Archive for February, 2007|Monthly archive page
The benefits of due diligence
Filed under: Chicago GSB, NVC, Wikipedia, venture capital |
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Last night I helped out with the Chicagoland Entrepreneurship Center’s Fast Pitch Competition. The event was co-sponsored by The GSB, Kellogg, and De Paul and a bunch of my GSB classmates entered with hopes of winning the $5,000 prize. Each entrant in the contest had 3 minutes to pitch to a panel of 4 judges. I was the timekeeper in for the Web-Based Technologies group where one of the judges was Matt McCall of DFJ Portage Ventures and author of VC Confidential, a blog that I subscribe to. It was cool to meet him. It was also great to see GSB entry ParkWhiz win the Web-Based group and go on to win the whole competition. ParkWhiz wants to create a marketplace for buyers and sellers of parking spaces in urban areas where parking spaces can be hard to find.
I think the idea behind ParkWhiz has potential. However, ParkWhiz’ victory illuminates the flaws in these quick pitch types of contest, as well as the benefits of due diligence. This idea is not a new one – there is company out of MIT called SpotScout that is trying to tackle the same problem and has a mobile application that has substantial momentum. There is also a group called Spark Parking out of Northwestern that is taking a high tech approach to the same problem. There is likely room for multiple players in this marketplace, especially considering intensely regional nature of their products and services, however if the judges had not known about the other players (and they likely didn’t), the idea behind ParkWhiz probably seemed much more novel than it actually was. This reminded me of the coverage I saw of the CRV Entrepreneur Idol fast pitch contest held at Stanford GSB earlier this year where the winner pitched battery-less LED flashlights, a product that is already mass produced.
I’m not saying that these ideas wouldn’t have won if there was a diligence period, but as the New Venture Challenge is on the horizon here at The GSB, I am starting to realize the macro flaws inherent in business plan competitions, and lack of time for judges to research ideas is definitely one of them.
Fuzzy Zoeller sues IP address owner over Wikipedia entry
Apparently golfer Fuzzy Zoeller is suing the owner of an IP address over defamatory comments made from the address via Wikipedia. Strangely, the IP address is owned by Josef Silny & Associates, a Miami education consulting firm, which means that one of the employees of the firm edited the Zoeller entry through a work IP connection. 
The entry allegedly stated that Zoeller went public with his alcoholism and prescription drug addiction, but that when he made those statements Zoeller was “in the process of polishing off a fifth of Jack (Daniels) after popping a handful of Vicodin.” The statement allegedly also stated that Zoeler “detailed the violent nature of his disease, recalling how he’d viciously beat his wife Dianne and their four children while under the influence of drugs and/or alcohol.”
The complaint is available over at The Smoking Gun and makes defamation, invasion of privacy, and intentional infliction of emotional distress claims against the owner of the IP address. Wikipedia itself was not named in the complaint. The AP coverage of the story cited at Zoeller’s official site (www.fuz.com), quotes Zoeller’s attorney stating “courts have clearly said you have to go after the source of the information” which seems to be supporting the choice to sue the source of the edit, not Wikipedia itself. I have posted before on the DMCA and protections provided to Wikipedia-like entities in copyright infringement cases. It looks like the Communications Decency Act protects Wikipedia type entities from defamation suits, however I am not aware of any suits that have successfully targeted those that post defamatory remarks. If this suit is successful, it has potential to substantially change the Wikipedia landscape.
NetVibes continues to innovate
NetVibes has recently released rich text and pictures via through feeds and NetVibes2Go, which allows you to check feeds from your phone. I particularly like the Craigslist module, which allows you to monitor specific queries on the site through your NetVibes page. I definitely think this type of robust aggregation is the way things are going to head in the future and look foward to seeing how cool these modules will get. I have included a rich text screenshot below. Om Malik and Unwired have good reviews of the 2Go feature. I haven’t tried it yet myself.
Welcome StumbleUpon readers!
At first I was convinced that my site counter had screwed up and the 560 viewers my blog got yesterday was a glitch, as this is a big increase from the 3 to 7 I usually get. A little investigation through my FeedBurner stats shows that the visits are real and everyone is coming from StumbleUpon.com, where my blog currently on the top of their blog buzz list. I’d never heard of StumbleUpon, so when I saw this, I thought I was stuck in some weird spam site that could ID me and make me think my site was at the top of their list…but the paranoia subsided when I saw that, according to TechCrunch, StumbleUpon is legit and has 1.65 million members in 139 countries who “stumble” 4 million sites per day, much like Digg and Reddit. Apparently intelligrad saw my blog, liked it, and submitted it to StumbleUpon for other people to see. Thanks, and I hope all you Stumblers stick around!
