A few weeks back, I posted about the NYT article on young Silicon Valley entrpenuers and its focus on Max Levchin, the cofounder of PayPal and current CEO of Slide. For more insight on him and where he sees the widget/app market going in the future, per the OpenSocial from two weeks ago, watch the GigaOm video below:
I watched this video over the weekend even though Om bagged the interview before the NYT story so props to him for the scoop. Of course, I saw the NYT's article on Techmeme but I don't think Om's video made it there.
Given my recent trip to Chicago and shooting the breeze with Pedro about potential new business ideas, this NYT article on Max Levchin, founder of PayPal, only got me more energized about the prospects of starting my own web company.
I want to create something and work tirelessly to make it successful so here are the reasons why the article struck a chord (emphasis added):
It's not inherently all about the money (of course that's a great and mandatory outcome and it's a reason driving everyone but it's not the only or primary reason)
"They are happy to be wealthy, of course, but many of these baby-faced technology tycoons often seem indifferent to the buying power of their money, at least at this stage of their lives. Instead, nearly all of them have chosen to throw themselves back into a start-up, not so much because they want a spectacular new home or a personal jet — though many of them do — but because they are in a competition with themselves and one another."
Business time becomes personal time when you're passionate about the work that you're doing, and this blending of your two worlds isn't necessarily a bad thing. This relates to Mihaly Csikszenthmihalyi research on the idea of flow (see my an old 2005 post mentioning this concept).
"I enjoy sitting on nice beaches and hanging out with my girlfriend and playing with my dog, but that's three hours a day," Mr. Levchin said. "What about the remaining 18 hours I'm awake?"
Sounding like Richard Florida discussing the creative class, it's about your talent, not your school or family background:
"In other parts of the country, things like a great estate are the symbols people most respect," Mr. Sutton said. "But here, the greatest status symbol is a person's ability," he added, to "still bring out hot new companies" and show that you are "working on the hot new technologies."
Wrote this via email since I can't post via Typepad when I'm at Murky so formatting and links may not look right. It actually did work earlier this morning but now it crapped out again.
It doesn't take more than these two headlines below, both on the front page of my news reader today, to show the perfect contradiction that is the telcos.
The hyperbole about "fast" is almost laughable if not for the reality of most people's "high-speed" connections in the United States being truly laughable. Remember how far behind the United States is to the rest of the world in overall broadband penetration (yes we have larger geographic areas to cover but it's more than that) and even the paltry broadband connections that do we have are pitiful compared to the bandwidth of Europe's or Asia's internet connections.
I'm not saying that all of the blame rests on the shoulders of the U.S. telco companies but as monopolistic players with no real incentives to innovate or compete on prices, they carry a large amount of the burden. Don't get me started on Net Neutrality or ask me about those 'Cable Brings Choice' TV and print ads that I see here in D.C.
Best of all, don't even think about criticizing them either because AT&T recently updated its terms of Service (TOS) to indicate it could cut off your internet connection if your opinion or commentary "tends to damage the name or reputation of AT&T, or its parents, affiliates and subsidiaries." This language has since been changed, due to the public outrage first generated on the blogosphere, but it's another reason I have no love lost for the telcos.
Calacanis recommended Evan Williams' presentation from the Web 2.0 Summit last week but since I'm on a PC and I think Evan's presentation is in Apple's Keynote format, you'll have to settle for John Battelle's interview with Mark Zuckerberg:
And I had to laugh, as Battelle also noted when Mark come on stage, that he was wearing the now ubiquitous Adidas sandals/slides. Those sandals are like Steve Jobs' jeans, no belt, and black turtleneck attire, Zuckerberg is always wearing those sandals (and usually a North face fleece too) whenever you see him.
A few important takeaways on The Economist’s recent special report on innovation. Worth reading for anyone interested in economic development, global competitiveness, and entrepreneurial activity in the world. And for the Friedman ‘the world is flat’ crowd and Richard Florida’s ‘creative class’ disciples, there’s something here for you too (emphasis added).
