EarlyStageVC

Who is Google's Next Victim?

A few months ago I posted the following

Google has built a stunning platform for the rapid development and deployment of applications on a worldwide scale.  They have repeatedly taken revenue-generating software categories and made them free, media-supported businesses.  This leverages their economies of scale in delivery and their ability to aggregate, segment, and monetize audiences.   Free is a very effective appeal for a CFO or small business owner looking to reduce IT expense. It may not work for Exxon and GM.  But it doesn’t have to.  If it works for millions of small businesses around the world, it works.

Google is rumored to be working on a slew of new applications for delivery later this year and early next.  I have no idea what they may be or if they really are.  But I would speculate that some are targeted at business use cases that revolve around people, time, content, and communication.   After all, they have Google Home Page, Calendar, Writely, and Gtalk/Mail today.  It is not hard to begin to package them as business process applications and collaboration portals.  Google already has a significant developer community using Google’s APIs for creating mashups with other web services. Motivating them to redirect toward business use cases is a natural extension of  the present. Once you own the process, you own the Control. If the View is the Web, Control is free web-based application, Model will follow.

It is completely conceivable that the future of Web 2.0 in the Enterprise looks a lot like Google 2.0.

Yesterday Google announced it has acquired Jotspot and is making their applications free.  Hmm... So Google is squarely going after horizontal business applications with the Googleplex.  Where do they go next?

Google isn't really trying to capture Microsoft's market value.  I think they are focusing on everyone else first. It is now well understood that Ebay's market cap is squarely in their gunsites with Gpay, Gbase, and Adsense.  Who is Google's next prey?

If I were Eric Schmidt, I'd be salivating over an Google-delivered Intuit killer.

And why not?  It is both consumer and small business focused.  It has high value user data that is suitable for targeting.  It is the ultimately sticky application.  It further leverages Gpay.  It further leveages the small business productivity applications.  The core user base of Adwords and Adsense probably already use Intuit (Quicken or Quickbooks) for accounting. Google could close the loop between marketing, fulfillment, and payment with GBooks.

So while Google is busy re-inventing the media business with targeting and delivery technologies, they can, should, and probably are looking to find applications to inform that targeting system.  What better source of targeting data than where individuals and business are spending their money?

A Vast Improvement for Classifieds, Mashups, and the Web

A few months ago I noted the release of Google Base as a pivotal moment in the maturation of the Web.  I said the move from unstructured to structured data was an important improvement in making the Web usable and re-usable. 

I have also discussed mashups as an important, lightweight development paradigm for making this reusability possible.  Thus far the mashups I have seen have been features, mostly visualizations of someone else’s data on Google or Yahoo maps.  The owners of the primary data have Web 1.0 business models, including Google Base.  The Web 1.0 model is “all your data are belong to us.  So come to [oursite].com if you want to see it."   Consequently, mashup innovation stops at the edge of what’s  really interesting, because mashup developers can’t rely on re-mixing those data and building really great destination sites.  This conflicts with the walled garden business model of the data aggregator.  Hence, restrictive licensing models.

Well, now there is about to be a Vast improvement. 

Vast has been in development for about a year, creating what I think of as the first inverted portal.  Now the preview release is up, showing the first three "applications" of the technology. Vast crawls the web for data and extracts that data in vertical categories.  The URL Vast.com is a demonstration site, not really a destination site.  The real destination site is everyplace else on the web – blogs, discussion boards, microsites, social networking sites, etc.  Anyplace where content creates context.

Vast.com looks like a classic classifieds site, but it is not.  It is not a data aggregator.  It is a data disseminator.  It is a hub targeted to the developer community to enable the mashup of structured data in a reusable form.   And it’s not just about classifieds.  It’s about adding structure to content. But the first application of structuring the Web is to take free-form descriptions on the Web and make them structured, searchable listings, i.e. classifieds.

What’s different from the aggregators besides the business model?  It is the data itself.  The data do not come from feeds.  They come from crawls of primary data sources – cars listed on dealer sites, jobs posted on companies’ web sites,  personal profiles listed on blogs, personal web sites, and dating sites.  As a result, the data are Vast – millions of cars, millions of jobs, and millions of profiles, with more categories of objects to come.

This is the true long tail of listings. The user benefit is obvious -- find the exceptional value.   Like the old joke -- why is it always that you find something in the last place you look? -- the exceptional value is always in the long tail. 

You don’t see a lot of end user features on Vast.com – no AJAX widgets, no mapping, no integration with reviews and ratings.  What you will see a Vast amount of data.  If you have a web site about Miami – create Miami-only view of the data.  If you have a Mercedes-Benz discussion site, create an M-B specialty classifieds component.  If you think you can do the next HotorNot.com, build it.   You can even build the next Vast.com on the API.  All the features you see are available in the API for free.

I don’t think of Vast (or Riya) as just Web 2.0.  Web 2.0 is largely about tagging, social annotation, and sharing.  I think of Vast and Riya as bricks in the road toward a Structured Web, beyond Web 2.0. Vast does for free form text what Riya does for images – extracts structure for reusability.  There is some additional discussion of Vast here, here, and here. 

Vast is not a walled garden.  It is  “All your data are belong to you.”  Have at it. 

Organizing Chaos

Today Dan Farber paraphrased some comments by Munjal Shah about the Riya.com business model. The comments refer to extracting value from user-generated content and rewarding the 'long tail.' Those of you following Riya know they are in the process of launching a site to automatically tag photos with faces and text. These metadata make it easier to organize and share photos. They also make it easier to search for photos that have value to you.

The principle behind this is as old as the commercial Web -- all of nine years. Brooks Fisher (now a VP at Intuit) was the first person to invent and implement the concept of keyword advertising back at Infoseek in 1996. (We were doing all of 2M page views/day!) That was when it became clear that as the audience grows, the value of the ad inventory expands exponentially. Targeting equates to value. Targeting specificity increases as volume increases, lifting the value of the entire inventory. It is a virtuous cycle. (This is also part of why search has a winner-take-all dynamic, but that's for another time.) Adding the structure unlocks the value.

This is the power behind the Riya business (and another soon-to-launch business in which we have invested). Adding structure unlocks the vaue. It attracts users by improving the experience. More users generate and attract more content. Content expansion increases the value of targeting. Value is extracted by making the content more searchable, and ultimately, reusable. Scalability and consistency are key to unlocking the value. Scale and consistency limitations are also why I think manual tagging regimes have a limited role in the Web platform.

If this sounds like a machine-learning bias, guilty. If it sounds like the core of how search engines monetize, that's no accident. Search engines are the most mature. I prefer to think of them as targeting engines.

The generic rule - add structure and mine for money by organizing the chaos. We'll see it played out many, many times over the next several years. Because it works.

Web 2.0 Media Coagulation

Lots of chatter at the Web 2.0 Conference late week about what a renaissance bubble this is. Mary Meeker had a typical presentation full of "it's gonna be huge' Meeker-stats.

One sobering statistic was semi-buried in the presentation. The absence of business models for Web 2.0 highlights its sobering impact. Meeker reported the following
- US yr/yr Internet Ad Revenue +26%
- Google yr/yr +75%
- Yahoo yr/yr +54%
- EVERYONE ELSE FLAT

This reminds me of what Ted Leonsis said eight years ago....

Media does not disaggregate. It coagulates. [The newspaper] industry has proven that. Eighty-eight percent of the circulation in this country is in the hands of 25 top newspapers, within 10 companies. Or, look at the cable industry. There are really only 20 big cable brands, one or two by cate-gory, owned by the distributors. I see that trend happening in this business. The concept of 400,000 or 500,000 free Web sites has miti-gated the value of content. Brands will win. Category killers and scale will win, and some of those brands are starting to emerge.

Granted the big brands of 1997 are mostly not the big brands of 2005. But that's not the point. The point is advertising isn't a viable sole business model for any but a very small number of Web sites.

It's no different now for the small sites than it was in 1997. The only thing that seems different now is that, because the costs of developing web site/app are much lower now, the breakeven traffic level is lower, too. So, Adsense makes sense for small, hobbyist sites. But building a medium- to large-scale advertising-supported business is as hard as it ever was, maybe harder now.

This observation highlights the real elephant that was in the room last week that few really talked about -- business models for Web 2.0. When we see real and new business models around all this social content and the atomized web services, that's when Web 2.0 will cease to be a idea and will really be a platform. Advertising is the 'effort-less revenue' we talk about when we have no idea about the real business model.