Peer-to-peer lending…or not.
Prosper.com bills itself as a peer-to-peer lending network where borrowers post the amount of money they are looking to lend, the term of the loan they desire, and the max interest rate they want to pay. Prospective lenders then bid an amount and rate they are willing to pay, the lowest of which are pooled to grant the loan. Loans can be made in increments of $50 to $25,000 and borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Prosper charges a 1% fee on the loans made to borrowers and a 0.5% annual loan servicing fee to the lenders.
The concept is an interesting one, and the company, funded by Benchmark Capital and eBay founder Pierre Omidyar and piloted by Chris Larsen of E-Loan, has made nearly $40M in loans during the past 12 months. Tangentially, the site illuminates how comfortable people have become in transactions with strangers.
However, all loans on the site are unsecured, and Prosper is less clear about the fact that lenders deposit their funds into a Wells Fargo account and that Prosper actually makes the loan to the borrower and then immediately resells it to the “winning” lender…so it’s not really peer-to-peer lending at all. While lenders do get pretty good rates, Prosper sits in the middle and retains rights to dish the loan when borrowers default, and while this gets around the inevitable collective action problem that would arise with en mass lending, it can also leave lenders holding the bag on bad loans. It will be interesting to see how Prosper fares down the road.
Washington Post on Prosper: “Want to Loan Me Money? Here’s a Picture of My Dog.“
HBR on Two-Sided Markets
The October ’06 Harvard Business Review had a great article entitled “Strategies for Two-Sided Markets” ($6.00, also available via Lexis, etc.), which I found through the Lightspeed Venture Partners blog. The authors dig into the big picture structural issues that face two-sided market platform providers like eBay and Craigslist, including subsidization/pricing, winner-take-all dynamics, and competitive envelopment. It’s the best summation of the structural strategic challenges that face market platform providers that I have seen, but while it does a good job of addressing the structural issues, it glosses over the challenge of generating traffic in the first place, which is the largest challenge that these systems face.
To mix overused metaphors: if you build it well, will they come…or will you be a well built tree falling in a forest with no one around to hear you?
Shift Happens
My good buddy Jake sent me this presentation, which was originally written by Karl Fisch and was adapted by Scott McLeod. When I first watched it, I was thinking how I would love to see a footnoted version…and then I found it. Pretty powerful stuff. I bet this will be viral pretty fast.
I found the 1.5 exabytes of new information each year figure to be especially interesting in light of Schmidt’s 2005 5 million terabytes figure. 1.5 exabytes = 1.5 million terabytes, so we are now up around 6.5 million terabytes in the world, and Google has indexed approximately 500 of these, which puts them back down to .07%, but that’s up from .0034%. It seems to me that Schmit and Co. probably extrapolated their figures from the ’03 Berkeley report where the 1.5 exabyte figure came from, which I referenced in my .0034% post, but there I missed the 1.5 growth number. All 100 pages of the report can be downloaded in .pdf form here.
The Economist on Netvibes
There is an interesting article in last week’s Economist on Algerian native & French citizen Tariq Krim and his successful feed aggregator Netvibes. I am a huge fan of Netvibes and think that it works almost too well. I use it to scan the headlines of over 80 news sources and blogs throughout the day and while I am always up to speed on news, there is almost always something interesting to read that I haven’t seen yet from one of my sourced sites. It takes a bit of discipline to not scratch the itch and see what is going on all the time. I have pages devoted to tech news, tech blogs, VCs, entrepreneurs, traditional news, and one to random stuff. My favorite Netvibes feature is the way you add feeds – no messing with XML is required – just paste the site address into the add content window and the feed shows up in your page.
I am a bit surprised that I don’t see more people using aggregators, especially people like traders who have information intensive professions. The traders I know monitor sites that aggregate financial news in real time and are constantly watching CNBC, etc., but I don’t know any that use aggregators to track hot stories.
Anyways, the Economist article is worth checking out. It seems a little bizarre that Mr. Krim is a rising star in French politics because he has created a successful web application that generates very little revenue, but I guess you have to take what you can get. Also, Yahoo has always been rumored to be a potential purchaser of Netvibes, but with the recent release of Yahoo Pipes, this seems unlikely. From what I can tell, Google Reader is nearly as good as Netvibes, so they won’t be buying either. It is unclear where Netvibes will end up down the road. They probably need to start making some money soon though…
Edit: In case the folks at WebWorkerDaily are interested…my full bio is viewable via LinkedIn .