The debate between idea creation and execution isn't as important as you think, more critical is the filtering process between ideas and execution
Failure is good but fast failures are key (the U.S. has an advantage here, e.g. the ease of declaring bankruptcy and starting a new business endeavor without any baggage)
Radical innovation and disruptive innovation are different and the two are often conflated
User-driven Innovation: Listening to only your best (high value, etc.) customers can skew your innovations towards the niche and erode your market share with the mighty middle. Kenneth Morse of MIT's Entrepreneurship Center advocates firms should keep closer watch on new and dissatisfied users, who are much more likely to be source of disruptive ideas.
Richard Lyons of NBER and Goldman Sachs argues that “commoditisation often occurs even faster in services than in physical products because innovations are easier to copy, patents can provide less protection, upfront costs are lower, & product cycles are shorter
For businesses that use open, networked innovation, it matters less where ideas are invented and more about extracting value from ideas wherever they come from.
[This seems to fly in the face of Michael Porter’s work on innovation clusters and Richard Florida's new book/research that location does matter (listed to his keynote from the Human Capital Institute conference last April, podcast here, where his new data shows that it's still job satisfaction, job challenge and responsibility, and relationships with coworkers BUT that it's also about your community's openness to new ideas and people.]
Sergey Brin insists that “Silicon Valley doesn't have better ideas and isn't smarter than the rest of the world' buthas an edge in filtering ideas and executing them(there's that filtering idea between innovative idea creation and the execution of those creative ideas, no. 1 above). Or put another way, domineering bosses and governments can only drive innovation so far because 'creative people like to challenge constraints and authority.'
So what does all of this mean? Or why are these takeaways worth mentioning?
I studied International Political Economy in school and combined with having worked in economic development for the city of Colorado Springs, I like to read and study about economic development, innovation, competitiveness, and globalization for the long-term, macro reasons.
At a more personal level, I want to know how where the economy and business world is going in the next five to ten years and how this will affect entrepreneurs: given the changes we’re seeing above, how can new companies or business models develop that harness the knowledge and implications of these insights above?
And just so you or I can make a buck (which there’s nothing wrong with) but also so society in general can enjoy an expanding economic pie. Improving our own lot can, should, and does improve the lot of others.
Don't worry, I'm not crazy or the only one engaged in this conversation about the future of advertising, seems that Microsoft is also trying to provoke this same discussion via this humorous video below:
It may not be revolutionary or surprising for people who have been paying attention to the web and how its fundamentally changing the traditional Madison Avenue model of advertising but this NYT article should cement the idea for everyone.
Whether it was Adam Curry talking about podcasts changing the media world or the Gillmor Gang engaged in deeply technical Web & geek discussions/rants, the basic premise has been that with so many media options available to people now, attention is the now the most scarce resource.
Combined with the fact that the general public has been tired, immune, and oppositional to advertising everywhere we go, everywhere we look, etc., and you have a recipe for the slow death (or at least lobotomy) of the traditional advertising model. And don't think of the repercussions only for the web, the change will affect advertising across all channels and mediums.
So what does the new advertising model look like?
It's advertising that more closely reflects content that we actually want. It's more than being less explicit with your branding message (side note there — you no longer have complete control, or any depending on your industry, over your brand so get over this fact and work with the system of blogs, wikis, user-generated content, etc. to help your brand remain successful) or engaging in product placement, consumers can see right through that crap.
This quote from the article sums it up nicely (emphasis added):
"Behind the shift is a fundamental change in Nike's view of the role of advertising. No longer are ads primarily meant to grab a person's attention while they're trying to do something else — like reading an article. Nike executives say that much of the company's future advertising spending will take the form of services for consumers, like workout advice, online communities and local sports competitions."
Note the critical part: how do we approach consumers given their attention scarcity, e.g. not interrupt what they want to do or read with in-your-face ads that aren't targeted, and actually deliver meaningful, value-add content, help, or resources for them.
Likening this form of advertising as value-add content gets us thinking in the right direction. Maybe it's not really 'content' per see because it still is content with a purpose (what content however is without a purpose, explicit or not?) but it's much closer to content than it is to traditional advertising.
