robwebb2k

Jason Calacanis’ new project Mahalo is up and running, the goal of which is to “hand-write the top 10,000 search terms.” There are 40 Mahalo employees writing search results today – they have 4,000 results written now and hope to have 10,000 by the end of the year. The top 10,000 searches apparently account for 1/4 of search engine queries and the majority of search advertising. Calacanis has raised enough money to “run his company for four years with no revenue.“

OK. I’m sure if you were to ask Calacanis he would say that the big difference between this project and sites like Yelp and Wikipedia is that only the certified guides craft Mahalo results. This means that for Mahalo to be successful, there is some advantage to paying 40 people to do what tens of thousands of people intimately familiar with a vast array of subjects will do for free. I don’t see it. Maybe I’ll eat my words on this one. Sequoia, News Corp, and Elon Musk can’t all be wrong, can they? That said, I do understand why they’ve chosen a Hawaiian theme with their design and logo: surfing sells.

Prediction markets have gotten more and more mainstream over the past several years with companies like Tradesports.com leading the charge. I posted a while back about the recent trend in web applications towards harnessing crowd wisdom. Somehow I missed Chicago based Inkling Markets in that post. Inkling is a YCombinator participant (Winter 2006) that allows users to create customized predictive markets. I recently got a good look at the Inkling product through the Chicago GSB New Venture Challenge, where one of the participants organized a market through Inkling where participants could place bets on who would win the competition. It wasn’t an ideal setting to see the power of predictive markets because every participant had an incentive to jack the price of their own stock to improve the perception of their team and product. Markets like these work best when knowledge about a result or situation is dispersed through a large group of people and the only incentive participants have within the market is to guess the eventual result. However, it was very cool to see that a tool like Inkling is out there and easy to set up.

The Inkling guys spent a lot of time on their UI design (everything looks really nice) but I was forced to do a lot of calculations on my own to figure out if I should buy or sell. The math is generally straight forward (e.g.: User #1 bought stock A at $X, it is now at $Y, if #1 sells they will get $Z) but things can get extremely complex when users short stocks (which they have to be able to do for the market to be accurate) and when they buy and sell the same stock at multiple prices. I’m guessing this is what the Inkling guys are working on. A big decision they need to make is whether to show gains/losses relative to recent changes in stock price or relative to the purchase price…which is again complicated when you have multiple purchase prices and purchase times…

I think predictive markets are here to stay and their potential uses have yet to be fully discovered. One of my professors recently wrote this interesting paper about possible uses of predictive markets in corporate governance scenarios. Who knows if this is an area where markets will spring up, but many, many companies use prediction markets internally to monitor anything from product launch timelines to option prices. However, many of these uses never see the light of day since the markets can predict bad results which the companies generally want to control/spin. Anyways, good luck to the guys at Inkling! Their blog is here if you want to stay up to speed on their progress…

The last time I posted about Last.fm and Pandora, they were worried about being run out of business by a rising RIAA fee structure. Last.fm and Pandora are certainly still vulnerable to such rate hikes, but it doesn’t seem to be a big worry to CBS, who reportedly is purchasing Last.fm for $280m. I recently started using Pandora because I think the music stream seems to be a bit more consistent – Last.fm cuts out for me fairly consistently. However, it seems that social network side of Last.fm was the big factor in the price. Pandora, on the other hand, has a far less robust social aspect to their service but has many more device options.

Last.fm built their network in a very intelligent manner – the network is a sidenote to a very effective service. Last.fm works great for anyone who comes to use it…and by joining the network and tuning your “station” to your likes and dislikes the service only gets better. It is the second step that built huge value for the service.

Today’s Wallstrip interview is with Feedburner CEO Dick Costolo. I recently posted about the Feedburner/Google acquisition rumors and how it would be a big event for Chicago if it were to go through. In his interview, Dick said he is long on Chicago but thinks “it needs to do something about its technology environment.” Interesting…I wonder what he has in mind.

When I tried to embed the Wallstrip video here, but it didn’t work (the embed link went to this dead link: wallstrip.cbsnews.comtheshow). Wallstrip was acquired by CBS on Wednesday, and now there are lots of dead links to Wallstrip out there, all with CBS in them, including the one on Wallstrip investor Fred Wilson’s blog linking to the acquisition announcement. Ironically, in his Wallstrip interview Costolo also said he was long on CBS…

From the FT:
A hedge fund investing in old violins has been pledged $11m (£5.5m) in the latest sign of investor willingness to put money into offbeat assets that were previously the exclusive domain of collectors and enthusiasts. Florian Leonhard, a London-based violin dealer and restorer, is aiming to start investing the Fine Violins Fund once it has raised $50m, with a target of returning 8 per cent to 12 per cent a year. The fund is perhaps the strangest in a series of new asset classes being created by investors trying to avoid stocks and bonds. Hedge funds have been set up specialising in wine, art, shipping and even football players, demonstrating the appeal of assets that historically have not been correlated with financial markets.

Wow. That guy better get some good insurance. Joshua Bell’s violin is nearly 70 years older than the United States and is worth $3.5m. Lots of questions come to mind:

1. How many uber expensive violins are out there?
2. If this is going to work, why stick with violins?
3. Is this guy is going to buy violins and just lock them up? Or let artists use them and get lots of insurance?
4. What impact will this have on the violin market? The market may be small enough where supply is noticeably cut and prices inflate…also very doubtful the actors are rational…
5. How liquid is the market? If I remember correctly, Bell’s violin has been owned by less than 10 people.
6. At what point is something just a crazy idea and not a hedge fund?

TechCrunch is confirming a $100M term sheet between Google and Chicago based Feedburner, backed by Chicago based DFJ Portage. If this deal goes through, it will make Feedburner the biggest Chicago tech success in recent years…possibly the biggest since Orbitz? Also, assuming Feedburner stays where they are, it will make Chicago a significant non-Mountainview engineering location for Google.

Either way, Feedburner is great. I “burn my feeds” with them for this site and use their site to monitor my blog traffic. I’m a bit doubtful that Google will make $100M in feed based advertising from them, but history has shown that they don’t seem to care about such things.

My good buddy George, who works for a mid-sized independent ski manufacturer, just told me about an interesting company called Shopatron. Shopatron runs the e-commerce transactions behind branded manufacturer websites like Callaway, Brooks, and Diadora…companies that run the risk of upsetting retail partners by selling directly to consumers and cutting retailers out of the loop. Shopatron runs transactions from partner sites, “sells” items to the consumers at the manufacturer suggested retail prices, then puts items out to bid via the web to retailers within the consumer’s region. The retailer that is in the consumers region that has the item in stock and is willing to sell it at the highest price gets to make the sale. If no retailers have the item in stock or want to sell, the manufacturer sells the item directly to the consumer.

For example, Spy makes sunglasses and ski goggles…they sell goggles and glasses on their site, but the transactions are processed by Shopatron. If I buy a pair of ski goggles for $150 via spy.com, Shopatron processes my order and puts it out to bid to Spy retailers in the Chicago area. If none of them pick it up, I get the item directly from the manufacturer.

Very cool idea and Shopatron has a very solid portfolio of companies.

Seth Goldstein posted, in his usual bizarre fashion, about the billions of cookies that lie behind the billions of dollars which make up the recent ad network acquisitions. Seth’s venture AttentionSoft is trying to empower users to take control of their “attention” (embodied in cookies) because, as these acquisitions show, their attention is very valuable.

While I admire Seth’s unique take on the market for attention, I think the more interesting issue in play here is the fact that these networks thrive on the fragile world of cookies. Banner advertisements generally have miserably low CTRs, although the networks that serve banners argue that they can increase clicks by “targeting” ads served to users. This targeting is done through cookies. If a user navigates to a site that contains a banner ad from one of these networks, the ad “sees” the cookies in the users browser, and if it recognizes any of them it can use that data to serve up a relevant ad. For example, if a user is shopping for a car, he may visit several car manufacturer sites. If Ford is using an ad network, they may try to plant a cookie in the users browser so that when the user navigates to a site that serves ads from the network they run ads in (NYTimes.com, whatever), the site will see that the user has been to the Ford site recently and will serve up an ad for Ford. Additionally, some ads themselves can plant cookies. These ads analyze the content of the page a user has navigated to and plant a cookie that contains information about the ad and the context the user saw it in. You likely have hundreds of cookies in your browser right now – to see them go to Preferences and then look under Privacy or something similar. Some of these cookies are useful and enable autofill or autologin features you likely agreed to, but the majority are likely not.

This system hinges on the cookies making it into the users browser in the first place. Different browsers have different default options for cookie acceptance. Firefox currently only has one option: “Accept cookies from sites.” A user with this option selected will see targeted advertising as they navigate around the web while someone who doesn’t select it will see no targeted advertising. Safari’s options are: “Always,” “Never,” and “Only from sites you navigate to (for example, not from advertisers on those sites) .” Internet Explorer has a scope of options from “Low” to “High” to “Block All Cookies.”

The way in which these options are framed has a large impact on how users choose between them (i.e.: the fact that the “Block All Cookies” is past the “High” security setting may make a user feel like an extremist for selecting it). Similarly, the default security setting on a browser like Internet Explorer, which tends to be used by less savy web surfers, will have a huge impact on how cookies are logged. Now that Microsoft has acquired aQuantive, which relies heavily on cookies to target ads, you can bet that the default IE option will be to allow cookies.

Comscore has done lots of interesting research on user cookie deletion from the perspective of traffic measurement systems. Their study states that 3 in 10 internet users delete their cookies every month. This seems quite high to me. At the end of the day, for the vast majority of internet users the default configuration of a browser has the most impact on cookie acceptance and retention, and with browser makers moving into the advertising world, you can bet that default browser settings are going to become more and more cookie friendly.

In the past two days, two people close to me have sent me links to WhiskeyMilitia.com. It’s a slick e-commerce site site targeting the Shaun White generation that follows the woot.com promotional format of putting one heavily discounted item on sale at once until it “sells out.”

About a week and a half ago I wrote about the Liberty Media purchase of Backcountry.com. Backcountry.com runs the extremely successful SteepandCheap.com, which also employs the woot.com promotional format. