Category: Tech news

Editor’s note: Mike Knoop is co-founder of Zapier. Follow him on Twitter @mikeknoop.

One in four Y Combinator companies loses a founder. It’s not hard to conclude that startup co-founder disputes are universal. They range from the big decisions (What should our product do? Should we hire? Should we raise capital?) to the small (What should you work on today? What should the blog design look like? Should we allow non-profit discounts?).

I have identified a few trends from my experience with my startup Zapier. Not every founding team is meant to work out, but the ones that stick together may find these trends useful to relieve tension and frustration.

Start With Your Surroundings

Surrounding myself with like-minded founders has preempted many arguments from occurring in the first place — because we already agree! Some of the best founders are old friends and many old friends come from similar walks of life. Seek out these people. Be wary of radically differing lifestyles because they often signal differing tastes and ultimately lead to the most frustrating and difficult disputes.

Define A Tie-Breaker Policy

We do not resolve every dispute. It is very useful to have a tie-breaker when two founders are at an impasse. A third co-founder is particularly effective at enabling this – as long as politics remain on the sideline.

Another tie-breaker is simply to default to the person with more expertise in the area of debate. At Zapier, a backed or infrastructure problem is typically deferred to co-founder and backend engineer Bryan Helmig, a frontend issue to myself, and a marketing or customer-related topic to Wade Foster, co-founder and CEO.

Practice Empathy

I always try to remember: every (good-faith) founder only wants what is best for the company. Failure to realize and re-affirm this is a quick path to resentment and frustration. I ask myself: Why do they think this is what’s best? Taking this simple step back always helps me. I can feel the frustration lift immediately.

A Zapier Example

Allow me to highlight a real-world example by describing a problem, dispute, and resolution we had at Zapier: deciding on our name.

When we sat down to build the minimum viable product of Zapier at Startup Weekend in 2011, Wade came up with our original name “Snapier” within minutes. We operated under that name for a few months until we discovered a similarly named company in the space.

The hunt was on for a new name. Early in a startup’s life, every decision seems monumental (especially a decision as public-facing as choosing a name). If you can survive the first few months of hard decisions, team unity tends to kick in and the dispute process gets easier. We were not at this point.

We spent an entire evening brainstorming names. Bryan wrote a script to auto-generate names and look up .com availability. Somewhere in the brainstorming process Bryan or Wade suggested replacing the “Sn” with a “z”. I hated it. I was never in love with the original name and a small spelling change was not improving much in my book. I made my position clear, but I also did not have a better suggestion.

So a few days went by, then a few weeks. Two blurred months later and we had adopted the name “Zapier” by the most informal, non-committed decision ever. Fast-forward one year and I couldn’t be more happy with that informal non-decision 12 months prior.

I was the defector in this dispute — two against one. It was apparent that the onus was on me to come up with a better suggestion or else “Zapier” would stick. But we all trusted each other. Bryan and Wade constantly reminded me that we could always change it again later if a better name came along. We all only wanted what was best for the company. Over the next few weeks I cared less and less until my attention was elsewhere. By the start of Y Combinator S12 I had bonded with the new name and the rest is history.

Healthy Conflict

In the end, debate is healthy and encourages outside-the-box thinking. To that effect, I realize that I cannot control other founders and I can never eliminate disputes, but I can impact the company positively through my own behavior and decisions.

Editor’s note: Mikkel Svane is CEO and co-founder of Zendesk. Zendesk is hosting a panel on the consumerization of the enterprise at their HQ in San Francisco on Tuesday, January 29. TechCrunch’s Eric Eldon is moderating. Follow Mikkel on Twitter @mikkelsvane.

Dating used to be a lot harder before the Internet. Your access to information was limited by proximity effect, and your ways of communicating to people beyond who you already knew and who you were trying to get to know were few. You were restricted from true choice. Then the culture changed, and technology helped it. Today’s dating world is transformed by both changes in culture and technology which lift many cultural barriers. When we talk about the “consumerization of the enterprise,” similar changes have occurred.

When online dating, you can choose anyone you like to reach out to, for the most part. It’s the same when selecting enterprise software.

There Are Lots Of Fish In The Sea

Maybe you like someone who’s elegant – of few words? Perhaps you prefer a multi-tasker with a wild color scheme? Maybe you don’t know what you like, or what’s best suited to you?

Just like choosing someone to date, and knowing there are so many people in the world, there’s an incredible variety of software products out there. But today, you have the power to choose whatever you like best, whatever’s best suited to your needs. Previous barriers to your selection process (and ultimate happiness) have been lifted. You’re free to discover a really great solution — a potential life partner — based on your own preferences, needs and philosophies.

It’s becoming rarer by the day for someone to tell you what you must choose. In other words, there are fewer “arranged marriages” with respect to your software selection. In modern companies, rarely does someone from the IT department deliver you a piece of software that you don’t like but are forced to use. The obstacles that used to restrict your ability to select the software you want — i.e. whom you can date — are becoming things of the past.

Today, real choice exists. You can find something that’s truly amazing. End-users in your company — for example, your customer service team — can help you decide what software to use. After all, they’re the ones using it. They’re the ones taking the free trials and getting to know what’s available on the market. End-users are now driving choices your organization makes about buying; it’s not just a decision maker from on high who makes the call. (At least, not without major pushback.)

Never Go On Another Blind Date Again

But it’s better than that. Just as you wouldn’t want someone to tell you whom you should date, you don’t want some outside authority to make a software choice for you. Now, the way you find your software can be organic. It can come from word-of-mouth recommendations.

Today, you don’t get all your information from a research company and then go buy your software based only on that evaluation. No, the software you try first — the person you decide to ask for a first date — probably came to your attention from a very trusted source, like close friends.

Even if close friends make the suggestion to you but haven’t yet made the introduction — setting up a classic blind date — there’s no such thing as “blind” anymore.

Research is fundamentally changed, and information is everywhere. At Zendesk, 15 percent of our mid-market customers make buying decisions without the assistance of a salesperson. In other words, companies today make huge buying decisions based on their own research, following “unassisted” research patterns. They can get the information they want without needing the help of another party, i.e. the traditional intermediary role of sales.

This is true of dating, too. Even if friends set you up for a date but you haven’t met the person, you still don’t have to go into the experience “blind.” The research tools available to you — Twitter, Instagram, Google — provide information you can use to make your choice, in addition to the advice of friends.

This means you’re in control of the partner — and software — you choose.

Try Before You Buy

In dating, you can take someone out and get to know him or her first before deciding on another step. Similarly, today’s software environment requires that pricing be extremely flexible so consumers can try something first, see how it works and fits into their business.