It will take various forms as Nike suggests, and be across all mediums but there will be at least one consistent theme: new advertising will be information or content that perhaps a person didn't know about or wasn't actively seeking out BUT it will still align with their needs, goals, objectives and will ultimately help them.
If advertising used to be about how to get people to want/buy your product or service, it's now about helping people understand how your product or service fits in their busy lives. Or put another way, it's getting back to the very earliest and most effective form of advertising: word of mouth.
There's going to be lots of hits and misses as marketers, advertisers, and consumers try to figure out all of the exact details of this new world but it's coming whether you like it or not.
And the longer you wait, as Seth Godin points out recently regarding the music industry (the ongoing meme on The Radiohead Effect) that is also experiencing drastic, paradigm changing forces, the longer you wait to embrace the world the longer you'll remain in mediocrity.
UPDATE: Wrote this originally on the bus returning from NYC so I cleaned up formatting and did spell checking.
It's been some time since the last Snarky Post of the Week installment but there's been enough good material lately (Apple's scare tactics surrounding iPhone hacks is a perfect case in point) that it's coming back for now.
Ignoring the iPhone and Facebook and Social Graph hoopla but continuing with the music-themed posts from this week, this headline caught my eye. A great example of dinosaurs trying to show how with it they are, when in reality, as Umair would say, it's an example of strategy decay:
"MTV, Real, and Wal-Mart Shake Up Digital Music" (PC World)
Thanks for the eye-catching headline; my question is what's worse, writing that headline to grab people's attention or writing it because you think it accurately captures what MTV, Real and Wal-Mart are trying to do?
Nothing could be further from the truth, having those three companies and their brands even mentioned as "shaking" things up in the area of digital music. It's almost laughable if it weren't so sad. And if you're new to the DRM discussion, you have some catching up to do but at least start with my last Snarky Post of the Week on why DRM does rock.
Let's not just complain without explaining why. The NYT Magazine story on Rick Rubin taking over at Columbia Records stirred up the music industry (see Bob Lefsetz) because Rubin suggested that music subscription was a possible answer to the industry's woes. As the PC World story says,
MTV and Real Networks announced in August that they would create a new music
service based on Real's Rhapsody service and MTV's music content and packaging.
Verizon will deliver portions of the service through its V Cast music offering.
Hmm, MTV as the arbiter of music that we want to listen to, not the partner or brand I'd chose to help with "content and packaging." MTV is old and done. We can all agree that MTV was once counter-culture and the barometer of cool but they sold out to advertising and cheap content (e.g. reality shows or user-generated content for your Web2.0 fans. MTV doesn't even play music anymore (last time I saw any music videos, and ones worth mentioning, were Feist and Ben Lee videos on VH1 late night last week). You know when Justin Timberlake is telling you to play more music that you've really lost it.
Second, don't get me or anyone else started on Verizon. I have a general distaste for all cable and telco companies because they've been ripping off consumers and fighting innovation in their respective industries for so long that I don't have much respect for them. Again, it's almost funny to see their business models withering away thanks to the internet (go Google phone, please reduce the telco carriers to a commodity, transferring bits and not locking us into their devices anymore) but I can't laugh because they've been screwing consumers for so long.
And who uses V-Cast? Or put another way, how was the service slipped into the tiny print of the bills for those 10 unsuspecting people in the world that have this service (and don't even know that they're paying for it)?
Third, while there are some fans of Real's Rhapsody service (Fred is one among them), it hasn't taken off with people. They've had the service for some time but most people my age (20-30 range) probably don't know about it and prefer to still buy the music (CDs to rip themselves or via iTunes-- I told you my stance earlier this week.
The better question about subscription models, as Bob points out, is that "We need to define terms. Is subscription RENTAL or GETTING A STEADY CHECK FROM EVERY CUSTOMER EVERY MONTH?"