Google in on the Tiffany v. eBay fray
A little digging revealed that Google entered the Tiffany v. eBay fray as an interested party on the side of eBay. Google attorney Ashok Ramani, partner at San Francisco litigation boutique Keker & Van Nest, applied to practice in New York State on the case (pro hac vice). Court approval of his involvement and admittance to practice law in New York is below. As is shown in the time line below, the case was referred to a magistrate court judge for settlement negotiations on 11/7/06 and the parties had a conference call with the magistrate on 12/20/06. Maybe this is standard puffery to get in good graces with the court? [Edit: turns out it is required] Strangely, the one news source that picked up on the settlement referral was this story in Women’s Wear Daily. This is a bit bizarre in light of the press coverage the case got in 2004 when it was initiated and has received intermittently since. [Edit: not bizarre at all - every civil suit in SDNY that is seeking monetary damages must go through settlement negotiations]. No news sources reported on Ashok Ramani’s involvement in the litigation.
- 6/18/04 COMPLAINT against eBay Inc. filed by Tiffany (NJ) Inc., Tiffany and Company
- 6/18/04 SUMMONS ISSUED as to eBay Inc.
- 7/15/04 AMENDED COMPLAINT filed by Tiffany (NJ) Inc., Tiffany and Company.
- 10/1/04 ANSWER to Amended Complaint with JURY DEMAND filed by eBay Inc.
- 8/11/05 MOTION to Amend/Correct Answer to Amended Complaint filed by eBay Inc.
- 11/3/05 NOTICE OF CASE REASSIGNMENT to Judge Kenneth M. Karas. Judge Naomi Reice Buchwald no longer assigned to the case.
- 3/31/06 ORDER denying 14 Motion to Amend/Correct Answer.
- 4/14/06 MOTION for Ashok Ramani to Appear Pro Hac Vice. Document filed by Google, Inc.
- 5/4/06 STIPULATION AND ORDER; that the trial of this case shall be by the court sitting without a jury.
- 5/11/06 ORDER granting Motion for Ashok Ramani to Appear Pro Hac Vice.
- 11/6/06 Trial will begin on 5/14/07. Plntfs’ response to motion in limine must be submitted no later than
- 11/20/06 Deft’s reply is due no later than 12/15/06.
- 11/7/06 ORDER REFERRING CASE TO MAGISTRATE JUDGE. Order that case be referred to the Clerk of Court for assignment to a Magistrate Judge for Settlement. Referred to Magistrate Judge James C. Francis.
- 11/20/06 OPPOSITION BRIEF TO MOTION IN LIMINE filed by Tiffany
- 12/15/06 REPLY MEMORANDUM OF LAW in Support re: MOTION in Limine filed by eBay Inc.
- 12/20/06 Minute Entry for proceedings held before Judge James C. Francis : Telephone Conference held on 12/20/2006
Tiffany & eBay settlement?
I did some digging today on the status of the Tiffany v. eBay lawsuit – the case is in Federal District Court in Manhattan, home of the handy PACER system that allows public access to court documents. I think this is where the gossip sites get their spicy celebrity court documents, although I didn’t see a mug shot link, which is unfortunate. Anyways, the case has been bogged down with answer amendments and motions in limine since 2004, but on November 11, 2007 this document was filed:
I spoke with some clerk friends who are generally knowledgeable about litigation issues – their interpretation was that while this is an indication that a settlement is possible, the fact that a magistrate judge is conducting the negotiations indicates that a settlement may very well not happen. However, as I mentioned in my previous post, if any damages are awarded via trial or settlement, any corporation that has had counterfeit goods hawked on eBay could potentially see some form of a payday if they were to follow suit. The fact that eBay is considering a settlement at all is pretty interesting.
Edit: eBay is at $33.51 today (2/9/2007). It will be interesting to see if this has any impact or if it is already baked in.
Edit 2: Stop the presses. It looks like SDNY has a mandatory settlement negotiation step for civil suits seeking monetary damages, so this doesn’t mean boo. Bummer
Tiffany & Co. v. eBay, Inc.
Last week eBay released some pretty good preliminary numbers for Q406 and 2006 as a whole:
- $6B in revenues
- $2B in operating income
- $3.5B in cash
- $1.7B in stock repurchases
- 220M eBay users, 41M new accounts
- 133M PayPal users, $38B in payment volume, 37M new accounts
- 171M Skype users, 32B minutes of dialog
Those are some pretty stunning stats. The 220M eBay users really blows me away.