Many businesses, including Zendesk, have a free trial to start, and then offer various graded options as needs change, all for monthly subscription-based fees. You have the choice to add more features and functionality, and pay as you go. If you decide to upgrade, you do it when you’re ready.

In dating parlance, you’ve decided to make the relationship “exclusive.” It’s about getting to know someone before making bigger commitments. The point is: you can try a software product and decide after spending time with it if it’s the absolute best solution for you.

Txt me: u r on my mind <3

Dating today without mobile is unthinkable. Texting is a completely new platform for communication, for flirting, connecting and coming together. It’s exciting knowing you can communicate at any time, anywhere. A map feature helps you get to the restaurant, and your GPS could let you know your date is nearby. In fact, many location-aware apps can be used for dating, and some dating services are apps only. With mobile, the information you need is always available, and it encourages more accessible interactions.

Likewise, mobile functionality is a top consideration for enterprise software. People are using different devices in many places, and they want access to all their information at all times.

Happily Ever After

It’s the same revolution. In dating, traditional barriers to free choice changed as the culture changed. Suddenly, you could date whomever you wanted, if you could convince them to date you, and ultimately choose with whom to spend your time…and maybe your life. “Consumerization of the enterprise” means you’re free in the same way. You can choose a software product, try it out, go at your own pace, and arrive at a solution that really works for you.

Consumerization of the enterprise, like dating in a brave new tech-enabled world, is the way to build beautiful relationships.

Yesterday I wrote about the ongoing CNET editorial independence issue. I said that the editors and journalists at CNET were part of the problem, and suggested that they either publish their (assumed) dissent, or resign, or both.

A conversation began in the comments of that post, with some people saying that it isn’t reasonable to expect people to resign.

From Danny Sullivan:

I think a lot of CNET staffers probably aren’t resigning, Mike, because they have families to support, as well as themselves. It’s not exactly a great economy out there. I think what Greg did was very brave, but not everyone is that brave nor even able to make that type of move.

Rof Hof:

I don’t blame people in today’s publishing business for wanting to line up work first. Not everybody can be sure of being able to support their families, and when they’ve been screwed by their employer, they shouldn’t be expected to *immediately* screw themselves too. But don’t be surprised to see more leaving.

There were similar comments on Twitter. These comments were often combined with statements my position wasn’t valid because I have made some money selling my business.

As just one example, David Carnoy, Executive Editor at CNET, says:

@arrington In your post about @CNET you neglected to disclose $$$ you made from selling out to AOL. Easy to walk when you had your BIG EXIT.

And finally, some people have said that it’s only reasonable for people to resign if they have another job lined up.

Hunter Walk, in a comment to the original post, says:

Let’s see other journalists stand with their brethren and start a “free the CNET staffers” fund that can be tapped by any CNET journalist who wants to walk away but needs the money to do so. Mike, I’ll match up to the first $500 of your contribution

I think some of these are valid points and worth exploring.

First, sure it’s easy for me to say they should just quit their jobs when I’m not the one doing it and I may have more financial security than most or all of them. If I worked at CNET, had a family to take care of and had little financial breathing room I cannot say for certain that I’d resign. My family would certainly come first (and second, and third). It’s a fair point.

Second, I agree that it would certainly be easier for CNET people to resign if they knew that they had another job waiting for them.

Still, I think there are some profound issues to think through that drive to the core of what it means to be a journalist, and these issues are worth exploring.

What does it mean to be a journalist? If I have bias here, it isn’t in net worth. It’s that I don’t respect what I’ve called the Priesthood of Journalism. Journalists hold themselves apart, and above, the common person. They have rules designed to ensure their objectivity and impartiality.

Among those rules – “Be vigilant and courageous about holding those with power accountable.”

It doesn’t say “unless you report to them,” or “unless you might lose your job.”

No, journalists hold themselves to a higher standard. Situations like CNET are exactly what journalists are supposed to fight. That’s why we entrust them as the fourth estate.

Is the pushback here because we’re just talking about tech press and not real press? What if someone at the New York Times was under express orders not to write about a political or financial scandal? Would we say it’s ok if they were at risk of losing their job and maybe not being able to pay their mortgage? Hell no, we’d consider that reporter as part of the overall conspiracy. “Just following orders” doesn’t cut it there, and the tech press should hold themselves to those same standards.

Journalists are supposed to put the people first, even before themselves. Around the world and throughout history journalists have died to get the truth out. We’re not talking about losing a job and having trouble paying the bills. We’re talking about things like having your head removed from your body.

Of course covering the latest tech gadgets isn’t quite the same thing as covering a bloody civil war. It’s not as important, or dangerous. But there is still quite clearly a principle at stake here. If a tech journalist needs financial security before doing what their conscience dictates, I’m not sure they should be calling themselves journalists at all.

Would it be ok for a CNET reporter to take a bribe to cover or not cover a certain product? Or what if CBS said “in appreciation of you not leaving after this debacle we want to give you all a 10% spot bonus.” Would that be ok? But what if they really need that bribe or spot bonus? What if they have a sick kid and can’t pay the hospital bills? Is it ok then?

To me, every paycheck a CNET reporter receives from here on out is just a bribe. A bribe that they are accepting in exchange for putting up with CBS telling them what they can and cannot say. By staying they are making it easier for companies to do evil in the future.

“It comes down to *why* we do this job. Do we have a burning passion to report the truth, or simply a desire to eat?” – Lee Hutchinson

So to end this I’ll say this. I don’t think CNET reporters are bad people for not quitting, and I quite understand that some of them may not be in any kind of financial position to even consider it. But as this crisis passes, perhaps those that couldn’t make that hard decision should consider if, over the long run, they should continue to call themselves journalists. Perhaps a new line of work, one where the public isn’t relying on them, is a better choice.

All the salacious headlines are (mostly) true — as of today, you can’t unlock a carrier-subsidized smartphone on your own before the contract associated with it runs out without technically running afoul of the Digital Millennium Copyright Act. Granted, I’d wager that the number of people who faithfully stick to their multi-year wireless contracts far exceeds the number of people who would unlock their phones and bail, but this is still a damned lousy turn of events for all you proponents of phone freedom out there (myself included).

But how did this actually happen? To more clearly understand the change that went into effect today, we have to flash back to the heady days of 2010.

In late July of that year, the Electronic Frontier Foundation announced on its blog that it had won three big exemptions to the DMCA. One of them dealt with the legality of using copyrighted footage from DVDs for noncommercial works of “criticism or comment,” but yet another exemption made it legal to jailbreak a phone, and the final was actually the renewal of an existing exemption for (you guessed it) unlocking phones for use on other networks.

Everything was copacetic until this past October, when the U.S. Copyright Office and the Librarian of Congress spent time reviewing some of those exceptions made to the DMCA. Geekier endeavors like jailbreaking or rooting your devices are still totally kosher, but after extensive review the original exemption for unlocking phones was overturned, noting the ability for users to unlock their own phones for use on other networks just wasn’t necessary anymore given the perceived ease of obtaining either a pre-unlocked phone or a carrier-sanctioned way to unlock one:

The [Register of Copyrights] concluded after a review of the statutory factors that an exemption to the prohibition on circumvention of mobile phone computer programs to permit users to unlock “legacy” phones is both warranted and unlikely to harm the market for such programs.

At the same time, in light of carriers’ current unlocking policies and the ready availability of new unlocked phones in the marketplace, the record did not support an exemption for newly purchased phones.

The decision goes on to say that, considering “precedents in copyright law,” a 90 day transitional period would be allowed so people would have time to unlock their phones before the exemption kicked in. That period has just run out.

The full text of the Librarian’s report can be found here (the section on unlocking starts on page 16), and after taking a few moments to glance through it, the amount of lobbying and discussion that went into the process of drawing a conclusion is pretty amazing. As you might expect, one of the most vocal proponents of axing the exemption was the CTIA, a wireless trade group that counts every major U.S. wireless carrier (not to mention a whole host of others) among its members. It’s no shock to see the CTIA — and, by extension, the carriers — get a little worked up over this.

You see, shelling out a mere $99 and signing a piece of paper may seem like a trivial action for the person actually doing it, but the carriers view the situation a little differently. They sell those phones with hefty subsidies in hopes that they’ll make up the difference (and then some) over the two years a customer is contractually bound. In this case, the CTIA’s argument basically boils down one of money: “the practice of locking cell phones is an essential part of the wireless industry’s predominant business model.” Put another way, unlocking a phone can be considered one of the first steps in jamming up a carrier’s revenue stream, and they certainly don’t want that happening too often. In this case, carriers get some additional protection without inconveniencing their customers en masse — not a bad deal for them.

So yes, unlocking your phone without your carrier’s explicit approval is technically verboten. But let’s not forget what this particular change doesn’t mean — the police most likely aren’t going to knock down your door because you felt the compulsion to free your phone from your carrier’s shackles. It also doesn’t mean that the stash of old phones nestled in your drawer can’t be unlocked — so-called “legacy” devices are exempt from silly change, so feel free to take your old phones and show them a little bit of freedom. You can still buy unlocked phones from eBay and Amazon like you always could, and hey, some phones sold by carriers are unlocked right out of the box anyway.

But all those caveats raise an even weightier question: what will actually happen if you unlock your phone? For now, it’s the sort of question that comes without any clear answers — if anyone, it’s the carriers who have the ability to detect and crack down on unsanctioned unlocked phones, but so far none of them seem very keen on addressing the matter. I’ve reached out to representatives from AT&T and T-Mobile, the two most prominent GSM carriers in the country (and therefore the two carriers that are mostly likely to deal with the issue of unlocked phones) and asked what would happen if either carrier had determined that one of their customers had illicitly unlocked their phone.

Surprise, surprise — I was met with canned responses and unsatisfying non-answers at every turn. It seems they’re angling to keep that particular card close to their chests for now. What’s also unclear is whether or not intrepid unlockers (and the folks that make unlocking tools and services) will soon face any legal ramifications. Electronic Frontier Foundation lawyer Mitch Stoltz told Engadget earlier today that the U.S. Copyright Office is “taking away a shield that unlockers could use in court if they get sued.”

The key word in that sentence is “if” — while I doubt we’ll be hearing about many unlocking-related lawsuits in the weeks and months to come, there’s little denying that this turn of events has left more than a few people wondering about what it really means to purchase and own something. Some have already made their discontent known; a We The People petition imploring the Librarian of Congress to rescind the decision has already made the rounds on Reddit and Hacker News, and racked up nearly 15,000 signatures in two days.

UPDATE: To its credit, the CTIA has painted a clearer picture of the potential legal penalties of unlocking a phone on its official blog. Sadly, those penalties aren’t inconsequential:

Civil penalties are based on the carrier’s actual damages and any additional profits of the violator, or a court can award statutory damages of not less than $200 or more than $2,500 per individual act. Criminal penalties are even more severe: any person convicted of violating section 1201 willfully and for purposes of commercial advantage or private financial gain (1) shall be fined not more than $500,000 or imprisoned for not more than 5 years, or both, for the first offense; and (2) shall be fined not more than $1,000,000 or imprisoned for not more than 10 years, or both, for any subsequent offense.

Today’s watch porn comes courtesy of Roger Dubuis, a manufacturer of odd timepieces. Their latest, the Quatour (which kind of sounds like a character from Total Recall), is a watch with four separate escapements that average each other out as the watch is worn. It’s very weird.

The watch is absolutely massive – about 48mm from stem to stern – and the weird escapement system is designed to ostensibly improve accuracy. The theory is that when a watch is worn gravity tends to pull down different parts differently. The escapement is the part of the watch that flips back and forth to drive the watch hands forward one tick at a time (check this out to understand it better). To account for gravity, tourbillon watches spin the escapement 360 degrees. This watch, on the other hand, just has four escapements and a differential gear to “average” their movements. It basically “ticks” four times, making an oddly pleasing, organic sound.

You can read a full hands on over here or just marvel that this thing costs about $400,000 and is limited to 88 pieces. An all-silicon version costs a cool $2 million.

Editor’s note: David Teten is a partner with ff Venture Capital and founder and chairman of Harvard Business School Alumni Angels of Greater New York. Follow him on Twitter @dteten. 

The good news for TechCrunch readers: Every major study conducted to date has placed angel investors’ internal rate of return (IRR) between 18 and 38 percent, as summarized by my Partner John Frankel and Professor Robert Wiltbank in previous TechCrunch articles. The bad news: The data on angel returns has historically been difficult to obtain, analyze, verify and, therefore, rely upon.

Despite the inherent difficulties in quantifying angel returns, we think that the aforementioned studies have significant implications for angel-stage investors for several reasons:

1. Even if there is some bias, the median IRR is still far higher than any other asset class. It seems unlikely that the reporting problems above account for all of it. Every major angel study conducted to date has shown high IRR.
2. The results don’t generalize to all angels, but they strongly suggest that more professional, institutional investors should do even better than individual amateur angels.
3. Even if the methodology is full of holes, it is still useful for generating theories on angel-stage opportunities. That is what we are doing through our own investments.

Small, agile funds are in an excellent position to take advantage of opportunities in the angel space. As Jon Calligan of True Ventures explains, “The numbers just don’t add up. There are a minimum of 2,000 companies per year getting funded and coming out of incubators, and there are only 750 VCs that call themselves ‘active.’ But when you look at who is doing at least two deals a quarter, the numbers fall to just 200 firms. Those firms are only going to do a few Series A deals a year.”

In fact, 97 firms have invested at least $1 million a quarter for four straight quarters. AngelList co-founder Naval Ravikant concludes, “The real winners here are going to be the seed funds and early-stage VCs that can write a $1 million to $2 million check. They’re buying into companies post-seed funding, with traction, at prices that aren’t significantly higher than angel prices.”

With that said, the data is definitely weaker here than, say, the data that Identified (ff VC company) uses to gamify your job search. There are hundreds of thousands of active angels at any given time, and they are bound to no legal reporting requirements on their investments beyond filing tax returns. The only way to get data is to reach out to individual angels. Unfortunately, angels aren’t easy to find; many intentionally keep a low profile. Researchers are forced to rely on angel group registries and word of mouth. Even if a sufficient number of angels are identified and surveyed, most of those angels will fail to respond or give incomplete data. Obtaining accurate return data for angel investments is therefore a daunting task. However, given that angels deploy almost as much capital as VCs ($22.5 billion for angels versus $29.5 billion for VCs), it is worth the effort to do so.

We believe the most reliable studies are “Returns to Angel Investors in Groups” and “Expected Returns to Angel Investors,” both of which use the Kauffman Foundation’s Angel Investor Performance Project (AIPP) dataset and place angel IRRs north of 30 percent. Data was collected from 1,137 exits on 3,097 investments, but only 602 exits have enough variables reported to be fully usable. Even so, AIPP is still easily the largest angel dataset. All exits occurred between 1990 and 2007 – the vast majority after 2000.

Despite the relatively large sample size, we do not believe it is necessarily representative of the overall angel market for two reasons. First, all respondents are accredited and belong to angel groups. Results can only generalize to other angels with these characteristics. Second, all investments are equity instead of debt. Forty percent of actual angel investment dollar value is debt, which has a lower expected return.

Two biases are of particular concern (and seem to plague all angel return studies): self-selection bias and survivorship bias. The lack of a significant difference in returns between high- and low-response-rate angel groups surveyed somewhat counters the concern with self-selection bias.  The aforementioned Robert Wiltbank, co-author of “Returns to Angel Investors in Groups,” makes two generic arguments on the subject of survivorship bias in a later report (“Siding with the Angels: Business Angel investing – promising outcomes and effective strategies“).

First, it is possible to access inactive angels through their groups, meaning that some angels who have discontinued their activities may nevertheless be among the respondents. Second, sampled angels still have ongoing investments. Since positive exits take longer, the results should be negatively skewed. Moreover, some of the sampled angels will fail later even if they haven’t already.

In order to determine the extent to which these biases may be affecting results, “Expected Returns to Angel Investors” includes a few “bias tests,” most of which point to modest bias or none at all. First, larger deals and deals involving multiple angels are more likely to be reported accurately. Only one metric showed statistical differences between these deals and others. This outcome suggests that respondents were reporting honestly. Second, the overall returns from AIPP are comparable to other datasets (though the IPO percentage is a bit higher).

Some VCs have adopted the principle that typical angel returns must be “atrocious.” After all, if the average VC fund barely returns investor capital, how could amateurish angels with more risk and worse deal flow possibly do better? As it turns out, the conventional wisdom is wrong. The claim that typical angel returns are atrocious is demonstrably false, and no amount of tortured reasoning or unsystematic anecdotal evidence will prove it true.

However, it is absolutely true that any one angel deal is very risky. We think the bare-minimum level of diversification needed to get good returns as an angel investor is 20 companies, and few angels have the time, patience, and resources necessary to make 20 angel investments. This creates a market opportunity for formal angel groups (which have been shown to increase returns for their members) and for institutions that focus on angel-stage investing.

Thanks to intern Matt Joyce for help researching and drafting this.

Editor’s note: Tadhg Kelly is a game designer with 20 years experience. He is the creator of leading game design blog What Games Are, and consults for many companies on game design and development. You can follow him on Twitter here.

In the age of better metrics for games, some developers take it too far and let the numbers make their creative decisions. This generally leads to trouble. However one of the better aspects of metrics is the idea that you can assess the overall performance of your game against someone else’s. You can know how well you’re really doing, or at least you should be able to.

In the screen trade they have done this for a long time through Nielsen ratings and BARB, to the point that audience numbers are a regular part of the critical conversation. Such information is valuable because it shows what seems to work in any given market. Every company in the television market knows where they stand relative to everyone else, and they can segment their efforts accordingly.

In the games industry such objectivity has long been absent, and this is because games is a multi-platform business. It’s not just about game developers or publishers fighting it out, but of whole systems striving to be the dominant host of all games. The games business is what the television business would look like if Disney, ABC, NBC, CBS and Fox all sold their own TV sets in addition to their own programming. As a result of platforms trying to outdo one another, performance data is often hidden.

Sony does not necessarily want to lift the lid on just how poorly (or well) PSHome is doing on a day-to-day basis, for example, because that gives ammunition to Microsoft and Nintendo. Apple does not necessarily want the daily active user count of Rage of Bahamut to be query-able, preferring instead to use relative chart positioning. They don’t want Google to then turn around and show that the game is played more on Android. And vice versa. Rumour may have it that Halo 4 is attracting a lot less concurrent play than previous Halo games but nobody external knows that for sure, and Microsoft isn’t keen to tell us.

In the retail space there are some companies like NPD and GFK Chart-track that conduct market research and publish charts. This information often varies per country and sampling method, but it’s seen as trustworthy enough to act as a rough guide to the state of the industry. In the online space, however, there’s almost nothing to compare.

There are plenty of companies who provide metric solutions, but these tend to be for internal use only. Just like hardware platforms do (and sometimes for legal reasons as part of the terms-of-service of those platforms), the tendency of publishers is to keep their true numbers secret and only expose their vanity metrics. It’s all too easy to claim you have a million users if you stretch the definition to a million registered email addresses, for example, or how many Facebook likes your page got.

Such numbers are generally useless for any kind of analysis because they cannot be validated, and do not conform to any standardised methods for collection. Their only value tends to be as sales points for VC types who might read Techcrunch, or for fuelling Reddit threads. But overall we may as well be using divination sticks for all the good they actually do.

