Eric Schmidt spoke tonight to a packed crowd at the Economic Club. He talked about how Google views the world and what they hope to do in the coming years. Overall, it was a fairly interesting speech. Key points included:
— We live in a world of continuous distraction and multi-tasking. Just look at kids doing IM, watching video, talking to friends while doing homework. It will only get worse.
— People’s attention is the most important asset for marketers (similar in theme of the AttentionTrust initiative).
— The key to getting people’s attention is targetted advertising instead of untargetted. He asked how many people read the paper this morning or watched TV. Could they recall any ads they saw?
— Society is trying to block untargetted ads with Tivo, spam filters, Do Not call lists and such.
— Social communities will become more and more core to interactions and marketing on the web.
— An example of a social paradox: people lonely in the city.
— Group dynamics, such as predictive markets (future blog), are fascinating
— Study after study shows that groups collectively predicting/assessing dramatically outperform individual experts. How to tap? Some hedge funds trying to find ways to mine opinion from chat rooms about stocks. The trick is guaranteeing no gaming…one person, one vote.
— He said that all decisions at Google are made consensually through groups. New ideas are broken out into three person teams.
— Predators, Phishers and other such elements are greatest threat and will always be there.
— Google is working on auto-translation products. This will allow content, trapped within a language such as Japanese, to be freed for consumption world wide by all.
— Not only is the world opening up as never before, but data is unbounded as well, with handhelds having access to all content in the world. Google mobile core to this.
— Furthermore, handhelds will truly be digital assistants. They will know location & preferences in order to deliver what you want, when you want and now where you want.
— We are at the early stages here. Over 1 billion people are online, but 5 billion are not (of course 2.6 billion people get by on less than $2/day).

He took a few questions, including ones about their China interaction. How can they "do no evil" while also complying with censorship in China? He said that they want to be a part of every country’s engagement of the internet. They have to respect (though not agree with) the laws of each country.

In short, Google’s goal is to help people organize and find all information in the world, whether online or offline. Feel the fear…

It seems like everyone is suddenly a B2C, Web 2.0 service driven predominantly by user generated content.  The first wave of B2C plays have hit, delivering strong initial financial success to investors and management.  The blood is in the water and now, as is usually the case in the venture business, everyone is jumping in with both feet. You are seeing several of the pioneers like YooTube (video) and Digg (news) and some later entrants like Tagworld (community) going exponential in their growth. There is also a very long tail of new entrants coming in, taking advantage of the low cost of entry. While the revolution is early, the models are maturing quickly and the fields are getting crowded, making it increasingly difficult to break out from the crowd. Furthermore, there are a handful of logical acquirors (IAC, Yahoo, Google, etc) and once they have either bought or built their own, they will not necessarily be looking for high priced future acquisitions. This is similar to the Web 1.0 phenomenon. By 1998, enough success stories had generated enough copy cats that the chance for success dropped dramatically.

Furthermore, many of these models rely on giving away the service for free to drive rapid adoption while leveraging ad models for revenue. Recessions and slowing economic conditions have a chilling effect on the advertising world. Remember when Yahoo’s revenue dropped 40% in one year from $1.1B to 0.7B in 2001? Additionally, click fraud threatens the engine at the heart of much of this, Google’s and other ad networks’ CPC offerings.

The trick is in going where the puck will be, not where it is today. Enterprise applications are out of vogue. The sales cycles are long and firms can’t fall back on the simple ad-based models driving the B2C world. That said, there are numerous opportunities for proven technologies from the B2C side to migrate over to the B2B world. These include everything from search to social networking to blogging to predictive markets. Corporations don’t like being guinea pigs, so the fact that millions, if not tens of millions of users, have pounded away at technology, helps to reduce the “technology risk” associated with it. Clearly, these technologies will not simply transfer over as corporations are much more demanding and careful in controlling the experience with their customers and employees. Blogs and Wiki’s are two classic examples. They are concerned about rogue participants flaming their products and services or disseminating false/erroneous information.

That said, I predict that we will see a resurgence of B2B services and offerings in the coming year. We are already seeing it with several of our own Web Service infrastructure companies. After years in the wilderness, they are starting to close deals at an increasingly rapid pace.

So, get ahead of the curve. Help corporations adapt the new, promising B2C technologies to their more rigorous business needs. You have a broad array of open-source, web-service and Web 2.0 technologies to mash together in your efforts. There are many areas you can target ranging from customer intimacy & intelligence to location based services to mobile workforce applications to database analysis opportunities. The key is to get out ahead of the pack before it becomes obvious that the worm has turned.

Want to get way, way, way ahead of the pack? Later this week…Quantum Physics. Follow the white rabbit, Neo.

It seems like everyone is suddenly a B2C, Web 2.0 service driven predominantly by user generated content.  The first wave of B2C plays have hit, delivering strong initial financial success to investors and management.  The blood is in the water and now, as is usually the case in the venture business, everyone is jumping in with both feet. You are seeing several of the pioneers like YooTube (video) and Digg (news) and some later entrants like Tagworld (community) going exponential in their growth. There is also a very long tail of new entrants coming in, taking advantage of the low cost of entry. While the revolution is early, the models are maturing quickly and the fields are getting crowded, making it increasingly difficult to break out from the crowd. Furthermore, there are a handful of logical acquirors (IAC, Yahoo, Google, etc) and once they have either bought or built their own, they will not necessarily be looking for high priced future acquisitions. This is similar to the Web 1.0 phenomenon. By 1998, enough success stories had generated enough copy cats that the chance for success dropped dramatically.

Furthermore, many of these models rely on giving away the service for free to drive rapid adoption while leveraging ad models for revenue. Recessions and slowing economic conditions have a chilling effect on the advertising world. Remember when Yahoo’s revenue dropped 40% in one year from $1.1B to 0.7B in 2001? Additionally, click fraud threatens the engine at the heart of much of this, Google’s and other ad networks’ CPC offerings.

The trick is in going where the puck will be, not where it is today. Enterprise applications are out of vogue. The sales cycles are long and firms can’t fall back on the simple ad-based models driving the B2C world. That said, there are numerous opportunities for proven technologies from the B2C side to migrate over to the B2B world. These include everything from search to social networking to blogging to predictive markets. Corporations don’t like being guinea pigs, so the fact that millions, if not tens of millions of users, have pounded away at technology, helps to reduce the “technology risk” associated with it. Clearly, these technologies will not simply transfer over as corporations are much more demanding and careful in controlling the experience with their customers and employees. Blogs and Wiki’s are two classic examples. They are concerned about rogue participants flaming their products and services or disseminating false/erroneous information.

That said, I predict that we will see a resurgence of B2B services and offerings in the coming year. We are already seeing it with several of our own Web Service infrastructure companies. After years in the wilderness, they are starting to close deals at an increasingly rapid pace.

So, get ahead of the curve. Help corporations adapt the new, promising B2C technologies to their more rigorous business needs. You have a broad array of open-source, web-service and Web 2.0 technologies to mash together in your efforts. There are many areas you can target ranging from customer intimacy & intelligence to location based services to mobile workforce applications to database analysis opportunities. The key is to get out ahead of the pack before it becomes obvious that the worm has turned.

Want to get way, way, way ahead of the pack? Later this week…Quantum Physics. Follow the white rabbit, Neo.

I have had a number of discussions with people this year about when venture will take off in Latin America. Venture capital is clearly going global. We have added affiliates from our own network not only in India and China as many are doing, but also in Russia and Eastern Europe. We are in discussions with several firms in Latin America about expansion down there. With the boom in commodities, there will be increasing economic activity and resources flowing south of the border. There are pockets of activity in energy and telecom specifically in Latin America. The following article describes Intel’s recent expansion. Much like the railroads opened up economic activity across all regions of the United States, the internet is doing so across the globe whether it be chip design in China or game development in Estonia. Our business has definitely scaled well beyond it cottage industry roots and will become more international in nature. This will increasingly reward the firms with the largest global networks and put pressure on smaller regional players. It is the next phase in the institutionalization of the business.

venture market summary

By VentureWire Staff Reporters
Continuing its trip around the world in search of venture deals to seed nascent technology markets, Intel Capital, the venture arm of the world’s largest chip company, has launched a new $50 million fund for investments in Brazil.
The burgeoning economy was one of the determining factors in the decision to launch the latest fund, according to Dave Thomas, managing director for Intel Capital Latin America. There were "significant improvements in the investment arena in the last 18 to 24 months," he said.
Foremost among them "is the strength of the public capital markets," he said. Investments in Brazil can look to the Nuevo Mercado as a viable place for a public offering, and changes in the ways that venture investments are taxed also make the investment climate much more favorable, Thomas said.
For National Venture Capital Association President Mark Heesen, it’s surprising that more investors don’t make the trip south. "The venture market in Latin America is still not a particularly great market," he said. "I continue to kind of be surprised by that when you look at the growing middle class in Central and South America and you look at the stability of the governments."
Intel’s launch of its Brazilian venture capital fund comes a little over three months after it announced a $250 million venture fund for India and four months after the announcement of a $50 million fund for investments in the Middle East. Though Intel has invested in Brazil since 1999, the new fund represents its strongest commitment there to date. Intel Capital has invested more than $35 million in 13 companies in the country since it began committing capital there.

Corporate America has a love/hate relationship with the freedoms created by the various Web 2.0 technologies like blogs.  At the Blog-On conference last Fall, I noticed the audience broke into three sections. You had the corporate communications and PR teams, the technology providers (blog services, business intelligence/analytics, etc) and the revolutionaries. The corporations expressed an interest in embracing and using these new technologies to better understand and communicate with their customers and employees. They also asked for help on how to leverage these without losing complete control over their brands. The technology providers, excited by the notion of big revenue, offered up a variety of services and solutions to help Corporate America. However, in the end, it was the Revolutionaries that had the final say. They frequently commented that these new technologies gave the average Joe (or Jane) voice and Corporate America could not silence them. They could embrace this future and put their brand out willingly to be dissected and discussed by the masses or have it dragged out involuntarily. This was not the answer Corporate America wanted to hear and is why it is very slowly adopting these solutions.The most recent test of this is Microsoft. Microsoft has encouraged its employees to publicly embrace blogging. They believe, rightly, that it gives Microsoft voice in many corners of the net as well as providing a more authentic presence out there. The most popular is Robert Scoble while a recent "insider" in the spotlight is Mini-Microsoft who blogs anonymously and has recently been commenting and revealing the considerable disatisfaction with Microsoft’s internal operations and politics. It will be interesting to see how commited Microsoft is to this open approach going forward. Will corporate PR try to reign things in? I am a firm believer that open always wins and I give Microsoft credit, so far, for their efforts. Time will tell. Either way, this will provide a great learning environment for the rest of Corporate America.

Red Herring Article: Postings on company blog reveal low morale over Vista delay.
Postings on a Microsoft blog by company staffers over the past week reveal dismay, anger, and demands for high-level resignations in the wake of the company’s delays of consumer releases of its Windows Vista operating system and Office desktop productivity suite.

Illinois leads the way in defining the next wireless frontier. What better place to lead the charge than the city of Winnebago, namesake of the famous RV? As future cases of WiFi freeloading come up, there are going to be a host of questions to be answered in the courts. An  op-ed in the NYT argued that leaving a WiFi network  open is a public service and available to all nearby. Others argue that it is no more legal than going into a person home who leaves his door open and watching TV. Who knows where this will land, but if you own an access point, it is clearly in your best interest to password protect it and take other precautions to avoid this issue altogether.

Illinois Man Fined For Piggybacking On Wi-Fi Service

In Illinois, riding piggyback on someone else’s Wi-Fi could cost you some money.

David
M. Kauchak, 32, pleaded guilty this week in Winnebago County to
remotely accessing someone else’s computer system without permission,
the Rockford Register Star newspaper reported. A Winnebago County judge fined Kauchak $250 and sentenced him to one year of court supervision.

Kauchak has the dubious distinction of being the first person to
face the charge in Winnebago County, and prosecutors say they’re taking
the crime seriously.

"We just want to get the word out that it is a crime. We are
prosecuting it, and people need to take precautions," Assistant State’s
Attorney Tom Wartowski told the newspaper.

A police officer arrested Kauchak in January after spotting him
sitting in a parked car with a computer. A chat with the suspect led to the arrest, Wartowski said.

This post was triggered by an interesting question that Wil Schroter from Go Big Network asked me.

Venture capital, like any asset class, has a natural cycle to it. As in the bible, it has followed roughly a seven year cycle. One can argue dates and duration, but these have roughly been 1980-87, 1987-94, 1994-2001, 2001-?. Our last cycle clearly had a significantly higher beta than the others, causing the current one to be much more moderate.  Many people have commented that the number of "quality" businesses started (taking a long-term perspective) in any given year, tends to grow in a gradual, linear fashion. While I don’t know if this is true, it certainly feels right. What causes the cycles to peak and bottom tends to be capital flows into the business and the number of companies started. The public markets and general economy are the other key factors as corporations tend to buy technology when the economy is expanding along with share price, and they tend to aggressively cut budgets when share prices plummet (to get Earnings up to offset the falling P/E).

During the last bottom in 2000-1, assuming you could raise the capital, you had a pretty open competitive landscape. Since corporations were not buying, you had a somewhat limited view of customer demand. But, you had the time to get the kinks out of your business and to do a slow roll into the market place. As a result, there are quite a few companies that are in the vanguard of their space, doing $40-80m in revenue today. They got ahead, positioned themselves well and when corporate and consumer buying came back, they took off.

Today, there is an increasing amount of capital flowing into the business. You are seeing brand name funds that had cut their fund size from $800m-1B back to $400m, now out raising another $600-700m fund. With every $4B Skype acquisition or $600m Myspaces purchase, fund size grows in $50 and $100m chunks. Consumers and corporations are also buying services and products at a healthy clip.

To make matters worse, the cost of entry for many of the new businesses is dramatically lower. So, you are seeing a 1000 Flowers Bloom. You have 20-30 different search engine plays, 10-20 podcast services, legions of anti-spam companies and many more over populated spaces. VC firms are targeted given market spaces and dropping one or two plays into them. When aggregated across the many firms around, you get a lot of plays popping up in each.

What is an entrepreneur to do? Life is not dire. There are still many great opportunities around but you need to make certain you don’t get swept up in the euphoria. Here are my two cents, in random order:
1) Build to Last: figure out if you have a product or a company. many of the quick launch companies are feature sets, packaged for a quick flip. As Jason Fried has said, building to flip is building to flop.
2) Know Thyself: determine what you do really well (what customer need you meet best) and target that with laser like focus. get happy customers using your product. swing for the fence "platform" plays are very expensive and very scary in this kind of market.
3) Burn, Baby, Burn: keep your cash burn down. these periods often become a war of attrition. you do not want to fail just short of the finish line nor cross the finish line with so much capital raised that you have no equity left. the instinct is to pour cash in to accelerate and beat the new entrants. the reality is that the market advances at its own rate and cash burn does not change it. don’t win the battle and lose the war.
4) Skate to Where the Puck Will Be: listen to the overused Gretsky quote. if the opportunity is obvious and publicized, it is obvious to everyone in Menlo, Chicago, Shanghai and Moscow. Figure out where the logical choke points are going to be in the future if current trends continue to play out. think of services (hosted or otherwise), products or plays that will solve many of these. for example, as more and more people came online, the ability to make secure/anonymous payments grew more important. Paypal figured this out early.
5) Quality is Job 1: when the dust settles, it will be the companies whose products work consistently, simply and intuitively. Don’t over engineer.

While I don’t think we are on the verge of a precipice, I would be very careful in how you approach your business, how you spend your money and how enthusiastically you drink the coolaid. I will write in the future about the risk of ad based models, but remember, if more and more plays earn their keep through advertising models, there are going to be a lot of dead bodies when the next recession hits and ad budgets are slashed. Just sip at the glass and remember that gravity still exists…

Short rant. Elections today. Lot of calls to our home from recordings of politicians to get out the vote. Sometimes technology and automation work to the detriment of society. This is such an occasion. If we have a do not call registry for telemarketers, how come politicians can spam us? Is there a political do not call list? These guys can’t be too bright. Wouldn’t you want to check to see if someone is on a do not call list before ringing them. Kind of works against your purpose of encouraging people to vote for you. Just a thought…
(let me know if any of you know how to stop these calls)