There was no mention in the eBay call or in the press about the lawsuit Tiffany’s filed against eBay back in 2004, which eBay said in their Q305 10-Q was “scheduled for January 2007.” Tiffany’s is suing eBay for damages incurred from sales of knock-off Tiffany’s jewelry being sold on eBay and want to limit the number of Tiffany items any one seller can have for sale at one time. While a ruling in the favor of Tiffany’s would probably not even register on eBay’s radar screen (there are only 22 Tiffany & Co. items currently for sale on the site), it is likely that a avalanche of money hungry plaintiffs would follow. If any damages are awarded, hypothetically, any brand that has ever had a knock-off item sold on eBay would stand to get some cash.
In 2001, the landmark case of ecommerce, Hendrickson v. eBay, the court found eBay to not be liable for stolen or counterfeit items sold on its site. The site was found to be in the safe harbor of the DMCA, and differentiated from the classic case of the flea market proprietor found liable for selling stolen goods. eBay was found to be in the safe harbor, including robust terms of service and links for users to flag inappropriate content. At the end of the day, Hendrickson required manufacturers to be on notice and proactively search and flag stolen goods on eBay. This was a big change from the flea market paradigm of the past, but there were a lot of strange things happening in 2001. Conversely, after Hendrickson, Napster & Grokster came through, which were about copyright but pondered a similar unchartered realms of e-commerce and trade. Napster couldn’t keep 100% pirated work off the site per court order, and were forced to shut down.
There currently an interesting stirr with YouTube, where it seems NBC and Viacom have not reached agreeable terms with YouTube since the Google acquisition and are ordering 100% take down compliance. YouTube has not yet responded to either and has not taken any videos off their site. It is possible that they may actually be able to comply 100% if necessary. If eBay were put in a position where they need to comply 100% as well, they would be put in an extremely difficult place, because while it is easy to recognize a NBC TV clip, it is not so easy to recognize a knock-off Tiffany & Co. ring by looking at a grainy photograph. This distinction may be what in the end saves eBay and sinks YouTube like Napster before it. However, while Hendrickson and Napster both made trademark claims, they were overshadowed by the copyright issues in the cases which call to the DMCA. Tiffany’s has made a claim strictly within trademark, so it will be interesting to see how things turn out. eBay’s 10-Q for Q406 should be out soon. If they settled, expect a ton more suits, and if it’s going to court, it will probably be another 3 years before we know anything!
Google up to .01% of the world’s information
Marissa Mayer did a phenomenal job of fielding questions after her very informative talk today at the Kellogg Technology Conference. I was able to sneak in a question during the session and asked her if she could ballpark the number of terabytes that Google had indexed to date – her guess was 500. If she is right, then they are up 330 terabytes, or 194%, from 170 where Schmidt thought they were 16 months ago. That’s pretty good! However, if you take all of the numbers from Schmidt’s speech as valid, specifically that 5 million terabytes of data exist, then they have now organiz
ed .01% of the world’s information, up from .0034%. Interestingly, Marissa spent not an insignificant portion of her talk focusing on the acquisition of offline data via projects like Google Books, Picasa, etc…
As you can see, I have convinced myself that 500 terabytes, in the scheme of things, isn’t that much. This may be crazy, especially considering I don’t really trust my conceptualization of how much data is in a gigabyte, let alone a terabyte. However, the fact that 1TB servers are commonplace and Apple announced last month that they were shipping 10.5 terabyte servers (for a mere $12,399) makes me think I’m not too far out in left field on this. Pictured to the left is the 200 terabyte GLOW system that the University of Wisconsin physics department has put together. Yes, the information Google has organized is likely a larger percentage of the “useful” information out there. Yes, what you take your definition of “information” to be makes a huge impact on this analysis. Yes, the information Google has indexed may be on the “light” side of the spectrum. And yes, these servers I’m talking about are HUGE. But the fact is, all of the information that Google has indexed could be put onto roughly 48 Apple Xserve RAID servers, or 2.5 of these behemoths.
The question that follows for me: why is Google building all these massive computing centers if all of their information can be stored in the area the size of a large walk in closet? Tthe answer t
o this was covered also covered by Marissa in her presentation: she mapped out what happens when you run a search on Google and showed how Google searchs hundreds of millions of sites in less than a second. So these data centers are needed to get nearly instant access to an amount of data that could be stored on 48 commercially available computers.
Edit: If google continues at the 194% growth rate, they will hit 5MTB in roughly 28 years…that’s a lot better than 300 years…
Kellogg Technology Conference 2007
I went to a great conference this morning that Kellogg put on, the theme of which was “The Digital Lifestyle.” The keynote speakers were Robert Dotson, CEO of T-Mobile; Marissa Mayer, VP of stuff at Google; and Kevin Johnson, Co-President of Platforms & Services at Microsoft. I had to leave before Mr. Johnson’s speech, but he clearly has the best title. “Co-President” is pretty great.