This means that our efforts to understand how well the industry is doing only come from incomplete sources like the iOS charts. The Top Grossing chart is particularly popular among game makers, especially those who are fans of free-to-play games. It helps make the argument for certain kinds of games over others, but the data is all relative. Clash of Clans may sit atop the chart, but we don’t know to what extent. Supercell may kindly tell us that the game coins half a million dollars a day, but we don’t know if that performance has sustained. We don’t know on what size of user base. We can’t really verify it.

Ideally what is wanted is objective measures of daily active users. Up until very recently there was one platform that provided that information: Facebook. Through services like Appdata it was possible to track the MAU and DAU of games as well as their chart positions, and this was very valuable information. In the early days these metrics were key to wowing potential investors as to the size of the market and helped formulate many a business model. They also provided a positive story. You could see where CityVille got over 100 million users, and that information was reasonably objective, which was powerful.

Now Facebook has instituted a change that only provides banded information about games (whether they are in a 500K+ MAU game or a 10 million+ game, etc.) and charts. The reasons Facebook cites for doing this are to bring its reporting into line with other platforms like Google Play or Amazon, but it is a deeply disappointing change. Rather than knowing, we are back to guessing and supposing based on our historical understanding of the platform, and over time that will become inaccurate. This means that soon vanity metrics will follow, with studios announcing unverifiable numbers to grab headlines.

It feels like a gigantic step backward. Everybody in the industry knows that this sort of thing goes on, and how difficult it makes market research, but nobody wants to fix it for fear of losing face. If one publisher were to start to reveal its numbers then it would be vulnerable to attack from others who had no compunction to do likewise. Nobody wants to be the one who leads with their chin, even if they know that that’s near-sighted thinking.

This is why the industry needs someone to solve the problem for it. It needs its own version of Nielsen or BARB, across all platforms. The question is how to do it: Behind closed doors at every major publisher there are accountants and forecasters constantly analysing their own performance and that of their competitors to derive a picture of what’s going on. What will it take to bring them together?

Nielsen did it by polling. Samples of customers were asked to record their viewing activity, and this data was then projected and weighted to determine the market size for radio, and then television. Later this technique evolved into distributing meters to a sample size of homes across the United States. For tracking games a similar approach may be needed.

Perhaps a company like Raptr would be well-placed to create an app that regularly asks players to submit what they are playing. It already has the back-end for this in place, but instead of trying to create a social network of gamers (which has never really taken off), it could be used as a Nielsen equivalent. Or perhaps one of the metric companies could do it. Ideally the place to be would be to convince the industry as a whole to embed some black box code in games to report usage stats directly, but I suspect that’s more of a pipe dream.

It’s crazy that in an age where we have the tools to know more about our audience, the industry actively supports deception and hoodwinking. As an industry we should be able to compare the performances of games on tablets versus those in browser, or console, or Steam to further open an honest debate. Otherwise we are just kidding ourselves and making up stories about our games that we want to hear.

Better playing through data yo.

Editor’s note: Glenn Kelman is the CEO of Redfin, a technology-powered real estate broker backed by Madrona Venture Group and Greylock Partners. His last post for TechCrunch was The Maximum, Beautiful Product. Follow him on Twitter @glennkelman.

Silicon Valley home buyers, I wish we had better news. Prices keep rising, with no end in sight.

Across the 20 markets Redfin serves, only Phoenix saw more rapid price increases than the Bay Area. Over the last 12 months, San Francisco prices rose 20 percent; San Jose prices jumped 23 percent. When the market moves this fast, the appraisals required by a lender reflect last year’s prices, and sellers just take all-cash deals instead — even when another bidder with a mortgage offers more money. Across California, we are starting to see conventional sales handled more like the sale of foreclosures once were, with the home sold as-is.

What’s going on? Well by December of 2012, the number of homes for sale across the Bay Area had declined 68 percent from the previous year. Once foreclosures stopped flooding the market, there weren’t enough conventional sellers to take their place. Goaded by very low interest rates, buyers turned out in force. High demand and low supply were why we were so bullish in our September TechCrunch assessment of Silicon Valley home prices.

This swing to a seller’s market happened first in California and Arizona, then spread to other parts of the country. Now, the inventory crunch is self-perpetuating, as some homeowners we talk to hesitate to sell for fear they won’t be able to find a place to buy, and even more consider renting out their place instead.

So that’s the recent history of Bay Area real estate. But what’s happening in the market right now, and how is it changing? We’ve noticed four trends:

1. Silent spring: 2013 was the first year in the past six to begin with a broad consensus that home prices were again rising, so we expected the year to start with plenty of new listings.

But in the first two weeks of January, the inventory problem somehow got worse rather than better, with new listings in the Bay Area falling more than 45 percent compared to the same period last year; much of the drop is due to a whopping 72 percent decline in short sales, where the owner sells for less than she owes on the mortgage. When foreclosures first became scarce in 2012, short sales became the preferred way for banks to clear out troubled loans, but with rising prices and more loan modifications, even short sales are now rapidly disappearing.

What this means is that Bay Area real estate is again becoming a free market, where the only people selling are the ones who want to sell. As any East German will tell you, this transition is hard. It’s almost as if homeowners have forgotten how to sell. We expect the supply of homes for sale to increase by the Super Bowl, but if it doesn’t increase a lot, we’re going to have a silent spring, with meager sales gains.

2. Local monopolies: 88 percent of the December offers written by Redfin agents for our Bay Area clients faced competition. Inventory is now so scarce that sellers sometimes enjoy a virtual monopoly, as was the case just last week with a listing that had no competition for half a mile in any direction. Every Redfin agent in the San Francisco office represented a different home-buyer on that property. As Redfin agent Landon Nash likes to say, there’s an enormous difference between competition of any kind and no competition whatsoever; it’s like the difference when raising venture capital between having one term sheet or two.

3. Flash real estate sales: Mobile real estate applications are increasing the pace at which the market moves. After getting listing alerts instantly delivered to their mobile devices, several Redfin clients have been able to get those listings under contract hours later. With so many home-buyers across the Bay Area now getting alerts instantly rather than nightly, the whole home-buying cycle here is becoming more like a flash sale, with properties lasting a day rather than a week.

4. Wild-card offers: As frustration builds among would-be home-buyers, we increasingly see wild-card offers, higher than any competing offer by hundreds of thousands of dollars. According to Brad Le, the leader of Redfin’s Silicon Valley business, “People just get tired of losing, and say, ‘Screw it.’” In just the past few days, a $1.8-million listing in Silicon Valley attracted six offers clustered around a price of $1.95 million, which was at the high end of what recent comparable sales could justify. This kind of competition was familiar to us. But the seventh offer came in half a million dollars higher, at $2.45 million, with no contingencies for an inspection or an appraisal. The seller’s agent was flabbergasted. These are the kinds of shots that send a shiver down the market’s spine.

5. Cash-out buyers: As the U.S. government approached a fiscal cliff, plenty of folks in Silicon Valley with stock in their own companies became worried that capital gains would be taxed at a higher rate, and so rushed to sell their shares by December 31. Redfin saw a spike in the number of high-end customers making an offer on a home in December, and still Redfin agents are representing a handful of clients who cashed out their equity positions with an eye toward using that money to pay for a home. Even as investors become more cautious in the face of increased competition, more cash buyers than ever are entering the market, loaded for bear.

Where will it all end? The truth is, alone among the 20 markets Redfin serves, the Bay Area market is the one I dread getting asked about. Everywhere else follows rational economic laws. But here it just gets crazier and crazier.

[Image via Redfin]

Early on in the Netflix original series House of Cards, you see Kevin Spacey get his hands dirty. As Representative Francis Underwood, he doesn’t suffer fools and he doesn’t tolerate weakness. The opening scene shows Spacey performing a mercy killing of sorts, removing the pain of a beast not fit to continue living. It’s an apt metaphor for Underwood’s upcoming crusade against a presidential administration that has turned its back on him.

But the scene could also be read as a metaphor for the show itself: Just as Underwood seeks to show up the incumbent powers that be, so too is Netflix attempting to shake up the TV distribution model. And in both cases, you’re rooting for the underdog.

Spacey’s Underwood is the House Majority Whip and already has a tremendous amount of power. But when spurned for the position of Secretary of State, he puts a plan in motion to not only unseat the person chosen instead of him, but to cause further headaches for the administration that passed him over. The first two episodes are an unraveling series of events that have Underwood stealthily undermining the new president during his first several days in office.

He’s helped in this pursuit by aide Doug Stamper (Michael Kelly), as well as young Washington Herald reporter Zoe Barnes (Kate Mara). Meanwhile, Corey Stoll plays Representative Peter Russo, a hard-partying Congressman who ends up owing his loyalty to Underwood, and Robin Wright plays Underwood’s wife, an equally ruthless businesswoman undergoing her own professional upheaval.

Altogether, the ensemble and script makes for really good TV, even if you’ll never watch the show on any broadcast or cable network. That’s because Netflix cut a reported $100 million check for exclusive rights to stream the program to its subscribers. Like HBO, which has spent the last two decades winning over subscribers with really high-quality original content that can only be seen on its network (or, if you’re willing to wait, packaged for DVD and Blu-ray sale), Netflix is hoping that it too will soon be defined by shows that users can only see by paying $8 a month for its streaming service.

House of Cards wasn’t the first exclusive series Netflix put on its streaming service, and it won’t be the last: There are at least three others in development, including the reboot of Arrested Development, Eli Roth’s horror series Hemlock Grove, and Weeds creator Jenji Kohan’s prison comedy Orange Is The New Black.

But House of Cards is probably the most significant original release that Netflix will see over the next year. Unlike Lillyhammer, the goofy fish-out-of-water comedy that planted a New York mobster in Norway, this series was created exclusively for Netflix and features serious star power in Spacey and Fincher. And while viewers are no doubt waiting for the coming Arrested Development revival, most have some idea of what to expect from that project.

House of Cards, though, bears the burden of being the first real serious piece of original programming that the online streaming company has licensed exclusively. It is, one might say, a defining moment for the company.

Ever since it was announced, critics have questioned whether Netflix would be able to pull off an original show with HBO-like quality. While everything looked good on paper, including the involvement producer/director David Fincher and actor Kevin Spacey, there are no shortage of announced series that had viewers salivating, only to be let down once they were actually able to see the end result. Even HBO has had a few blunders of this sort — just check out the network’s horse racing extravaganza Luck, which combined the talents of David Milch and Michael Mann, and starred Dustin Hoffman. It was cancelled after just one season.

At the same time, Netflix famously stepped back during the production of House of Cards, something that few traditional networks are willing to do. The common belief among those in the TV business was that Netflix was making a big, risky bet by paying upfront for two seasons of a show that didn’t even have a pilot, and then letting the production studio do its job with little interference.

But if the first two episodes are any indication, Netflix’s bet on House of Cards should pay off handsomely. The show not only lives up to the production quality that we’ve come to expect from cable TV — in writing, acting, and directing — but it will probably surpass the expectations of many.

That’s not to say that the show is perfect: Kevin Spacey as a Southerner is a tough sell, and his affected drawl can be grating. The fictional Washington Herald isn’t a great representation of the modern news room, and the balance between the print reporters and the online ambitions of newcomer Barnes seems a little off. In the initial few episodes, the motivations driving certain characters are a little over-simplified. But overlooking those issues — which, frankly, are present in most TV pilots seeking to get a viewer up to speed in the fictional world they weave — House of Cards is very good. At least, the first two episodes were.

All 13 episodes of the show will be made available soon enough, as the series premieres February 1. And when it does, viewers will be able to make up their own minds about whether or not House of Cards lives up to the hype.

Twitter launched Vine, the mobile iOS app that lets users create six-second looping video and share it to various social networks, just two days ago and it’s been the topic of many a media conversation since.

Yesterday, Vine swung to the top of social in the App Store after being featured, and many have even called the app the Instagram of video. But does Twitter’s new video-sharing venture have what it takes to maintain momentum?

In what may be a first for a video sharing app, we both think this little Twitter birdy’s going to fly. I mean these things are pretty cool.

The number of social networks that launch into our laps is limitless, and there are a very rare few that truly get us excited. But the ability to string multiple clips together makes Vine a different form of mobile media creation, something we’ve never seen before.

The user can press their thumb to the screen to record, and then release to switch to a new angle, perspective, or shot. The maximum length of a video is six seconds, but that could comprise seven or eight very short clips.

The real-time nature of it fits in well with the Twitter brand, as Vines let you look through a window into someone’s real life, complete with motion and sound.

We see big things in Vine’s future, especially if Twitter can integrate the service directly into Twitter’s mobile app.

The Gillmor Gang — Robert Scoble, Kevin Marks, John Taschek, and Steve Gillmor — watched in amazement as Apple’s stock price tanked due to their blowout quarter and two-thirds ownership of the U.S. smartphone revenue. @scobleizer gave it a 70% chance that he would bolt the Apple Fanboy ranks by the end of February, but only a 10% chance that an unexpected breakthrough from an unexpected source would change the world by the end of 2013.