The market so far has not shown an appetite for the former. The latter is something that most consumers would be okay with if it means having access to all the music we want, whenever, wherever, and for whatever platform we want (home PC, work PC, laptop, mp3 player, phone, PDA, etc.). Stories about new music services demonstrate that the music industry is experimenting, and that's good, but they've had a lot of time to experiment and so far all results have been anti-consumer (DRM, Sony rootkit CDs, suing their customers, etc.).
We can hope that they figure out and survive or look forward to the new guard changing the entire industry and say goodbye to the traditional music industry as we know it. Rubin sums it up well.
"I have great confidence that we will have the best record company in
the industry, but the reality is, in today's world, we might have the
best dinosaur. Until a new model is agreed upon and rolling, we can be
the best at the existing paradigm, but until the paradigm shifts, it's
going to be a declining business. This model is done."
Is it harder to be in a rock band than it was a generation ago? Or put another way, is getting signed to a record deal still the best outcome for a struggling band?
Washington City Paper tackles that question this week, covering a local Rockville, MD band, Hotspur, trying to make it in the music business.
A couple of facts and numbers cited from the article:
Bands are making the same now as they did in 1979.
Numbers suggest that pay for local gigs has declined
ComScore data shows only about 100 blogs reach audience of >100,000 U.S. users in one month
Only two of 100 focused on music, sohh.com (hip-hop music, 630,000 uniques) and stereogum.com (alt-indy-rock, 208,000 uniques).
Arbitron ratings for now defunct Bethesda-based station (WHFS) were 86,000-120,000 radio listeners each week in 1985
There are a couple of problems with the new metrics (either downloads, MySpace page visits or friends, or web hits) and problems with comparing historical radio numbers to the present metrics.
First, website hits or MySpace friend popularity doesn’t translate into direct income numbers, like it would with radio ratings numbers (which, although the radio royalties were always low, meant you were getting some small check in the mail). But online popularity and more importantly, having your rabid fans spread your name and mp3s online, virally and through word of mouth recommendations, is priceless.
The question then becomes translating online popularity into a living for the band. If local shows are on the decline, as the article suggests, because you can’t reach a mass audience via the radio (I’d argue that you shouldn’t want to reach a mass audience anyways, focus on reaching the hardcore niche audiences wherever they are), then be creative about how to have a “show” over the web or through some other, non-traditional venue. How can a band in the digital age aggregate these loyal yet disparate fans for “shows”?
Second, comparing the website hits to the Arbitron radio rating numbers doesn’t make sense. There’s no doubt that the days of commercial radio success (and shouldn’t be any nostalgia for it) is now over, long live the death too. I’m not arguing that all radio should or will die (because it won’t) but the mass appeal of the old days of radio is over: there are too many competing channels now and more importantly, these other channels have content that we actually want, rather than the lowest-common denominator BS music that commercial radio now plays endlessly.
You don’t want to reach a mass audience in fact, because the days of trying to sell a gazillion records is over, it will never happen again. Ask Paul McCartney or Kayne about that, with their recent albums not replicating the huge sales success of their earlier records.
More importantly, I disagree with the idea that the ComScore data suggests that music or information about bands won’t spread very far online.
For me and from what I read on both the techie and music blogosphere sites, it’s that online sharing of music (information or mp3s) is huge and growing tremendously. In fact, rather than buy albums (which I never did anyways, I was late to the whole music obsession in high school so when I got the music bug in college, Napster started and I’ve been downloading ever since) I discover new music online from blogs, personal recommendations (e.g. Last.fm or Pandora) or from friends online (e.g. blogs that I love and trust for their recommendations, Fred Wilson primarily) or from traditional media (NYT Sunday’s artists picks section or Wired Magazine’s suggestions). Rather than buy their albums, I attend shows and then tell everyone I know about these great bands.
What would you rather have, an anonymous DJ who’s forced to play the bubblegum crap dictated by the major labels (payola anyone?) or have a personal recommendation from a friend that’s passionate about music and shares your musical tastes?
So I’m not supporting artists by buying their records, but I market them by word of mouth, via my blog, via my Last.fm or Anywhere.fm profiles, and most importantly by buying a ticket for their shows.
“We’re in a period where CDs are clearly dying,” says Donald Passman, author of the music biz book, ‘All You Need to Know About the Music Business,’ “but there’s nothing to replace it.”
That's crap again. Even if you argue that downloading has made it harder for new bands to get a record deal (which I’m not sure is true), why should the immediate goal of new bands be to land a record deal? I don’t think that it needs to be, why not build the following first and then let the record deal come later—or do the recordings yourself.
To get a coveted spot on the Warped Tour, Hotspur, the band featured in the story, had to pimp themselves out to Smartpunk.com in order to win their online popularity concert. Is that really the smartest way to get ahead in the new digital music world?
If I were Hotspur or any other band trying to break into the music industry, here are the questions I’d be asking myself and asking fellow bands:
If local gigs are down, then even with the reasonable or even great MySpace numbers, how can you aggregate these loyal yet disparate fans for profitable “shows”?
Is doing whatever it takes to get a record deal that best strategy for success in the digital music world?
Are you thinking of yourself as a business? (The days of being able to think of yourself solely as an artist and forgetting or delegating the business side of everything to someone else are long over, just like the days of huge national record sales)
What are the answers?
I’m not sure, but I mentioned some possible solutions and some do have positive suggestions (please keep reading, just a little but more). And no, I’m not in a band, just a devoted music fan that’s giving the fan’s perspective. You could argue that being a techie and business person, I really don’t have any idea what I’m talking about and you might be right…But you can’t ignore these trends.
If you think I’m wrong, read the amazing Bob Lefsetz blog (which I recommend to everyone even if you’re not interested in the music industry). He’s worked as an “entertainment business attorney, majordomo of Sanctuary Music’s American division and consultancies to major labels” and has been writing about the music industry the past 20 years.
If you want to know where the music industry is going, read Bob's Lefsetz Letter everyday:
That’s one of the dirty little secrets of this business. Talent is only fifty percent. Desire and perseverance make up the rest of your success. But NONE of the foregoing are a guarantee.
So, you’re up shit ocean with a paddle so small you’re overwhelmed.
Welcome to the club. You’d better be doing it for a love of the music, because chances are that’s ALL you’ll have, your music and your enjoyment in playing it.
Maybe you’ll gain some traction, you’ll become a pro. But the odds are against you. You need that desire and perseverance and LUCK! And it’s harder to get lucky every day. Even if the radio station DID play your record, what would it MEAN, is anybody LISTENING?
We’ll get some clarity in the future. The gulf between amateur and pro will reemerge. But chances are, only a thin sliver of pros will be like the stars of yore. There will be Kanye, and then the guy who can fill theatres.
That’s the game you’re getting into.
So don’t lay out a plan for world domination. If you’re lucky, you can dominate your DOMICILE! Maybe if a friend goes to college in another state you can make headway there. But there are too many people and too few slots and no pot at the end of a rainbow.
Cry all you want, but this is fact. You’d better be doing it for the love of the music. And this is the key that may grant you success. Those old paradigms, how you look, how you’re marketed…the majors only have a few slots per year, and most of THEM don’t make it. The old game is dead. The new game is daunting.
UPDATE (10/01/07): Greg Robinson, the drummer from Hotspur, was kind enough to leave a thoughtful comment answering some of the questions I outlined and I think this could be a good discussion. I'm even trying to see if Bob Lefsetz might add his opinion.
And since I do want to support artists however I can, here's their song, "Have You Seen This Girl." Please support these guys by checking out their MySpace page and buying their latest album from here or from there (does one of these give you guys a better deal?).
What the newspaper and traditional content owners don't get, summed up quite nicely by Facebook's Zuckerberg at TechCrunch 40:
MZ: our thinking is that if we give people more controls, they can share more information. As people shared more and more information, Facebook found that it creates a more component experience that brings them back to Facebook more often. Page views and traffic went up 50% within weeks of the launch of the news feed.
Contrast that insight with the relatively back of the boat thinking of the NYT who's finally closing down Times Select in favor of open access to all of its archives becuase of the huge ad revenue it was losing thanks to the walled garden (failed) experiment.
