages much more widely.

Let’s unpack that a little. “The facts clearly show” is a strong opening. Facts are good; you can’t argue with facts. “Significantly reduce corporate marketing expenses” is also good. But “could significantly reduce corporate marketing expenses”? That’s almost a text book use of “could” as a weasel word, allowing (as it does) its author to make what appears to be a strongly-phrased and meaningful promise – without actually having to commit to anything of any substance.

To be clear, could is nothing more than a statement of faith since it implicitly allows the counter proposition: or it could not without making any judgement as to which is more likely. To put it another way, the following two statements have equal truth value: Cheyvitz’s article could be the most important thing you read this year. Or it could be a load of crap he believes without proof.

The time has come to abandon the evangelists

Being charitable, Cheyvitz might just be a little bit crazy, rather than knowingly misleading. That being the case it’s unfair of Pando to parade his madness for the entertainment and amusement of the public. The days of public visiting at Bedlam are over. It’s time for social media to grow up.

Here’s an admission. In the early days of social media we needed evangelists. We needed people who could tell big exciting stories with big exciting numbers. That is – as every entrepreneur knows – how we sell promising new ideas: by promising big, and by relying heavily on words like “could” and ideas like “everyone else is a lazy, befuddled, herd-following epsilon-minus semi moron, but smart people like you and I share a higher truth.”

Those big numbers, steep curves, and that sense of exclusive insider knowledge are attractive to a very specific kind of buyer; the early adopter. And just as there are early adopter consumers, there are early adopter advertisers.

Those early adopters been fantastic at supporting, growing and defining the early days of our industry. I’d suggest that – for many of them, social media marketing has already become a profitable part of their business. The challenge we face now is how we introduce social media to the mainstream; to the heavy TV advertisers.

We don’t sell to the mainstream the way we sell to the early adopters. The mainstream is more resistant to the big number sell; what they want to hear is that social media is a real thing; a useful and productive business tool. They’re looking for something that’s reliable. And people who throw around big numbers and empty promises don’t make them think that social media is reliable.

To the mainstream marketer, evangelists are just scary crazy people who trade in faith, fine-sounding statements and poorly-sourced infographics. From time to time they may find some – like Kooky Kirk Cheyvitz – who pay lip service to data and ROI: but when they come to investigate them, their numbers and mathematical models collapse into tinsel and glitter.

Social Media needs to change its pitch

Social media needs to change its pitch. We need to persuade sensible grown ups with grown-up budgets that they can profit from investing in Social Media. That it plays an important role in the marketing mix, not that it’s a panacea, or a replacement for TV.

We need to distance ourselves from the crazy people and their crazy numbers now. We need to start taking our numbers seriously, not simply cadge them from the latest nicely put-together SlideShare presentation or infographic. We need to interrogate them, understand them, not simply repeat them like some kind of magic spells. Only then can we really stand behind them.

And – sadly – this means that we may have to turn our backs on those who seem to share our goals most enthusiastically. It’s no longer OK to turn a blind eye to their excesses and inflated numbers. We need to choose our friends more carefully these days, because sometimes with friends like Kooky Kirk, we’re just laying ourselves and our industry open to ridicule.


Inside Microsoft’s Cauldron Of Ideas: From Kinect, Bing And Killing The Blue Screen Of Death, To Code That Can Learn, Pixels You Can Hold And Drugs Compiled From DNA

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If Steve Wozniak is worried Microsoft is now more innovative than Apple, the root cause for that concern undoubtedly lies within Microsoft’s network of research labs. Dotted around the globe, from Redmond to India and Asia via the UK, these university-style research institutions are the quiet engines behind innovations such as the Kinect depth camera which translates human movements into computable gestures, and Xbox users’ movements into gameplay.

Another notable Microsoft product that its research arm has played a substantial role in developing is the Bing search engine — with researchers knuckling down to crack problems such as how to compute relevance and design the auction mechanisms underlying search advertising. Microsoft Research has also helped to improve the reliability of the Windows OS via the development of Microsoft’s Static Driver Verifier (which addresses the problem of trusting third-party software – and has made the Blue Screen Of Death a rarity, where once it was a running joke).

From the outside looking in, Microsoft’s research labs look like the jewel in the crown of a corporation founded ice ages ago, in technology terms, helping to ensure that, despite being the grand old daddy of tech — with a former sales chief for a CEO — Redmond continues to be a huge force to be reckoned with in many of the spheres in which it plays.

The labs are “the far seeing eyes of Microsoft,” says Andrew Blake, lab director of Microsoft Research Cambridge, giving the insider’s view. “Our job is to be a cauldron bubbling with ideas and the ideas are there to be plucked out at the right moment,” he tells TechCrunch.

“It’s sort of intrinsically difficult to predict what’s going to be important,  so that’s why you have the cauldron bubbling, because let a thousand flowers bloom, let’s just see what happens. You genuinely don’t know what the outcomes are going to be.”

Microsoft spent a whopping $9.8 billion on R&D in its 2012 fiscal year but Blake says the labs account for “a small fraction” of that. “We don’t publish our budget but it’s a small fraction of the total spending on research and development,” he says. “I wouldn’t know how to spend [$9.8 billion]!”

On a press visit to Microsoft’s Cambridge Research lab, we are shown a glimpse of the huge variety of research projects bubbling away underneath the quiet corporate facade however modest its budget: from projects using machine learning to harness the power of big data to make better predictions about the Earth’s climate; to research into new user interface mechanisms that blend the real and the virtual so you can ‘hold’ a 3D ball of pixels in your hand; to a PhD project recycling Kinect components to fashion a wrist-mounted glove-less finger-motion-capturing device (below); to multidisciplinary research looking at making biological cells programmable using computer software.

If there’s a unifying thread connecting all the diverse projects going on under the Microsoft Research umbrella, it’s the sheer variety of research work being undertaken. This is not a model of corporate research tightly tied to product teams and immediate business aims, as is the case with Research at Google – which has a stated goal to “bring signi?cant, practical bene?ts to our users, and to do so rapidly within a few years at most.”

Microsoft Research is more akin to a university research institution, says Blake, a structure that he argues makes for a far healthier and more sustainable entity. ”It’s clear to us that for a healthy research lab you need to have a renewal mechanism,” he says. “If you simply take people who are used to doing research and being free thinkers and you put a yoke on them, like on the oxen, and have them driving the technology wagon, eventually they get tired and where are they going to get their refreshment from? Where are the new ideas going to come from? So that’s why we have this as an integral part of our structure — right in in our DNA is basic research, and publishing, and going to conferences, and free association with the academic community.”

Blake notes that he has recently finished organising an academic conference in his own area of expertise — computer vision — adding that: “We senior people in Microsoft research, we take our turn doing those things and we publish a lot in those conferences and we have researchers visiting us from other universities and we visit other universities. There’s a lot of that stuff going on which is not that different from what you’d see in a university.”

Of course there are important distinctions to a university. For one thing Microsoft Research is privy to vast quantities of business data — which it can use to its advantage as a research aid. Instead of having to build a mini datacenter, say, to test research into improving the efficiency of data centers, Microsoft Research staff can “go and talk to the people who run the Azure business any time they want and try their ideas out and see if they’re scratching the right itch,” as Blake puts it. (And yes, the lab is working on a research project aimed at improving datacenter efficiency.)

So researchers certainly have relationships with product teams at Microsoft — but products being developed by the business do not limit the research work being undertaken, according to Blake. Information and ideas flow both ways.

“We may get a product group saying look we have  got to develop this thing in a set time frame, are you going to help us? And mostly people are pretty keen to try and we find out whether we’ve got anything to help. The business goals come from the business; we are not business people here, we are researchers,” he says.

And then from the other direction: ”We go out there quite a lot and sort of sell our ideas [to the business] but it doesn’t bother us if the ideas aren’t taken up immediately because we kind of think maybe it’s not the right moment,” says Blake. “Business has its own cycles and  you can’t do everything in business; you have to focus on whatever is the issue of the day. So it doesn’t put us off if we’ve invented something that we think is great and the business is not quite what they need at that moment.”

In the case of Kinect, says Blake, the Cambridge lab responded to commercial pressure from the business to develop the product by drawing on relevant bits of (in some cases years-old) research to see if they could be made to, well, connect — and that research ultimately went on to form the technological foundation for the commercial product.

The Kinect people approached us and because we had ideas at our fingertips we were able to pluck one off the shelf.

“[Prior to the idea for Kinect] we were looking at all kinds of things speculatively, some of the things we never thought they would particularly make products,” says Blake. “But the Kinect people approached us and because we had ideas at our fingertips we were able to pluck one off the shelf – the one that we thought would fit – and it did. And the solution actually surprised us. We had these ideas at our fingertips. We didn’t think those ideas were good for this problem but then we were really under pressure, which we were because there was just a year to work with the Xbox team developing solutions, so we had to place a bet.

“We ended up putting some quite surprising things together but they were things that were in our background and that we had been playing with over years. It would have been no good if somebody had said play with those now. It has to be part of your research experience that you have all these things either at your fingertips or at least in the back of your mind.”

There is one clear influence the business has over the research labs: the type of researchers they choose to hire. “We’re probably not going to hire some analytical chemists because we can’t really see at the moment how that would really impinge on the business – not to say that it’s impossible — but we don’t go out to hire a lot of analytical chemists,” says Blake.

“We hire a lot of people around some of the core disciplines of computing and some of the fringe disciplines of computing and sometimes we go almost outside computing altogether — as with our computational science group, where the primary goal they’re doing is actually the science. But the link to the business is that they’re power users of computation tools, and often their users are stressing our systems so hard that new things get invented. So we have this cluster of areas where we hire expertise that is very broadly related to the business. But then we fire the starting gun and these guys go off and you don’t know what they’re going to come up with.”

Asked which of the current projects going on in the lab he considers most promising, Blake is unwilling to play favourites. “You’re asking me to choose between my favourite children – I cant possibly do that,” he jokes.

“A lot of the ability to do good research is not just deep analytical thinking, which is more how the public probably thinks of research, but with the exercise of good taste — it’s as much about what you choose not to look into, as what you choose to look into,” he says, echoing the Steve Jobs product mantra that ‘deciding what not to do is as important as deciding what to do’. “Opportunity costs, what looks promising, people use their gut instincts to choose things which they think are going to be exciting. That’s why it’s so critical that I hire the very best research staff because it’s that good taste that is one of the things that you’re bringing into the organisation — so I genuinely would find it very very hard to say what’s going to blossom.”

He is willing to touch on promising areas of research — machine learning being a discipline he believes will play an increasingly important role in building new generations of software systems. Machine learning techniques are already being used to build products — such as the Kinect gesture recogniser (which can determine whether you’re raising your elbow or your knee), and to power the Xbox’s recommendation engine for games, TV and movies (which crunches your viewing data to predict what else you might like). But in an age of big data and  increasing complexity, machine learning technology is becoming an imperative for more and more applications.

“One of the very early lessons from artificial intelligence is that programming intelligent behaviour is just too hard — you just can’t capture it,” says Blake. “What’s better is for the software to develop in the way that humans learn, the way animals learn: by example. You show them  things and those things get generalised and those generalisations become the software – you don’t actually write the software, not entirely. The critical bits get built automatically through these learning programs.

“We have a group here that does machine learning — it’s about one-fifth of the lab — and now those ideas are sort of spreading outside that group.”

In the future maybe what Microsoft will be in is software for generating biological structures, it’s too important for us to ignore.

Specifically, says Blake, machine learning researchers are collaborating with researchers who design programming languages — to explore how software can be developed that can learn and understand uncertainty. ”Now what we’re doing is writing programs which instead of just adding numbers together or dealing with strings actually reasons about probabilities and will estimate how likely things are,” he says. “That’s quite a fundamental capability that we’re pioneers in.”

Asked to look further afield, to consider what Microsoft might be in 10 or 20 years’ time, should it still be around by then, Blake is quick to point out there is no way to know exactly what lies ahead, however farseeing the lab’s eyes or deep and rich its cauldron of ideas. But he does point to the “interface between computing and biology” as a “fascinating area” — and one Microsoft Research is “very involved” with now.

The multidisciplinary nature of this work means researchers with computer science backgrounds are teaming up with biologists. Or, in the case of Microsoft Research principal researcher, Luca Cardelli, have switched their focus from designing programming languages to trying to use computational thinking as a way to unlock biological mechanisms like cell division.

“What Luca and his collaborators have done is they’ve opened up that mechanism a bit further to show a bit more of the detail. But the insight they’ve got has come from computational thinking, if you like, having computational processes and analogy available to express what the cell is doing. And extraordinarily they just published the theoretical paper and at the same time a practical paper. An experiemental paper came out which showed sort of exactly the same thing — but in an experimental setting — so that’s quite a landmark piece of work,” says Blake.

“In the future maybe what Microsoft will be in is software for generating biological structures; it’s too important for us to ignore. We have no idea at the moment whether it makes a business,” he adds. “Some of the things we’re investigating seem way off any kind of business, but who knows whether they might be part of Microsoft’s business in the future.

“I think it’s pretty clear that in 20 years time the intersection of biology and computing will be a big thing… It might be that people are designing drugs by writing programs. Designing them from the ground up and making them out of DNA. They’d just send the programs off to be compiled; the way they’ll do that is they’ll just send them across the web to someone who produces DNA.”

Designing fragments of DNA certainly feels about as far away from churning out the next iteration — or even the next generation — of consumer technology as you can imagine a technology company could be. But Microsoft Corporation is undoubtedly a far stronger, future-proofed business for having such a far-sighted, far-reaching focus.

Apple TV eat your heart out.


Apple Working On Auto-Zooming Content, iPhone Vibration Noise Suppression

pinch-to-zoom

Apple has a couple new patent applications this morning, spotted by AppleInsider and detailing two very useful features for mobile devices. The first is a method for detecting and adjusting noise resulting from an iPhone vibrating in silent mode, and the second is a design for auto-zooming of content based on the proximity of a user’s face to a screen to present content at the best size for reading depending on how close they are and what they’re looking at.

The vibration motor patent is intended to make silent mode on an iPhone truly silent, by eliminating the noise it can make when the phone is on a flat, hard surface and notifications come in. With a phone call, that can become a major annoyance, especially if you’re not in a position to be able to get to the phone to silence it right away. To remedy this, Apple has worked out a system where microphones or motion sensors on a device can pick up on cues that indicate a phone is making a lot of noise, and change the vibration levels and patterns to compensate and minimize rattle.

Apple covers two types of vibration motors in this patent, including the rotational model it uses in the current iPhone 5 and older models, and the linear magnetic version it implemented in the iPhone 4S and CDMA iPhone 4. Methods to compensate for excessive vibration in both are described, and Apple also addresses how to still provide notifications that will signal a user even if vibration has to be turned way down, describing visual feedback and soft audio alerts that would actually still be quieter than an iPhone rumbling on a hard table top. Already, users can set their camera flash LED to provide notifications via their iPhone’s accessibility settings, which is one way to get around having either an audible or vibration alert signal.

The other patent filing that turned up today describes a replacement for pinch-to-zoom, which provides a way to dynamically alter the size of content based on how close a user gets to the screen. Text and images can both be enlarged or reduced according to what a device’s camera, proximity sensor or SONAR sensor (which Apple described in a previous patent) tells the system about how far away a user’s face is. In one mode called “comfort,” the system would zoom out on content when a user gets close to the screen, and enlarge it when they back further way, making it more convenient and easier to read in each situation. In another mode, called “zoom,” the action is reversed, which could come in handy for more visual content, like if you’re surveying a full painting at a distance, and then move in close for a look at some particular detail.

If executed well, this could come in handy as a replacement or supplement for the pinch-to-zoom gesture on small-screened devices especially, where zooming in and out is a constant, repetitive process, especially when viewing web content and trying to navigate full web sites not optimized for mobile. Both the zooming and the vibration alert patent show Apple’s attention to the finer details of the smartphone user experience, and while neither of these designs may ever make it to market, you can tell Apple’s aware of where its devices (and smartphones in general) offer opportunities to significantly improve a user’s enjoyment of their phone.