Dotson’s talk was very interesting. He has had a bizarre career trajectory: Kellogg ‘89, marketing for PepsiCo, Senior Director of Marketing KFC (not a typo – KFC as in Kentucky Fried Chicken), VP Marketing for Western Wireless, Executive VP Sales and Marketing T-Mobile, COO T-Mobile, President T-Mobile USA, CEO T-Mobile USA. He actually made a great argument that selling cell phones was very much like selling chicken. He also said that he sees no need for GPS in phones, he doesn’t think video or music in phones will go anywhere, and has no enterprise focus. Although his arguments for these positions were pretty weak, I don’t really want video or music on my phone, so maybe he’s on to something. I do, however, think GPS and maps have huge potential.
Mayer’s speech was very good as well. She gave a good 10,000 foot view of Google (literal and physical) and dug deep on a few interesting areas of Google, focusing, interestingly, on getting more offline data online. She was also extremely strong in the Q&A and took 15 – 20 tough questions. I was able to sneak one in and asked her how much data she thinks they have indexed to date – she said 500 terabytes…more on this in another post.
Kellogg is a nice, btw. They have aeron chairs, branded bottled water, and a pretty great view. Hats off for putting on a great event!
Red Hat and the Linux Revolution
I just read this case for my Technology Strategy class, and it is by far the best business school case I have come across to date. It gives a great overview of the development of the Linux ecosystem, how Red Hat came out of the mix, and the business challenges that face Red Hat post-IPO and that face all businesses that base their model on open source software. I have no idea if it is accurate and plan to do some diligence on it, but it is really a good read. The ironic thing is that the Harvard Business School Publishing is the antithesis of open source and rules its monopoly of the business school case market with an iron fist, thus, I can’t post the full text of the article here. Granted, there are a few differences between operating systems and publishing I guess. You can download it for $6.50 though. Sort of like i-Tunes for business cases…
Freshwater Venture and G2 SwitchWorks
Yesterday afternoon I had the opportunity to speak at an employment seminar for the CS department at IIT. It was an interesting event and I hope we were able to give some CS undergrads ideas on getting traction with potential employers. I was by far the least qualified to be speaking, but I harped on the importance networking and creating an “online identity.” The other speakers were from Motorola, Merkle, and G2 SwitchWorks. Everyone was great and the event served as an interesting introduction to G2 SwitchWorks for me, which is a very interesting company. Check out this management team…I’m guessing getting funding wasn’t an issue. Anyways, I met Roger Liew, CTO of G2, at IIT. He clued me into FreshWater Venture, which “maps inland venture activity.” It’s really cool to see all the action that is going on away from the coasts! Previously the only companies on the list that I was familiar with were Vibes, FeedBurner, and PrepMe. The list is very robust and they even have an Orbitz family tree showing all the companies that have spun off from it, including G2.
Google Earth, NASA, and the Mechanical Turk harnessed in search for Jim Gray
There has been an incredible outpouring of support from the tech community to aid in the search for missing Microsoft researcher and tech pioneer Jim Gray who has been lost at sea off the coast of San Francisco for four days. Gray was the first person to receive a PhD in Computer Science from Berkeley (’67 – ’69). Google has
directed the Google Earth satellite technology towards the search and NASA has donated the use of airplanes with high-end image technology. The images these technologies have produced have been divided into groups of 5 and posted onto Amazon’s Mechanical Turk service. There are currently 4,000 groups of 5 available for review, but I am guessing they will all be chewed through in a number of hours. The story and MTurk link is Diggable here – hopefully it will be on the front page soon.
Unfortunately, the images look like this:
Apparently Gray’s boat will show up as a white block of approximately 4 pixels wide and 10 pixels long with sharp edges. There is a lot of noise in these, but hopefully someone will find something. I’m going to look through a couple now.
Edit: 150 groups of 5 have been knocked off in 5 minutes. Pretty cool. This has to be the best use of the MTurk to date.
Edit 2: An hour later and it’s popped up on the front page of the Tech section of Digg. 3600 HITS remain, but I think they’ll start to go fast now. Hopefully Arrington and the high profile blog and news sites will pick up the MTurk story soon.
Edit 3: A day later, and Arrington finally got a a post up about this. The comments in his post make it sound like all of the original batch were completed, but NASA photos are now up. This is what these ones look like, the colored dots representing how big a boat would be in the images:
Edit 4: It seems like they keep loading photos into the Turk – the counter is back up to +4000. There are also +900 HITS grouped separately that are password protected and designated to be reviewed by “qualified experts.” Maybe the ones that are flagged by non-experts in the normal batch are passed to this group for expert review? Pretty cool. Good luck!