That, of course, leaves Google to account for Robert’s waning enthusiasm for Tim Cook’s lack of leadership and lack of SteveJobsness. But what Jobs triggered was a continuous wave of innovation driven by the engaged forces of the Google/Apple contest. And as @jtaschek points out, fostered in the competitive playground of the carriers where innovation in bandwidth fuels the social players. You don’t have to wait for the end of February to place your own bet on the percentage likelihood of disruption in this year of dreams coming true.

@stevegillmor, @scobleizer, @jtaschek, @kevinmarks

Produced and directed by Tina Chase Gillmor @tinagillmor

Editor’s note: Roman Stanek is CEO and founder of GoodData. Follow him on Twitter @RomanStanek.

Lately, in Silicon Valley and its counterparts around the world, disappointment has ruled the halls of companies that had a huge impact with consumers, but then fizzled as investments when they went public. Facebook’s and Zynga’s IPOs are the most notorious examples. Attention quickly moved from the consumer to the enterprise market, where Splunk, Palo Alto Networks, Workday, and LinkedIn are all humming along just fine. Entrepreneurs seeking to sell to enterprise customers should recognize that the business-to-business (B2B) market, especially with respect to IT, plays by a different set of rules than the business-to-consumer (B2C) space.

The Silicon Valley Conundrum

There is much talk in the Silicon Valley community of lean startups and pivoting. The idea is that you get going, learn from your mistakes, and then evolve toward what the market needs. There is a lot less talk about what this process of evolution does to the founder’s stake in the company, which goes down with every pivot, every attempt to start over.

In the B2C space, this process can work because the marketing costs are low or nonexistent and there is an efficient path to massive scale. The goal is that the uptake happens virally and the figuring out takes place with a safe cushion of huge numbers of users. Even so, some of the figuring out isn’t so fun to watch, as evidenced by Instagram’s recent attempt to adjust terms of use to better support revenue generation or Twitter’s journey from lots of users to a stable business model, a journey that continues to this day.

This model just won’t work in the B2B space. New products, especially those aimed at IT, must usually be sold. If you don’t have both the technology logic and the business logic of your product worked out, the founders and early investors are in for a rough ride.

Here’s a common scenario. A Silicon Valley software developer will come up with a novel technology idea, such as a new database. Its first customers are other fast-growing Silicon Valley companies who are grateful for the solution but are small and not exactly flush with cash. The developer then turns to the enterprise. But the enterprise is not a dedicated follower of fashion. Gaining a toehold in the enterprise is a separate swim lane from engaging consumers or startups who never pay for support or consulting. Remember, Salesforce.com has a massive direct sales force. That’s not because they want to have one. Splunk has a sizeable direct sales force, too. And for a sales force to succeed, the offer must be compelling.

6 Requirements of Enterprise Software Sales Success

Of course, it’s not impossible to sell your technology to the enterprise. If you plan on finding ways to make some serious B2B money, here are some of the rules for getting the business logic right.

1. Have a significant, monetizable value proposition. Getting people to use something is different from getting them to pay for something. From the beginning, your offering has to be something that people find so valuable that they’ll pay for it, not just play with it. Yammer, the enterprise social platform, had plenty of penetration, but it was not fundamentally connected with the business systems people used every day to do work. The company was sold to Microsoft, which could bundle Yammer’s capabilities into its Office suite and exploit its significant presence in enterprises.
2. Sell the way the enterprise buys. Selling to the front office can be on an inbound basis, with relatively horizontal, lightweight, consumer-like pitches. The problem is, you’ll find that some serious company – Salesforce, Google, and Microsoft – already owns most of the desktop. Enterprise IT is used to provide significant, detailed explanations of functionality on an outbound sales basis. That means real salespeople burning real shoe leather. If you want to upsell, you’ll probably have to up-staff.
3. Meet enterprise requirements. Your technology will need to satisfy all of the enterprise’s requirements for the “-ilities”: scalability, reliability, security, availability, and so on. Enterprise IT wants to know that the software can integrate with long-established systems of record. Be prepared to answer questions about single sign-on, uptime, firewalls, recovery-time objectives, service-level agreements, and failover.
4. Focus on targeted value scenarios or first go vertical. Because of the “crowded shelf” in the front office, your technology stands the best chance of getting an initial enterprise sales bump if it can solve a deep and irksome process problem that is a known issue across industries, or only applies to one industry. Enterprise IT often won’t buy from companies that haven’t already sold to quite a few of their peers, but you have to start somewhere. Your “land and expand” strategy might do best by starting with a nettlesome issue, deep in the weeds.
5. Have some patience. We like to say, “selling to the consumer is about selling positive emotions. Selling to the enterprise is about suppressing negative emotions.” Enterprise IT is not a culture of early adopters. “Ain’t it cool?” is not enough. Enterprise IT sales cycles are often months long and you should prepare to be met with skepticism. Consumers usually ask, “Is it awesome?” “How much does it cost?” Enterprise IT asks, “What if it doesn’t work? Will I get fired?”
6. Establish a control point. With enterprise IT, being the first to market is not always the winning scenario. What’s more important is having a gambit that puts your technology’s hooks in an organization’s fabric – a “control point” of sorts. Your technology has to have some aspect that will prevent customers from moving to the nearest competitor tomorrow. Salesforce and LinkedIn sell dozens of products based on their control of customer data, which can be aggregated and, importantly, monetized, because they reveal important trends in business. Yammer’s control point was its community of thousands of people in an organization, which made it difficult to replace, though ultimately, it could not capitalize on that proposition alone.

Conclusion

If you want to sell your technology to the enterprise, you have to solve real problems for the enterprise, and you should expect to have a substantial sales and marketing operation. Fundamentally, the product has to make work easier, integrate better with other systems, and meet much more stringent requirements than a consumer product would. The enterprise is a large and slow-moving but a powerful and valuable animal. Capturing it requires addressing its concerns and its persona head-on. Don’t expect to figure most of this out by pivoting.

One of my investors, John O’Farrell of Andreessen Horowitz, puts it this way: selling to the enterprise “definitely separates the men from the boys. Enterprise customers are demanding and conservative – and they should be. They’re being asked to implement a product that will interface with their other apps in real time and form the basis for critical business decisions.”

It is vital that you know as much as possible in advance about how you are going to make such customers happy. Think of it this way: Raising an A round for an enterprise-focused company is relatively easy. Getting a B round on attractive terms will only happen if you are making sales because your theory of what customers need, the one you carefully figured out in advance, is actually working.

John P. Falcone over at CBS-owned CNET posted a quick piece on Aereo, the TV-over-Internet startup that is giving broadcasters fits. The story, which would have been a short piece on Aereo on a Roku device, is now awash with ridiculous disclaimers and discussions of lawsuits filed against Aereo by broadcasters.

In short, CBS no longer allows CNET to write about (or, more precisely, review) things that are in pending litigation. Because CBS can’t control its own business model, it wants to control CNETs. When the Dish stuff broke I really didn’t think much of it. Now that this is happening, I have no respect for CBS and am losing hope for meaningful change at CNET.

I wish we didn’t have to write about CNET this way. Whatever is going on inside CBS/CNET (I posited a bit here after talked to friends over there), it’s making the tech reviewing juggernaut look like an absolute joke. It gives sites like Amazon amazing respectability and essentially makes the entire business of tech writing suspect and reduces the amount of valuable information available to readers. It hurts us all.

As Mike writes over here in another story about CNET, we’re supposed to be truth-tellers. To be clear, CNET staffers are not writing dispatches from the Eastern Front when they review an all-in-one printer, but as anyone who has ever looked for a camera or tablet online can tell you, a secure, trusted source for product information is Internet gold. These people get paid to look at cool stuff all day and pass judgement based on certain criteria and past experience. For CBS to figuratively fuck them like this is an absolute travesty.

“The middle class is being hollowed out,” says James Altucher. “Economists are shifting their attention toward a […] crisis in the United States: the significant increase in income inequality,” reports the New York Times.

Think all those job losses over the last five years were just caused by the recession? No: “Most of the jobs will never return, and millions more are likely to vanish as well, say experts who study the labor market,” according to an AP report on how technology is killing middle-class jobs.

When I was growing up in Canada, I was taught that income distribution should and did look like a bell curve, with the middle class being the bulge in the middle. Oh, how naïve my teachers were. This is how income distribution looks in America today:

That big bulge up above? It’s moving up and to the left. America is well on the way towards having a small, highly skilled and/or highly fortunate elite, with lucrative jobs; a vast underclass with casual, occasional, minimum-wage service work, if they’re lucky; and very little in between.

But it won’t be 19th century capitalism redux, there’ll be no place for neo-Marxism. That underclass won’t control the means of production. They’ll simply be irrelevant.

Why? Technology. Especially robots. The Atlantic is already wringing its hands over “The End of Labor: How to Protect Workers From the Rise of Robots.” These days robots are in factories everywhere–but soon enough they’ll be doing plenty of service jobs too. Meanwhile, software is eating white-collar jobs.

Well, at least the newly unemployed can still go flip burgers…oh, wait, robots are doing that, too. (And other machines can print the meat. No, really.) No wonder people with jobs increasingly feel they have to work harder and longer.

Of course the robot manufacturers dispute this characterization. “While automation may transform the workforce and eliminate certain jobs, it also creates new kinds of jobs that are generally better paying and that require higher-skilled workers,” says the NYT.

That’s true, and the usual retort to this kind of Luddism. But what if, as I’ve been saying for more than a year, technology is now destroying jobs faster than it’s creating them? What if America has hit peak jobs?

Here’s your answer: that’s a good thing…in the long run. Job loss isn’t actually a problem in and of itself. Instead it’s a symptom of something much larger.

Step back a minute. Way back. What precisely is the purpose of technological innovation? Why do we want to make things faster, smarter, better, healthier, new? To get rich? OK: to generate wealth, and ultimately, eliminate scarcity. The endgame, where we’re going as a species if we don’t screw up badly and destroy ourselves or burn out all our resources before we get there, is some kind of post-scarcity society.

Will people have jobs in a post-scarcity society? No. That’s what post-scarcity means. They’ll have things to do, authorities, responsibilities, ambitions, callings, etc., but not jobs as we understand them. So if the endgame is a world without jobs, how will we get there? All at once? No: by a slow and inexorable decline of the total number of jobs. Today’s America is just at the edge, the very beginning, of that decline.

Trouble is, America, more than any other nation, is built around the notion that all able-bodied adults should have jobs. That’s going to be a big problem.

Paul Kedrosky recently wrote a terrific essay about what I call cultural technical debt, i.e. “organizations or technologies that persist, largely for historical reasons, not because they remain the best solution to the problem for which they were created. They are often obstacles to much better solutions.” Well, the notion that ‘jobs are how the rewards of our society are distributed, and every decent human being should have a job’ is becoming cultural technical debt.

If it’s not solved, then in the coming decades you can expect a self-perpetuating privileged elite to accrue more and more of the wealth generated by software and robots, telling themselves that they’re carrying the entire world on their backs, Ayn Rand heroes come to life, while all the lazy jobless “takers” live off the fruits of their labor. Meanwhile, as the unemployed masses grow ever more frustrated and resentful, the Occupy protests will be a mere candle flame next to the conflagrations to come. It’s hard to see how that turns into a post-scarcity society. Something big will need to change.

Image credit: Tom Brandt, Flickr.

Hacktivist organization, Anonymous, is threatening perhaps their biggest play ever: a massive WikiLeaks-style exposure of sensitive U.S. government secrets. As proof of their power, they announced details of the plan on hacked government website, the United States Sentencing Commission (USSC.gov). Citing the recent death of free information activist Aaron Swartz, they explain, “With Aaron’s death we can wait no longer. The time has come to show the United States Department of Justice and its affiliates the true meaning of infiltration.”

Swartz was facing up to 50+ years in prison and a $4 million fine after releasing pay-walled academic articles from the popular JSTOR database. Some legal scholars have argued that releasing copyrighted material, or breaking the “terms of service” of a website, should not carry such harsh penalties. Anonymous is demanding that legislation be passed to no longer consider such violations a felony–a law that Congresswoman Zoe Lofgren (CrunchGov Grade: A) has already introduced.

If legal reforms are not enacted, Anonymous has threatened to activate files containing embarrassing or incriminating secrets.

“The contents are various and we won’t ruin the speculation by revealing them. Suffice it to say, everyone has secrets, and some things are not meant to be public. At a regular interval commencing today, we will choose one media outlet and supply them with heavily redacted partial contents of the file. Any media outlets wishing to be eligible for this program must include within their reporting a means of secure communications.”

It appears that the secrets will come a cost: Anonymous claims that there will be “collateral damage” if they are reluctantly forced to expose the information, presumably related to individuals who they think are associated with, but responsible for, the offensive laws.

For added effect, Anonymous made USSC.gov editable. “Feel free to upload snapshots of your improvements with the hashtag #USSC. Failing that, we find that highlighting large sections and pressing the backspace key has a great therapeutic effect…”

As of this writing at 3am PT, the encrypted files on the page are no longer downloadable, but the hacked site remains intact.

We’ve seen Anonymous angry before, but the death of Swartz and the recent prosecution of some of their members seems to have pushed them over the edge. Big news may be coming very soon.

Listen to the full message below: