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AOL's Patch Gets New CEO, as Just Under Three Percent of Staff Is Laid Off in Consolidation (Memo)

Kara Swisher — Fri, 17 May 2013 17:46:46 +0000

Changes at AOL’s local content site, Patch: CEO Jon Brod will step down and is being replaced by COO and President Steve Kalin, according to an internal memo the New York Internet company sent to the division’s employees today.

As part of the move, Brod will be going back to run AOL Ventures, in a job where he began at the company.

In addition, sources said a little less than three percent of the 1,400-employee Patch staff will be laid off. The memo notes that downsizing, without giving the numbers, which includes consolidation of several parts of Patch by streamlining its regional structure from 20 to nine teams.

According to the memo, the layoffs are to “make Patch profitable in 2013 and a commitment to continue to improve our business model.”

AOL confirmed the contents of the memo, saying in a statement, “Patch is streamlining its regional editorial structure across the country by moving from 20 to nine teams. We are implementing this team approach based on the success of our field tests earlier this year. The team approach allows for flexibility based on the unique needs of each community and the strengths of our editors. We are not reducing our number of sites or our coverage area as a result of this change. Making these important changes came with the difficult decision to eliminate some positions. We recognize these changes are painful for individuals and for our organization — and we are committed to handling the people impacted with care and sensitivity.”

Patch is growing, according to comScore. In April, traffic was up 26 percent since last year to 13 million unique monthly visitors, who are consuming about 1.3 million pieces of content that are now being served up per month.

Still, Patch has attracted a level of investor pressure and criticism, even as AOL CEO Tim Armstrong has stuck strongly with the hyperlocal content effort and invested heavily in growing out a network of sites across the country aimed at neighborhood news and events.

But Armstrong signaled changes when he was queried about Patch during AOL’s recent quarterly call: “What you’re going to see as we approach Q4 is us trying to get to the finish line of profitability, and we will use all means possible to get there.”

Apparently, Armstrong means what he says and says what he means.

Here’s the memo:

Patchers,

Since the day Jon, Warren, and I founded Patch, we have had one mission in mind — improve the lives of people in local communities by 25 percent. Patch has become an important brand in the hundreds of towns we serve, and it is a staple of our communities. With the average Patch just over two years old, we are well on the way toward our goal of improving peoples’ lives and building a sustainable business in the process.

Over the past year, Patch has made an enormous impact in our communities. The coverage of the Boston Marathon bombings, the lifeline that Patch provided residents during the Sandy Hook school shootings and Superstorm Sandy, and the exclusive Sanford-Colbert Busch debate in South Carolina stand out as powerful examples. The new Patch platform that is rolling out now will only increase Patch’s ability to instantly improve communities.

As we have made a commitment to improve our Patch towns and communities, we made a similar commitment to make Patch profitable in 2013 and a commitment to continue to improve our business model. Just as we have rolled out new products and services to Patch, we are announcing today the rollout of the recently tested town structures, which will help us serve communities in a more local way and move Patch meaningfully toward profitability.

The changes have two main goals:

1. Improve and increase our hyper-local programming and deepen our user engagement through the Patch 2.0 platform; and
2. Implement a structure that unlocks the path to profitability.

To accomplish these goals we are taking the following steps, effective immediately:

We are combining the East, Central and West editorial zones to create a simpler structure that will enable faster decision-making and a more coordinated editorial effort across Patch. Anthony Duignan-Cabrera has been promoted to VP, Editorial Director, overseeing day-to-day editorial field operations, and will continue to report into Rachel in her role as Chief Content Officer.

We are streamlining our regional editorial structure across the country by moving from 20 to nine teams. We are not reducing our number of sites or our coverage area as a result of this change.

We are promoting Katie O’Connor to Director of Editorial Operations and Content Strategy. In this role, she will work with our editorial teams to help create new content and programming.

We are implementing a “team approach” for our sites, based on the success of our field tests earlier this year. This approach allows for flexibility based on the unique needs of each community and the strengths of editors.

Jon and I have decided to elevate Steve Kalin to the CEO position at Patch. Steve has done a fantastic job since he began at Patch in December as President and COO. Jon and I hired Steve with the thought that his extensive background in scaled, local platforms would eventually allow him to run Patch on a day-to-day basis.

Jon has led Patch since it was just an idea and helped scale it into one of the most significant brands in local communities in the U.S. Under his guidance, Patch has gained tens of millions of users and more than ten thousand advertisers; and it has covered millions of local stories. Going forward, Jon will return to AOL Ventures full-time and lead our push into several areas we have identified as significant future growth opportunities for AOL.

The changes we are making at Patch, however, come with the difficult decision to eliminate some positions. These employees have contributed greatly to Patch’s business with passion and dedication. We sincerely thank them for all they have done to make Patch what it is today. Their impact will always be felt here. We wish all affected employees continued success. They are truly Patchers for life.

This is an important time for Patch. We have many great opportunities in front of us, and we continue to make decisions to ensure Patch’s success. AOL’s Board of Directors and I remain firmly supportive of Patch and our mission. Together we are building a company for the long term, one that can grow and thrive — now and far into the future.

We will be having team calls today and a Patch All-Company call this afternoon at 6pm ET, to discuss these changes in more detail. I encourage you to join these calls. Keep an eye out for invitations to follow.

I want to thank you for your continued commitment to Patch and to serving your communities, and for staying focused on our goals. Patch is one of the fastest growing sites and brands on the Internet. We have the right plan, we have a great team, and I’m confident we can win together.

Keep going — TA

Yahoo Acquires Hipster Mobile News Reader Summly for Close to $30 Million

Kara Swisher — Mon, 25 Mar 2013 13:13:58 +0000

Yahoo has bought Summly, the mobile news reader app founded by a young British entrepreneur.

In a statement, the London-based company said it had bought the tiny outfit, which will close its app. The price was not disclosed (although I will try to find out soon enough). But the company had been seeking additional funding recently at a big valuation, in stark contrast to its small size (less than one million downloads), staff (five) and business model (zero revenue).

(Update: Sources tell me Yahoo paid just about $30 million for Summly, mostly in cash, with 10 percent in stock, for three employees.)

AllThingsD.com reported in December that Yahoo was looking closely at the startup, with CEO Marissa Mayer meeting with its founder Nick D’Aloisio. As we noted then, Yahoo was aiming at trendy mobile “acq-hires” to give the sleepy Silicon Valley Internet giant some sizzle and improve its moribund mobile offerings.

Mayer has been buying up a range of similar small mobile startups, largely for their teams of talented and innovative engineers. And, at a recent employee meeting, its M&A head Jackie Reses said the Silicon Valley company was looking at two significant purchases and a half-dozen smaller ones.

Said Yahoo: “Founder Nick D’Aloisio and the Summly team are joining Yahoo! in the coming weeks. While the Summly app will close, we will acquire the technology and you’ll see it come to life throughout Yahoo!’s mobile experiences soon. We’re not disclosing purchase price or other terms of the deal.”

Yahoo mobile head Adam Cahan wrote a blog post about the deal, as did D’Aloisio, who also tweeted news of it:

@summly has signed an agreement to be acquired by Yahoo!! Excited for the next chapter of Summly! Thanks to all who have supported me.

— Nick D’Aloisio (@nickdaloisio) March 25, 2013

News readers have been getting snapped up of late. CNN acquired Zite for $20 million in 2011, while we reported that LinkedIn was in the midst of buying Pulse for upwards of $50 million.

The 17-year-old D’Aloisio created the high-profile news reading app, which garnered much attention in the last year in the mobile space, which is probably what attracted Yahoo to it.

As I wrote:

D’Aloisio — who looks like he could easily be a member of One Direction if this tech thing did not work out — is perhaps a perfect storm for Yahoo, which is seeking to show that it can attract innovative, young entrepreneurs to the company, while also looking to strengthen its nearly bare mobile cupboard.

Summly is all that and a bag of (fish and) chips, with a very slick app for the Apple iPhone that has become one of the more popular in the App Store since it was re-launched last month. The company has said it has been downloaded 500,000 times.

It deserves the attention, as it is a pleasure to use — think an even hipper version of Flipboard with some more sass. The handsomely designed app summarizes news stories — all using a natural language processing algorithm — in only a few sentences and in under 400 characters. Users can then swipe through topics and stories quickly and click in to be directed to the full story on the original news site.

Summly originally started as a prototype app called Trimit, which soon garnered attention and seed funding from Hong Kong billionaire Li Ka-Shing’s investment firm. In no time, it had a range of other investors, ponying up about $1.5 million, including trendy ones like Ashton Kutcher and tech types like Zynga’s Mark Pincus, Automattic’s Matt Mullenweg and Airbnb’s Brian Chesky.

Since then, it has been striking content deals, including with News Corp. (which owns this site) and others, which seem to be attracted by its investor pedigree, its solid technology and — perhaps most of all — its media-darling founder.

To get an idea of the adorable hip factor involved, here’s a really clever video D’Aloisio did with actor Stephen Fry, who is also an investor in the startup:

Summly Launch from Summly on Vimeo.

Study: Online Media Pays Off for Consumers More Than Offline

Kara Swisher — Mon, 11 Feb 2013 00:00:21 +0000

Apparently, you can get media satisfaction — as long as you are online as opposed to offline.

According to a new study by the Boston Consulting Group, consumers accrue more value from their online media usage than from their offline consumption.

The new research report — titled “Follow the Surplus: How U.S. Consumers Value Online Media” — calculated that the average U.S. online user got a “consumer surplus” of $970, compared to $900 from offline media.

BCG defines consumer surplus as “the value consumers themselves place on a media-related activity or product over and above what they pay for it.”

The report looked at seven categories — books, radio and music, U.S. newspapers and magazines, TV and movies, video games, international newspapers and magazines and user-generated content and social networks.

The largest chunk of online consumer satisfaction came from UGC and social, such as use of Facebook and Google’s YouTube, which makes sense since the actual cost is nearly zero — making any benefit essentially digital gravy.

Books were where the least consumer surplus was online. That’s not a surprise, said BCG senior partner John Rose, who coauthored the report, but it is likely to change soon with the increasing popularity and proliferation of a variety of devices.

That’s double from three years ago, with the average consumer now owning 2.9 devices, such as mobile smartphones and tablets. It will increase to 4.1 in three years, said the BCG report. Also up, of course, is the number of hours spent online, which — in turn — dramatically increases the value of online media consumption.

Advertisers still have not caught up with consumers, of course. “The value is from the consumers’ perspective and not the advertisers’ perspective yet,” said Rose, in an interview. “The business models are still not in place to support what consumers already know they want.”

Gender is not an issue, with men and women both consuming about 12 hours a week of online content. But men listen to more music, while women prefer social interaction more.

Another interesting result, read the report: “By a margin of some five to one, U.S. consumers are more excited about the Internet’s potential rewards than they are worried about the potential risks.”

In other words, they like online media, they really like it.

That’s why, said Rose, the medium and the business model will evenutally come together.

“Different people will say different things about when it will come together and not if it will come together,” said Rose. “Advertisers have always found ways to create value, even if they have not done it yet with online media.”

There are lots of other interesting findings and charts from BCG, some of which are embedded below (click to enlarge them and the whole report can be found and downloaded here).

Ready for His Close-Up: Ross Levinsohn to Join Zefr Board

Kara Swisher — Wed, 28 Nov 2012 16:00:51 +0000

Former Yahoo exec Ross Levinsohn, who has laid pretty low since he left there earlier this year, will be joining the board of the Venice, Calif.-based video start-up, Zefr.

“Ross is a perfect intersection of everything we are in media and technology,” said Zefr co-founder Zach James. “He understands both sides natively, and we need that kind of expertise.”

Indeed — the company raised $18.5 million in additional funding this summer to turbocharge its offerings.

At the time, Zefr changed its name from Movieclips, and added sports, television and music videos to its film efforts. Zefr launched in 2009 as a niche video catalog site, focusing on helping movie studios collect and monetize fan and professional postings on YouTube, and offering advertisers a large network of premium movie clips.

The company said then that it had 600 million monthly views, 25,000 movie clips, and three billion total lifetime views on YouTube. It is about to celebrate one billion monthly views.

“Zefr has all the ingredients for success — dynamic, inspiring management, the ability to marry technology and content, and a business model that can scale,” said Levinsohn. “I’m thrilled to be part of the team.”

Exclusive: Is Andrew Mason on the Bubble as CEO of Groupon?

Kara Swisher — Tue, 27 Nov 2012 21:04:03 +0000

According to sources close to the situation, several Groupon board members have been seriously discussing making major leadership changes at the Chicago-based daily deals company, including bringing in a more experienced CEO to take over for co-founder Andrew Mason.

The board of Groupon has a regularly scheduled meeting later this week; sources said such management issues are likely to be discussed there, due to increasing frustration by some directors about the novice CEO’s performance so far.

To be clear, a move to replace Mason is not likely to happen immediately, if at all. And, in any case, any changes are likely to be done with his involvement. In addition, Mason also has support on the eight-member board — director and former AOL exec Ted Leonsis has always been a key mentor to him, for example.

But it has become obvious over the last months that a substantive rift has been developing between Groupon’s key players.

That has centered on Mason’s co-founder and Groupon executive chairman, Eric Lefkofsky, and board member and co-founder Brad Keywell. They, as well as several other directors, have been urging Mason to be more aggressive and public about the company’s turnaround efforts, sources said.

“The question is not whether Andrew is a good guy, but whether Groupon needs an Eric Schmidt,” said one person close to the situation, referring to the former Google CEO who was brought in to work closely with the company’s two founders. “And there’s been a lot more pressure now on the board to consider this seriously.”

The thoughtful and affable Mason — who has been the heart and soul of Groupon’s quirky culture and innovative product strategy — has indeed sometimes seemed to be in over his head in terms of leadership once the stakes got higher and the pressure increased after its IPO was announced last June.

While the company’s struggles have been well known for a while now, discussions about Mason’s tenure as CEO have increased as its stock has dropped precipitously. That has prompted its directors and management to seek to find a way to get the company on more stable footing as a business and, perhaps more importantly, with investors.

That has included the promotion of former Amazon exec Kal Raman to COO recently to give Mason more support. Raman is now, in effect, in charge of many operational aspects of the company, although not product, marketing or technology.

Another bright light recently has been a major investment by Tiger Global Management, a well-regarded hedge fund and private equity firm, which bought up close to 10 percent of Groupon. The move sent its shares up 24 percent in the last week, to $3.88, with a $2.5 billion valuation.

But that’s still 85 percent below its public offering price a year ago, and a far cry from the hype around the company when it exploded on the scene several years ago. Once the darling of the start-up space, with its innovative new social e-commerce model and lightning-fast growth, Groupon attracted huge funding from a panoply of top-tier Silicon Valley investors.

With that came a stunning $6 billion acquisition offer from Google and, later, an even huger valuation of more than $10 billion.

All that goodwill changed immediately after the company announced its IPO last June, with continued controversy around everything from Groupon’s accounting to management turmoil to its business model to rocky relations with merchants.

And while Mason has labored to affect a more professional tone in his own style, and seemed to have created a more stable management team, continued issues in Europe and getting enough traction for a number of new promising product initiatives has been tougher to solve.

Therefore, Mason’s performance is naturally under increased scrutiny, said sources. He will surely get questions on his record tomorrow, when he is scheduled to appear onstage at Business Insider’s Ignition conference in New York.

Charles Sipkins, a spokesman for the board, declined to comment, as did Groupon spokesman Paul Taaffe.

VCs Still Chasing Web Companies, but With Less Cash

Russ Garland — Sun, 25 Nov 2012 00:00:24 +0000

Venture investors still have a healthy appetite for early-stage consumer Internet companies, but those startups are having a harder time raising follow-on financing.

Overall the amount invested in consumer information services was off 42% in the first nine months as the difficulties of newly public Internet companies such as Facebook and Zynga cast doubt on the business models and valuations of social media companies.

Read the rest of this post on the original site

Furthering Its Monetization Strategy, Foursquare Launches Promoted Updates Pilot Program

Mike Isaac — Wed, 25 Jul 2012 04:00:09 +0000

Building on the launch of its Local Updates product for businesses last week, Foursquare announced plans to roll out Promoted Updates on Wednesday, marking the company’s further push into offering a more comprehensive array of tools for its merchant partners.

Similar to Local Updates, Promoted Updates allow businesses to push out recommendations to potential customers, serving as advertisements to Foursquare users as they move throughout the world.

The updates appear based on factors like proximity, time of day and past places you’ve visited, Foursquare says, so that users will only be seeing the most relevant sorts of ads. So, for example, say you’re in SoMa around noon, and have a history of eating at sandwich joints. If a merchant like Caffe Centro (one of my lunch standbys) placed a promoted update message, you’d probably see it in your stream.

“We’re thinking of them as Google search ads for the real world,” product manager Noah Weiss told me in an interview. “But instead of a Google ad driving traffic to a site like BestBuy.com” — one of Foursquare’s initial launch partners — “we drive traffic to the actual Best Buy store.”

Promoted Updates only appear when a Foursquare user opens the Explore tab, essentially an in-app recommendation engine that suggests places of interest nearby, again tailored to your Foursquare history. That’s somewhat in line with the Google analogy; A search query requires intent, putting in a request, and being served a series of relevant suggestions by Google. That’s how Foursquare sees Explore, a way to express the intention to discover places of interest without knowing exactly what it is you’re seeking.

Just like Twitter and Facebook did with their respective “promoted” products, Foursquare aims to increase a merchant’s visibility through promoting it in the stream, that portion of the app which receives the most eyeballs. What’s more, updates also offer the ability to attach a message. Such a message could contain a deal or special promotion, a potential hook to getting more foot traffic in the door.

In a more grand sense, Promoted Updates are in line with Foursquare’s attempt to take seriously its monetization strategy. For some time, merchants have had access to this wealth of user check-in data — gender breakdown, visitation frequency and times of day, among other statistics — but until recently, they haven’t had the opportunity to put it to good use.

Now, after more than three years of collecting data, Foursquare will actually sell tools like Promoted Updates to businesses that wish to capitalize on the popular, 20-million-user-strong platform. Typically those tools have been found from third-party vendor companies, cutting Foursquare out of a potentially lucrative revenue stream.

For now, details are scant on just how lucrative it is for Foursquare. Chief Revenue Officer Steven Rosenblatt tells me each partner pays on a cost-per-action model, and each promotion lasts for several months, though he wouldn’t go into further detail.

The tool is currently in a pilot mode, launching with only a handful of about 20 or so partners including the Gap, Walgreens and Best Buy. After a few months of testing and feedback, the company will likely roll it out to more of its participating network of more than one million existing merchants.

Twitter Poised to Close a Two-Stage $800M Funding, With Half Used to Cash Out Investors and Employees

Kara Swisher — Wed, 20 Jul 2011 19:42:45 +0000

In a move reminiscent of one done by Facebook in 2009, Twitter is close to completing an $800 million funding deal that will include a second part in which around $400 million of the total will be used to cash out current investors and also employees.

According to several sources close to the situation, the complex transaction could be completed within two weeks.

Along with basic funding needs, this is largely being done this way to give those with stakes in the San Francisco microblogging company an ability to monetize their privately held common stock and also to do this selling in a more organized — and legal — manner.

That is especially important since the company is not likely to go public for at least a year or more. And, while it could also be sold to a bigger company such as Google, that is also not in Twitter’s immediate future.

Before this secondary follow-on, the first part of the deal will be a $400 million investment for preferred shares by new and also existing shareholders, as was reported by the New York Times last week.

That round will indeed value Twitter at $8 billion, as the Times reported, which is a higher number than in other earlier reports.

This is more than double what Twitter was valued at when it got $200 million in venture funding from Kleiner Perkins in December at a $3.7 billion valuation.

Once the latest investments are complete, Twitter’s total cash haul since it was founded five years ago will be $760 million.

Key new moneybags are expected to be Russian investing heavyweight DST Global, which has invested in Facebook, Zynga and Groupon; as well as the digital growth fund of J.P. Morgan and perhaps others.

Current investors include Benchmark Capital, Union Square Ventures, Spark Capital and several other venture firms, as well as a spate of prominent angel investors.

The latest funding is an important one for Twitter and will up the pressure for its management, including CEO Dick Costolo, to really get its business growing in terms of revenue and profits.

Twitter is still struggling with coming up with a truly lucrative business model, and its execs have presented a number of them, such as promoted tweets, largely based on advertising.

It reportedly has $200 million in annual revenue from its efforts, which is still small in comparison to other Web 2.0 start-ups.

Interestingly, that was a similar situation to where Facebook found itself two years ago, when it allowed its employees to sell 20 percent of their shares.

That financing was part of a $100 million add-on to a $200 million investment in the social networking company by DST. At the time, the tender offer valued the company at $6.5 billion for the common stock, or $14.77 a share.

Of course, Facebook is worth upward of more than 10 times that now, so any Twitter sellers might want to consider their options carefully.

It is not clear exactly who can sell their Twitter shares, and in what amount, in the new deal. When Facebook did a similar move, for example, its top leadership could not sell any of their stakes.

A Twitter spokeswoman would not comment about any fund raising.

But, interestingly, in an onstage interview at a Fortune magazine tech conference this week, Costolo criticized stock trading of the shares of popular start-ups on secondary exchanges as a “distraction.” Like other companies, he said, Twitter had instituted stricter policies to limit the ability of its employees and investors to trade on those markets.

Exclusive: Andreessen Horowitz Invests $80 Million in Twitter

Kara Swisher — Wed, 09 Feb 2011 19:13:24 +0000

Andreessen Horowitz has invested more than $80 million in Twitter via purchasing stock in private secondary markets.

When called about it by BoomTown, a spokeswoman at the high-profile Silicon Valley venture firm confirmed the purchase.

To be clear, Twitter does not get this money–early investors and employees able to sell their privately held Twitter shares do.

Buying into the secondary markets–which have recently attracted some controversy and regulatory scruntiny–has become a common way for VCs to invest in a hot start-up without a complex and competitive funding bake-off.

The move is an interesting one, since Andreessen Horowitz was not part of the recent $200 million round of venture funding at the San Francisco microblogging company, led by Kleiner Perkins at a $3.75 billion valuation.

Sources said that the firm made the move because it is already deeply invested in other key companies in the social space, including gaming giant Zynga, location-focused Foursquare, local discounting phenom Groupon and general social networking behemoth Facebook.

Apparently, Twitter makes it a full basketball team.

The investment by the firm gives more perceptual boost to Twitter, which is still trying to create a lucrative business model for itself, focused on advertising.

It needs to, if it want to stay independent for the long haul.

While an IPO is a possibility, so is an acquisition. Several months ago, while it was doing its funding round, Twitter had incoming interest from Facebook, which lobbed in a $5 billion soft offer, as well from Google.

YooMee Games Opens the Chuck E. Cheese of Online Arcades

Tricia Duryee — Tue, 08 Feb 2011 12:30:26 +0000

What do you get when you give casual game players the chance to compete for cash and prizes?

A really addictive experience.

Or at least that’s the hope of YooMee Games, which is unveiling a new gaming platform today (yes, another one!) that allows developers to add features to their games, like tournament play and one-on-one challenges.

The San Francisco-based company’s founder, Prita Uppal, jokes it is the Chuck E. Cheese of the Internet because of the tickets.

It starts with players placing wagers or buying tokens for a chance to win money and tickets that can be turned in for prizes. “It’s an arcade. You buy coins and then compete with others in tournaments and get tickets based on the outcome, which can be turned into cash or prizes, based on how many tickets you have.”

Think skee ball, but with better prizes than Tootsie Rolls.

At the start, YooMee will have more than 30 games to choose from, including popular puzzle games, like Bubble Town and Cube Crasher, and word games like WordStone. Prizes include Amazon gift cards, digital cameras and other gadgets.

Uppal said the company is not a casino and people are not gambling on the site, because the games are skill-based and not based on chance. “It’s completely skill-based competition. It’s legal. All the casual games you see and play on the Web are skill games–so you can wager and compete and earn money.”

Still, the business model is complex, having to optimize winnings for the player while also distributing money back to the developer and keeping some for itself.

Users don’t have to pay to play–instead they can play for free and view ads, such as a video pre-roll. That business is doing well, and allowed the 22-employee company to reach profitability in October.

Uppal says YouMee isn’t competing against other companies that are providing developers other services, such as leaderboards, comments or rankings. Rather, it can be used in addition to those services. It also uses Facebook Connect, so friends can easily find one another from their regular social network.

Commonly, a player will be introduced to the “arcade concept,” which Uppal is also “calling social competition,” after playing one of the games. A message will appear that says something like, “If you had paid 50 cents, you would have made $10 with this score. Do you want to enter this competition?”

In founding the company, Uppal placed a few good bets of her own.

She met her first VCs on the ski-lift chair in Park City, Utah. Directly from the ski slopes, U.S. Venture Partners flew her to Silicon Valley–she was without a computer and practically still wearing her ski boots–to give a 45-minute presentation. She had a term sheet two days later.

And she found her second VC after seeing a psychic, who predicted that the letter “A” and foreign money were going to be really important. That led her to take meetings with Altos Ventures, which has roots in Asia. “I wouldn’t have ever spoken to them if it weren’t for the psychic.”

Is Jason Kilar Trying to Get Fired?

Peter Kafka — Thu, 03 Feb 2011 21:05:02 +0000

Is Hulu’s CEO trying to get pushed out the door?

That’s the question of the day for the TV and Web video world, prompted by a blog post Jason Kilar published last night.

It’s a lengthy read about the TV business and where it’s headed, and most people I’ve talked to today think it’s smart and well-written.

Some of them also believe Kilar wrote it so that his bosses–executives at News Corp.’s Fox, Disney’s ABC, and Comcast’s NBCU–will give him the hook.

That’s because a lot of what Kilar wrote challenges the TV networks’ existing business model: He argues that there are too many ads, and that consumers want to be able to watch their shows on demand, not on a linear schedule. And, crucially, he argues that the cable network bundle is on its way out.

In other words, change or become the music labels: “History has shown that incumbents tend to fight trends that challenge established ways and, in the process, lose focus on what matters most: customers.”

And all of that makes perfect sense. Except for the part where he says it in public, while working for a company owned by three TV networks.

Kilar’s post began making waves immediately last night, and the Financial Times’ Matthew Garrahan was able to quickly find several network executives who are agog at the post.

Most tellingly, he got a Disney rep to officially distance the company from Kilar’s post, stating that his views (published on the official Hulu blog) were “personal and clearly not shared by anyone at Walt Disney.”

In fact, his views are almost certainly shared by some Disney executives, and others at Hulu backers News Corp.’s Fox and Comcast’s NBCU. (News Corp. also owns this Web site.) It’s just that they have no intention of changing their business anytime soon. Especially now that they’ve gotten cable providers to start paying them for content they used to give away, via “retransmission” fees.

“80, 90 percent of what he says is right,” says an executive at one of Hulu’s network owners. “But why print that? Does he think we’re going to say, ‘Oh, thank you! You’re right! We’d never thought of that! Let’s give away retrans!’? I can’t see what he thinks will happen.”

So here’s one possibility: Kilar knows he can’t win. And his post is supposed to be his “Jerry Maguire moment”, as Garrahan puts it–a fireworks display you put on because you don’t want to work at your current job anymore.

The other possibility: Kilar genuinely thinks he can win.

Up until now the former Amazon executive has done a marvelous job of building a site everyone was convinced would fail, and then sustaining–and expanding–a joint venture everyone thought would collapse.

Kilar has pulled some of that off with brinkmanship. As last week’s well-reported Wall Street Journal piece notes, Kilar threatened to quit last fall, when he was trying to get the networks to agree to cut their monthly price for Hulu Plus. He didn’t get the 50 percent cut he’d been pushing for, but he still managed to get the networks to agree to cut the price by 20 percent, to $8.

Also note that Kilar’s post quite clearly argues that the path he’s pushing for will be better for the networks in the end: “We believe content owners are in a strong position to make higher returns from TV content distribution in the future than they have historically.”

But if Kilar thought his arguments would carry more force in public, he may well have miscalculated. This could all blow over with time, but for now, at least, he has some very bummed backers.

“Here’s the irony. Jason is probably best to lead Hulu. But he is also too righteous/robot to do it ‘the wrong way’ or a way he won’t agree with,” says an industry executive.

Another reports that network executives are “crazy, angry” over the post. “I’d be stunned if Jason was still there in 60 days.”

I’ve asked Kilar for additional comment. I don’t expect to get it.

Exclusive: Twitter Raises $200 Million at a $3.7 Billion Valuation; Adds McCue and Rosenblatt to Board

Kara Swisher — Wed, 15 Dec 2010 20:15:48 +0000

Twitter has completed its latest round of funding–$200 million at a $3.7 billion valuation–with Kleiner Perkins as the lead investor, according to sources familiar with the situation.

Sources said the San Francisco microblogging service is also adding two new board members: Flipboard’s Mike McCue and David Rosenblatt, who ran DoubleClick until a bit after it sold to Google.

Twitter recently added former Netscape exec Peter Currie to the board, as BoomTown previously reported.

A Twitter spokesman confirmed the funding and the board appointments, but declined further comment.

The moves are big ones for Twitter, which is moving fast to upgrade its management and business model under CEO Dick Costolo, who just posted a blog (see below) on the new funding and directors, titled “Meaningful Growth (although it was first curiously called, “Stocking Stuffers,” and was much funnier).

But, indeed, a big slug of cash will surely help the start-up’s expansion efforts and essentially declares it is not for sale to bigger companies such as Google (quite yet, that is).

As I reported last week, Kleiner partner John Doerr has been pushing hard to fund Twitter, beating out Russia’s DST Global.

Kleiner is the only new investor in the latest round, which brings its funding total to $360 million since it was founded about five years ago.

The storied Silicon Valley venture firm, which has been aggressively moving into the Web 2.0 space of late, put in $150 million, with the remaining $50 million coming from existing investors.

Past investors include Benchmark Capital, Union Square Ventures, Spark Capital and several other venture firms and angel investors.

Adding Currie, McCue and Rosenblatt are very strong choices for the board. Currie has deep financial and IPO experience, McCue is a well-connected and innovative entrepreneur and Rosenblatt brings much-needed online advertising heft.

As it happens, Costolo will appear at our D@CES event in January, where I am interviewing him and we can talk about all the changes.

(Thank goodness the funding is done, since I was worried about all those awkward pauses.)

Here is new version of Costolo’s blog post on McCue and Rosenblatt (the old one is below it for you to compare and contrast):

Meaningful Growth

In the past 12 months, Twitter users sent an astonishing 25 billion Tweets and we added more than 100 million new registered accounts. In that time, our team has grown from 130 people to more than 350 today. We’re thankful for every Tweet, every account, and every talented employee who has decided to join the Twitter team. This week, we’ve got some big news to share.

As part of a significant new round of funding with investor Kleiner Perkins Caufield Byers and existing investors, we’ve added two new members to Twitter’s board of directors. Please join us in welcoming Mike McCue and David Rosenblatt. The experience these new directors bring to Twitter, along with this renewed investment, will help us continue to grow as a company and business.

2010 was one of the most meaningful years since Twitter, Inc. was founded in 2007. We operate on a principle that people are basically good–when you give them a simple way to express this trait, they prove it to you every day. We’re proud of what Twitter users have accomplished, we’re proud of our work, and we’re very proud of our team. Thanks for being a part of this work; it means a lot to us.

Stocking Stuffer

Growth is fun. In the past 12 months, Twitter users sent an astonishing 25 billion Tweets and we added more than 100 million new registered accounts. In that time, our team has grown from 130 people to more than 350 today.

This week, we added two new members to Twitter’s board of directors who have strong experience running technology companies: Mike McCue and David Rosenblatt. Mike was the CEO of Tellme Networks, is currently CEO at Flipboard and also worked for Netscape and Microsoft (which acquired Tellme in 2007). David is the former CEO of DoubleClick and an ex-Google executive.

We also closed a significant new round of funding, with new investor Kleiner Perkins Caulfield Byers leading the round. KPCB brings to Twitter a track record of helping build great companies, ranging from Amazon to Zynga (get it? A to Z? See how we did that?), and a team with expertise in Internet, mobile and social platforms. The additional resources and expertise will be extremely helpful as Twitter continues to grow as a company and business.

Thank you to Twitter users everywhere for making 2010 such a good year.

Video: Picplz's Dalton Caldwell Says It's All About the Money

Liz Gannes — Tue, 14 Dec 2010 04:48:03 +0000

When you talk to early-stage Web entrepreneurs, they often want to talk about their latest feature, their undying dedication to delighting users, how they’re growing like crazy and all the vast unmet needs their company is finally addressing. Believe me, I have nothing against changing the world, but often it all sounds the same.

However, when you talk to Dalton Caldwell about his start-up Mixed Media Labs, he pulls the conversation to the topic of making money. Priority No. 1 for Caldwell is building a sustainable business. That drive arises out of his last start-up experience, with the music site Imeem, which failed in dramatic fashion (something about which he’s spoken publicly).

Mixed Media Labs, said Caldwell in a recent interview, is setting out to build a series of apps intended to prove that monetization of a mobile social community is possible. The company’s first app is Picplz, which has logically been lumped in with other very similar recent mobile photo-sharing apps like Instagram and Path. Instagram has seen tremendous growth and is beloved by early adopters. Path is trying an audacious approach to controlled, personal sharing.

The strengths of Picplz appear to be a bit harder to describe, but they include being built primarily in HTML5 so that the company can launch and iterate quickly on multiple platforms rather than just on the iPhone. Picplz is available on Android, iPhone and through a fully featured Web app. It recently added support for posting photos to Flickr, Tumblr and Posterous.

Picplz is also the one competitor to have its Series A funding provided by and a board seat occupied by Marc Andreessen, whose firm Andreessen Horowitz put $5 million into Mixed Media Labs despite having also provided early funding for Instagram.

So what’s the big idea? Caldwell said “there was no secret PowerPoint” he was withholding from me about his company’s larger plans. Rather, he wants to test a lot of things and see what works. He sees Mixed Media Labs as an application studio like Ngmoco and Zynga, he said, where the goal is to find apps that monetize by empowering small teams to execute big ideas.

And speaking of monetization, what will this magical business model be? Caldwell said it’s likely to be performance ads. At this point, of course, Mixed Media Labs is really not much different from other early-stage start-ups; it has seven employees, none of whom are sales people (and yes, it’s trying to make some apps that delight users).

Here’s a short video of Caldwell in his new, virtually unadorned San Francisco office, elaborating on some of these topics.

[ See post to watch video ]

Password Manager LastPass Acquires Xmarks

Kara Swisher — Thu, 02 Dec 2010 10:10:01 +0000

LastPass, a cross-platform password manager, has acquired the social bookmarking and browser synchronization service Xmarks.

The San Francisco-based Xmarks has been in the midst of some tumult of late, as it closed down in September and then quickly opened back up again in an effort to keep its service running for a large group of active users.

That happened after user outcry, spurring the company to try to stay afloat.

SInce then, Xmarks has been trying to land itself safely.

The start-up had multiple offers to keep the operation running, as well as pledges from almost 30,000 fans willing to pay $10 to $20 a year for a new “freemium” business model.

Enter LastPass, based in Vienna, Va., whose CEO Joe Siegrist said in an interview that he wanted to help keep the service operating.

“They had a large dedicated audience, but their free offering and advertising model was not working,” he said. “We really want to figure something out that could keep it going.”

Siegrist said LastPass offered a robust free service, but relied on a small group of users who pay to upgrade to a premium offering.

The browser add-on for cross-platform synchronization operates in the cloud.

And that is going to be the fate of Xmarks–which had been called Foxmarks initially.

It had been seed-funded in 2006 by well-known entrepreneur Mitch Kapor and also got an additional investment from First Round Capital.

Xmarks garnered another $5 million in funding from Redpoint Ventures in 2008,

That year, it also hired Silicon Valley entrepreneur James Joaquin as CEO, whose job it was to carve out a business with Xmarks’ assets, including using its mass of data.

Xmarks had certainly been growing its user base and bookmarked Web addresses strongly, via a browser widget that recorded bookmarking information.

Earlier this year, it tried out an advertising product called SearchBoost, which gave advertisers additional analytics about their ads, as well as organic search results.

But all that ultimately did not translate into a viable business for Xmarks.

“We think this will make a great ending and beginning for Xmarks,” said Joaquin.

Both Xmarks and LastPass declined to provide financial details of the transaction.

Here is the blog post by LastPass and Xmarks about the integration:

Today we’re excited to announce that Xmarks has been acquired by LastPass, makers of a leading cross-platform password manager. It’s a great opportunity that ensures the survival of Xmarks as the same service that you know and love.

In the last few years, we’ve attracted over 4.5 million users syncing more than 1 billion bookmarks across 5 million computers. Most importantly, we’ve provided a simple solution to help people easily access their bookmarks, wherever and whenever they needed to. We’ve had thousands of users tell us that Xmarks has become an integral part of their browsing experience. You can rest assured that LastPass will continue to build upon the service in the coming months.

We’re also committed to keeping Xmarks free while implementing a viable long-term plan. Xmarks is transitioning to a “freemium” business model, the same model that allowed LastPass to grow into a thriving, profitable business. The browser add-on and the vast majority of what users have enjoyed remains free. Users can then opt to purchase Xmarks Premium for $12 per year, which includes new enhanced features like Android and iPhone mobile phone apps, priority support, and more. The Xmarks and LastPass Premium offerings are also available bundled together at a reduced subscription rate of $20 per year. For those of you who pledged your financial support, you can make good on your pledge today and upgrade.

The restructuring of the Xmarks offerings will accelerate the introduction of new features and service improvements. The two services will continue to require separate downloads and will be administered through two distinct extensions and websites, although there are plans to integrate them in the future.

We believe the acquisition will prove to be a success because of the common mission shared by LastPass and Xmarks. Xmarks complements LastPass’ vision of secure, universal access to the information that gives you entry to your digital life. By joining LastPass, Xmarks will also be able to accelerate the introduction of new features and developments. As the ultimate cross-browser, cross-platform team, Xmarks and LastPass will work together to help more people simplify their digital lives and access their data from anywhere, at any time.

We’re excited to join forces with LastPass and be a part of a team that will continue to provide the best data-syncing tools out there! We hope you will support both of these great services through your business and your Premium subscription. For more information, please see the FAQs.

The Xmarks & LastPass Teams

Here's a Promoted Tweet Survey From TWTRCON

Kara Swisher — Thu, 18 Nov 2010 13:30:30 +0000

Later this morning, BoomTown will be at the TWTRCON SF 10 conference to interview Adam Bain, Twitter’s spanking new president of global revenue, in a session titled “Show Me the Money.”

I will surely make him show it!

The former head of News Corp.’s Fox Audience Network advertising platform, Bain is about as amiable a guy as there could be.

So, it will be interesting to see if he is feeling the pressure after only 45 days on the job of being the main person charged with figuring out and putting into action a lucrative business model for the San Francisco-based microblogging start-up.

No pressure, Adam! (But be forewarned: Don’t be fooled by Twitter CEO Dick Costolo’s friendly smile.)

Until then, I embedded a poll below that TWTRCON is releasing today on Twitter Promoted Products.

Among the key findings:

• Most Twitter business users have noticed Promoted Tweets, Promoted Trends and Promoted Accounts.

• As users, most have had a neutral reaction toward these products; the reaction is least favorable toward Promoted Accounts. Promoted Trends have had the highest response rate, with 37% saying they’ve clicked on a Promoted Trend to learn more.

• Half of corporate Twitter users are somewhat or very interested in Promoted Products as a marketing vehicle. Ten percent of respondents are at companies that are already experimenting with these products.

• About half of business users want to see more metrics to understand the potential ROI of Promoted Tweets, Trends or Accounts. One in five describe Promoted Products as a “very powerful tool” or the “future of advertising.”

• Thirteen percent believe that “users will push back.” Others would like to see Promoted Products better integrated into the Twitter user experience.

Here’s the full poll:

TWTRCON oneforty Promoted Products Survey 2010 1118

Demand Media's IPO Is On Deck, With Amended Filing

Kara Swisher — Fri, 29 Oct 2010 15:18:49 +0000

Demand Media, which posted its S-1 regulatory filing August, filed an amended version today that is likely to allow it to move quickly to an initial public offering.

The new version for the online content company has updated financial information for the third quarter.

Demand now must now wait for the Securities and Exchange Commission to approve the filing, after which the execs of the Santa Monica, Calif.-based Demand will immediately to go on a road show for several weeks to try to convince investors to jump on board.

Then, if there’s enough interest, the IPO is likely to come before the holidays.

Demand’s initial filing was to raise $125 million at a reported $1.5 billion valuation.

You can read the whole filing here, which shows an improved performance from Demand.

In its latest filing, Demand said it had generated revenue–from advertising and a domain business–of $179.4 million for the first nine months this year and had a net loss of $6.4 million.

In the same period a year ago, revenue was $102.3 with a net loss of $5.6 million.

Losses in the third quarter itself narrowed, to $305,000 from $4.2 million in the previous quarter and $1.9 million a year ago.

But Demand points in its filing to its “Adjusted OIBDA,” using less stringent non-GAAP financial rules, which shows a much improved $41.9 million profit compared to $18.9 million last year.

As MediaMemo’s Peter Kafka wrote:

Some investors may balk at these non-GAAP numbers, but Demand, Goldman Sachs and its other underwriters clearly think there’s a market for them. And there’s certainly a hunger in the tech world for a big, brand-name IPO to break the dry spell. You can feel people willing this thing to work.

If Demand did, say, $55 million in OIBDA this year, it would need a multiple of 18 times trailing 12 months earnings to get to a $1 billion valuation. It would need 27x to get the $1.5 billion number that people are whispering to reporters.

Another way to get to $1.5 billion: Project OIBDA of $100 million for 2011, and ask for 15x on that number.

Demand is definitely growing smartly from $170.3 million in annual revenue in 2008 to $198.5 in 2009 to possibly reaching–based on six months of 2010 results–well above $230 million in 2010.

That’s due to its increasing growth in traffic, largely via Demand’s popular eHow site and a network of others.

Almost all of the money is coming from traffic, and advertising, that it generates from Yahoo and Google–Google in particular.

Demand has done this using $355 million in funding it has raised since its founding in 2006. The company said it has only $29.2 million in cash and cash equivalents left, but there is also a $100 million untouched line of credit.

Hence, the IPO, which will give it both cash and stock to use to grow its content business, either organically or via acquisition, all while keeping the costs of content creation increasingly lower via innovative technology.

From Demand’s filings, it is clear such an effort is slow going, as it seeks to carve out any entirely new business model for content.

Now, it must find Wall Street investors who agree.

In its filing, Demand said it will sell 4.5 million shares in the IPO and current shareholders will sell another three million. It hopes to have DMD as its ticker symbol on the New York Stock Exchange.

But there is no price range yet for the offering, which is being led by Goldman Sachs and Morgan Stanley.

ATD Adds Tricia Duryee (Who Will Add It All Up for Our Readers)

Kara Swisher — Mon, 25 Oct 2010 13:42:49 +0000

And the hit reporters/bloggers keep on coming at All Things Digital.

Today, we are honored to add Tricia Duryee to the staff of our site, where she will be covering commerce, online payments, gaming and more.

In other words: She’ll show us the money.

Or not, in some cases.

The broad commerce beat is important to ATD, as we focus on what we think is another key space on the Web–a topic that straddles retail, mobile, social and virtual, as companies old and new try to come up with sustainable business models online.

While Amazon and eBay, as well as new upstarts such as Groupon and Square, are the obvious candidates for Tricia’s coverage, how commerce is innovating on the Internet is a wider-ranging story we aim to cover closely.

And Tricia is just the kind of superb beat reporter we were looking for to pioneer the coverage for us.

She comes to ATD from her recent job as Editor of mocoNews.net, an online site dedicated to covering the wireless industry. MocoNews is a sister publication of paidContent.org, and both are owned by the Guardian News & Media.

Tricia joined mocoNews in February 2008 and has written about how the Apple iPhone has changed the cell phone industry, how ringtones are giving way to mobile TV and how the carriers are building out the next-generation of networks.

Prior to mocoNews, Tricia spent eight years at the Seattle Times. In her first five years, she covered venture capital and Seattle’s start-up scene.

And, in her final three years, she wrote about the regional wireless industry, which included stories such as Cingular’s $41 billion acquisition of AT&T and how T-Mobile’s Sidekick was a must-have among celebrities, including NBA All-Stars such as Ray Allen.

The Seattle native attended the University of Oregon, where she received a degree in journalism and a minor in business.

Tricia is located in Seattle still, in a 102-year-old house, with a 10-year-old dog and a more recent husband.

We’re also thrilled Tricia is reporting from there and hope she’ll give our readers a flavor of what’s going on in tech in the Pacific Northwest, which is one of the key digital hubs in the U.S.

ATD Adds Tricia Duryee (Who Will Add It All Up for Our Readers)

Kara Swisher — Mon, 25 Oct 2010 12:42:48 +0000

And the hit reporters/bloggers keep on coming at All Things Digital.

Today, we are honored to add Tricia Duryee to the staff of our site, where she will be covering commerce, online payments, gaming and more.

In other words: She’ll show us the money.

Or not, in some cases.

And Tricia is just the kind of superb beat reporter we were looking for to pioneer the coverage for us.

Prior to mocoNews, Tricia spent eight years at the Seattle Times. In her first five years, she covered venture capital and Seattle’s start-up scene.

The Seattle native attended the University of Oregon, where she received a degree in journalism and a minor in business.

Tricia is located in Seattle still, in a 102-year-old house, with a 10-year-old dog and a more recent husband.

Pandora's Tim Westergren Speaks!

Kara Swisher — Mon, 11 Oct 2010 13:17:08 +0000

Here’s an interesting video interview BoomTown did last week with Tim Westergren, Chief Strategy Officer and founder of Pandora Media, where I interviewed him at “The Future of Music” forum in Washington, D.C.

The former musician has ridden all the various bumps the Internet radio station has endured since its founding in 2000–from a $9 million funding in 2004 that saved Pandora to continued struggles to stay afloat after record labels came after it over royalties.

Now, with a stable and growing revenue stream–based on a traditional advertising business model–turbocharged by a popular mobile app for the Apple (AAPL) iPhone and about 65 million users, Westergren talks about what’s next for the Oakland, Calif.-based company:

[ See post to watch video ]

Xmarks May Not Exit After All

Voices — Fri, 08 Oct 2010 15:23:35 +0000

Looks like Xmarks, the popular cross-browser, cross-platform bookmark synchronization service, will be saved from extinction. The company, which announced late last month that it was folding the free service for lack of a viable business model, now says it has “multiple offers” to keep the operation running, as well as pledges from almost 30,000 fans willing to pay $10 to $20 a year. Next steps: Settling on a buyer and a freemium model.

The Long Goodbye: Xmarks Tried to Sell Twice, Before Closing Down With Class

Kara Swisher — Tue, 28 Sep 2010 12:15:39 +0000

Yesterday marked the end for Xmarks, the Mitch Kapor-backed social bookmarking start-up that was founded in 2006.

What was most remarkable to BoomTown was the classiness and honesty of the goodbye, especially in Silicon Valley, which is loath to call a failure just that.

That was certainly clear in a terrific blog post about its history, titled “End of the Road for Xmarks,” written by its CTO and co-founder Todd Agulnick.

After noting Xmarks’ substantive growth as a browser synchronization service, he wrote:

“Tomorrow, however, will hardly be anything but typical, for tomorrow one of our engineers will start a script that will email each of our users to notify them that we’ll be ceasing operations in around 90 days.”

In the fascinating post, Agulnick did note that the company came close to selling recently. Actually, I heard it had gotten close twice and to no avail.

The San Francisco-based company–which had been called Foxmarks initially–had been seed-funded by Kapor, the well-known tech entrepreneur, and also got an additional investment from First Round Capital.

Xmarks garnered another $5 million in funding from Redpoint Ventures in 2008,

That year, it also hired Silicon Valley entrepreneur James Joaquin as CEO, whose job it was to carve out a business with Xmarks’ assets, including using its mass of data.

Xmarks had certainly been growing its user base and bookmarked Web addresses strongly, via a browser widget that recorded bookmarking information.

Earlier this year, it tried out an advertising product called SearchBoost, which gave advertisers additional analytics about their ads, as well as organic search results.

But all that ultimately did not translate into a viable business model for Xmarks.

At the time of launching this money-making effort in April, Kapor said that after growing its user base of actives, this was the next logical step for Xmarks.

“This is the effort to move from that category to the category of sustainable enterprises,” he said. “And that is certainly a good thing.”

But, as Agulnick concluded:

“We built it and it put it front of potential advertisers. Many were interested, but ultimately the feedback was negative: our user base was too small to be worth their time and attention.”

After thanking investors, employees, users and others, Agulnick ended:

“In the words of Douglas Adams, so long and thanks for all the fish.”

Indeed.

Looking back to happier times, here is a video interview I did with Joaquin in late 2008 about Xmarks’ prospects:

Making Fun of Prince Is Easy–Figuring Out How Talent Thrives in a Digital Age, Not So Much

Kara Swisher — Wed, 07 Jul 2010 07:55:21 +0000

So, yes, the quote from Prince about the Internet being “completely over” made him sound like a Luddite idiot.

And adding that computers and other digital gadgets “just fill your head with numbers and that can’t be good for you” pushed the music superstar over the edge into seeming like that crazy ranting dude you often encounter on the street claiming the government has invaded his brain.

But–after spending several days here in Los Angeles this week, talking to execs, talent and others who toil in the entertainment industry–I can’t say what I am hearing is that much different in terms of the continuing frustration with the lack of decent business models to replace the ones that have worked for so long and been so lucrative for the entertainment and media industry.

From music to movies to television, the biggest minds here still sound perplexed as to what will finally be the golden ticket to carry them through to the inevitable next era of digital distribution.

Still, so many questions and so few answers.

Will consumers buy subscriptions to cloud-based content? Will advertising be enough to pay for broadcasting online? Who will pay for the high up-front production costs of most major entertainment projects? Can costs come down enough to make up the difference?

And while there is now a lot of interest around tablets, such as the Apple (AAPL) iPad, and Hollywood types seem to accept that their customers are shifting their buying and consumption habits around entertainment drastically, there still remains a level of outright hostility to it all that has not changed much.

“Why is the consumer always right?” said one exec to me this week in a typical statement. “You can’t have a business if there is no business model.”

Indeed. And, in fact, that’s just what Steve Levitan, co-creator of “Modern Family,” the ABC television hit, talked about cogently at the eighth D: All Things Digital conference last month, telling a largely tech-centric crowd some truths it much needed to hear.

(FYI: We’ll be posting the video of the entire interview session with Levitan and also longtime Hollywood player Lloyd Braun here tomorrow.)

As much as he himself loves tech products, Levitan noted that lack of a business plan or credit for consumption online made digital largely pointless to his work.

“At its core, 90 percent of my job is still sitting down in a room full of people and breaking stories,” he said. “And that requires virtually no technology.”

It’s a salient point and not so different from Prince’s saying: “I don’t see why I should give my new music to iTunes or anyone else. They won’t pay me an advance for it and then they get angry when they can’t get it.”

If you remove the sillier parts of his quote that preceded it, such a statement is not unreasonable from an artist who wants to be paid for his creative efforts.

Thus, instead of mocking that sentiment, perhaps it is time for tech leaders to figure out a way to keep talent from being dragged into the future without so much kicking and screaming.

Or, as Prince might sing: He was dreamin’ of being paid when he said the Internet was over, so sue him if he went 2 fast.

Speaking of which, Prince really deserves a little more respect, folks, if only for his classic “1999,” seen here (jacked onto the Web, natch):

Facebook's New(est) Approach to Privacy

John Paczkowski — Wed, 26 May 2010 17:47:07 +0000

As an apology for betraying the trust of Facebook’s 400 million members, founder and CEO Mark Zuckerberg’s equivocating editorial in the Washington Post Monday was as half-assed as it was late. Facebook may have moved “too fast” by revising its privacy policy and tools in a way that makes more of its members’ personal information public, he conceded. “We move quickly to serve [our] community with new ways to connect with the social Web and each other,” Zuckerberg wrote. “Sometimes we move too fast.”

Sometimes we move too fast.

That’s an apology of sorts, I suppose. But it’s not an apology for further loosening Facebook’s privacy safeguards or for the speed with which Facebook loosened them. In other words, it’s a comment on the execution of a policy, not on the policy itself.

By saying “we move too fast,” Zuckerberg isn’t admitting that Facebook was headed in the wrong direction with respect to user privacy; he’s saying Facebook was headed in right direction all along, just a bit too quickly–for those of us with reasonable expectations or privacy, anyway.

Which makes you wonder about Facebook’s claim that its changing privacy policy and tools reflect “shifting social norms around privacy.”

Do they really?

Or is Facebook itself attempting to shift those norms in its quest for revenue? After all, there’s great money to be made in the sort of behavioral advertising that Facebook’s user data makes possible–great money to be made in monetizing our privacy and reputations.

So the unveiling this morning of what Facebook claims are “enhanced, simpler” privacy controls is interesting, to say the least. How does a company so clearly prejudiced against privacy assuage concerns that it might violate privacy?

With a new set of “granular data permissions,” Zuckerberg said this morning (here’s Facebook’s guide explaining them).

“First, we’ve built one simple control to set who can see the content you post,” he explained in a blog post published to coincide with the announcement. “Second we’ve reduced the amount of basic information that must be visible to everyone and we are removing the connections privacy model….Third, we’ve made it simple to control whether applications and Web sites can access any of your information.” (Click image below to enlarge.)

Evidently, there will be a simple control that applies to all content retroactively and to new products going forward. If, for example, you set your preference to friends-of-friends, that will be your historic default as well as your default going forward.

For applications, access to member information has been “dramatically” limited. There will be a single check box to opt out of information-sharing with third-party sites. Said Zuckerberg: “The net effect of this is that all applications are going to have restricted access to your personal information.”

And for Facebook Platform, the company is adding an “easy” opt-out for instant personalization. Finally, Facebook is differentiating between “basic directory” information and the more personal information in its members’ profiles. Directory information must be public so friends can find one another, and “allowing people to find you on Facebook is a very different use case than sharing your information.”

As a privacy tool overhaul, this is fairly substantial. And it does seem to address many complaints about the previous system. But it doesn’t do one thing that many critics have called for: Make the highest privacy settings the default.

Why not? Said Zuckerberg: “We’re trying to make the system simple to use. Facebook has never worked in a way where you sign up and only your friends can see your personal information. The point of the site is to allow you to connect with new friends and friends of friends. And that’s always been a really important part of how Facebook has worked. It’s really important to help people share simply by default.”

With their friends, perhaps. But not with anonymous companies. In that case, you’d think most people would want to limit that “sharing” by default. But that would undermine Facebook’s business model, wouldn’t it?

Evidently, outrage over the company’s privacy missteps hasn’t been sufficient to effect that particular change. “We really think about the trust issues,” Zuckerberg explained. “A lot of people right now are upset with us about these changes, and I take that really seriously…and I don’t mean to diminish privacy concerns….but all these blogs are talking about Delete-Your-Facebook-Pages campaigns and we’ve seen no meaningful change to our usage stats.”

So how does Zuckerberg answer accusations that Facebook doesn’t care about privacy, that his company preys on people who have an expectation of privacy but don’t necessarily understand the implications of putting their personal information on Facebook?

“People perceive that we don’t care about privacy and that’s just not true,” he said. “People want to share information and there’s got to be a balance. They’ve got to have control over how they share their information and that’s where the world is going….We’ve learned time and time again that privacy is a sensitive thing. Now we feel like we have a privacy model that will scale as we add more users….And hopefully, we won’t be messing with it for a long time.”

Why Will Google TV Be Any Different From WebTV? Or AOL TV? Or MSNTV? Or…

John Paczkowski — Fri, 21 May 2010 16:12:43 +0000

At its I/O developer conference Thursday in San Francisco, Google, predicted it would “change the future of television” with GoogleTV, an effort to marry broadcast TV with the Web. And in comments about the announcement, the company’s executives hawked the new software and hardware bundle with similarly aggrandizing pronouncements.

There was this from Google Senior Product Manager Rishi Chandra: “We’re going to have the same impact on the TV experience that the smartphone had on the phone experience.”

And then this from Google CEO Eric Schmidt: “TV has not been reinvented in any significant way since color television was brought in in the mid-1960s.”

With Google TV, Google clearly believes it is ushering in the rebirth of television. But, to Schmidt’s point, sure, TV hasn’t been reinvented in 50 years, but not for lack of trying.

The evolutionary path of the device is littered with failed Internet-TV initiatives. As the Time Magazine cover from Apr. 12, 1993 suggests, this is not a new idea. Nor has it been a successful one, at least not in implementations to date.

Steve Perlman’s WebTV, one the earliest products to bring the Internet to television, failed to gain significant market traction and didn’t do much better after it was acquired by Microsoft (MSFT) and turned it into MSNTV.

AOL TV, America Online’s (AOL) effort to extend its dominance from the PC to the television with a Web-TV hybrid, was scuttled in 2003, three years after it launched.

Brought to market with the help of some impressive hardware partners, like Hewlett-Packard (HPQ), Microsoft’s Media Center Extenders never really caught on.

Launched more recently, Yahoo’s (YHOO) Connected TV initiative hasn’t garnered much notice. Then there’s Kodak’s (EK) Theater HD Player, which doesn’t seem to be doing that well either.

So what makes Google (GOOG) think it’s going to succeed where so many have failed? Particularly with a platform that, frankly, looks a lot like TiVo (TIVO) with a Web browser?

Aside from arrogance, that is?

Well, there’s an impressive list of partners. Certainly, adoption of Google TV stands to benefit quite a bit from Sony (SNE), Logitech (LOGI) and Dish Network (DISH) baking it into television sets, Blu-ray players and set-top boxes. And sources tell me other electronics manufacturers will soon join them. Content partnerships with Netflix (NFLX) and Amazon (AMZN) will also help.

But the partnerships that matter most with an effort like this–cable company partnerships–are entirely absent. The simple fact is that cable companies like Comcast (CMCSA) and Time Warner (TWX) not only distribute the majority of the set-top boxes in the U.S, they also have a strong hold over content providers. Unless Google can convince them that their current business model is in need of something like Google TV, pushing the platform into the mainstream is likely to prove quite difficult.

[Image Credit: Time Magazine]

Adobe Co-Founder: We Never Abandoned Apple, but Apple Is Abandoning Us

John Paczkowski — Fri, 14 May 2010 10:00:55 +0000

A couple of weeks ago, Apple CEO Steve Jobs published “Thoughts on Flash,” a 1,671-word execration of Adobe’s Flash platform.

On Thursday, Adobe co-founders and co-chairmen Chuck Geschke and John Warnock followed suit with some thoughts of their own. Their eight-paragraph essay, “Our Thoughts On Open Markets,” mentions Apple only once, but when it does, it is to lambaste the company for its position on Flash, a position the two claim “could undermine this next chapter of the web–the chapter in which mobile devices outnumber computers, any individual can be a publisher, and content is accessed anywhere and at any time.”

I spoke to Geschke Thursday afternoon about the pair’s letter, Adobe’s (ADBE) new “We ? Apple” ad campaign and Apple’s (AAPL) stance on his company’s software. Below, a transcript of our conversation.

John Paczkowski: What is Adobe is hoping to get out of this new “We Love Apple/Freedom of Choice” campaign?

Chuck Geschke: We mostly are using it as a way to communicate with our customers and partners to assure them that we’re not going to change our strategy and to inform the rest of the community of what the pluses and minuses are of not supporting Flash on the iPhone and the iPad. Our customers, a large percentage of them, are the people who generate and distribute information and content, and for them they have one production stream that they use to do that and they’ve gotten used to the fact that we’ve worked very hard to open up the standards that we support so that we can offer them ubiquity of output on all kinds of platforms. So the fact that Apple is precluding that puts them in a tough position because it means that they’re going to have to create that content twice, and that’s not very productive. It’s certainly more expensive than what they do today. And as you know, the content industry is an industry under a lot of cost pressure these days.

JP: Both Apple and Microsoft have said publicly now that Flash has issues with reliability, security, and performance. Do you think those complaints are legitimate?

CG: I think they’re old news. Go to our Web site and read the actual facts about Flash. We enumerate the facts about Flash there as we see them. [Microsoft and Apple] may have a different set of facts that they believe are accurate. It’s up to you to decide. But I will tell you that the Flash version we’re coming out with now–where, for the first time with the Mac platform, we can actually get to the lower-level interfaces–is going to run like the wind. And the same is true on Windows.

JP: Shouldn’t Apple have the right to define the means by which apps for its own platform can be written?

CG: They absolutely have the right. No one says they don’t.

JP: Cross-platform mobile apps tend not to take advantage of native features unique to each device. What do you have to say about complaints that write-once-run-anywhere software results in subpar apps?

CG: Well, people don’t say that about Photoshop. They certainly don’t say it about Acrobat….I’m a little confused about what the real examples of that are. If there’s a problem with the performance of Flash as demonstrated on the iPhone, it’s because we haven’t been able to access the inner layers of hardware and software we need to to provide the kind of performance we can provide on other platforms. But that’s Apple’s choice, not ours. And now, of course, you can’t use it at all.

JP: So you don’t think write-once-run-anywhere is limiting at all?

CG: Not really. I mean there may be certain features in certain environments that you’ll want to do customization for, but the more you go down that road, the more you get the experience of HTML on the Web, where the kind of browser, hardware and OS you use determines what your experience. That’s because HTML is not well codified and standardized and people sort of roll their own.

JP: How much of Adobe’s revenue comes from Flash?

CG: I would share that number if we disclose it, but I’m not sure that we do. It isn’t a huge amount of revenue, but it is an extremely popular platform that all of our apps have the opportunity to exploit when it’s distributed everywhere. Flash tools aren’t the largest piece of our business, but it’s a significant one and obviously we feel it’s extremely important to our customers and partners who want to build third-party apps in an environment where they can, in fact, put them on a variety of devices without having to re-implement them.

JP: So could Apple’s exclusion of Flash hurt Adobe sales?

CG: I don’t think it will have a significant effect. As well as Apple is doing, if you look at the number of platforms out in the market and the number of release of new ones that will occur over the next six to 12 months, it’s going to be huge. That’s a much bigger population, and we’re just focusing on making our technology operate as effectively and efficiently as possible for it.

JP: In his “Thoughts on Flash” essay, Jobs accused Adobe of abandoning Apple. “Apple went through its near death experience, and Adobe was drawn to the corporate market with their Acrobat products,” he wrote. Is Job’s implication here a fair one?

CG: We never abandoned Apple. Apple now seems to be abandoning at least one aspect of our product line right now. No, we never abandoned them. We’ve always ported our apps simultaneously to both platforms. There have been times when Apple has changed its strategy on hardware or on operating systems that didn’t meet our product cycle, so there have been periods of maybe six months where we didn’t keep up with their latest release. But that’s our own business model; we can only afford to re-implement our products at a certain rate.

We have never, ever abandoned Apple and we don’t want to abandon them today. Everything you read in our new ad is true. I myself own probably between 8 and 10 Macintoshes — both laptops and work stations. I don’t buy PCs, I buy Macs.

JP: Why isn’t Flash an open standard?

CG: It is. What are you talking about?

JP: Flash is proprietary to Adobe. It’s not Open Source. Let me rephrase: Why isn’t Flash an open standard overseen by an open-standards body?

CG: As soon as Adobe acquired Macromedia, we openly published the SWF format and removed the requirement that you have a license to use it….No, we haven’t put Flash out to a standards body yet as we have with PDF and Postscript. But I wouldn’t be shocked if we do someday when it makes sense.

With the standards that we have built and made open to the entire world, we’ve tried our best to get them to the point where they’re mature enough so that we’re not doing design by committee. If you look at the amount of time it will take HTML5 to become a reasonably solid platform, it’s going to take a long time because there are an awful lot of vested interests trying to influence its development.

JP: Any thoughts on Steve Jobs’s claim that “Flash was created during the PC era–for PCs and mice”?

CG: What do you think an iPhone is? It’s a personal computer.

JP: One last question. What do you think of the iPad?

CG: I think it’s a neat thing. I personally have no particular interest in it; I’d much rather have a general-purpose computer. I think there’s definitely a market for that kind of product. We certainly know a lot of people that want to produce content for it and a large percentage of them are disappointed that they’re going to have to do that separately from the way they produce content for all the other devices they support.

PREVIOUSLY:

Adobe to Apple: You Wanna Hug It Out? Let’s Hug It Out!

Good Luck With That Alleged Antitrust Complaint Against Apple, Adobe…

Adobe CTO: Flash on iPhone Doesn’t Suck and Apple Knows It

A Possible Apple Antitrust Inquiry? Nothing to See Here…

Microsoft on Flash: What Steve Said

Adobe: We’re Done With You Too, Apple

Apple to Adobe: I Know You Are, but What Am I?

So Much for Flash on the iPhone

Adobe: Flash for Mac Is Getting Better–Really!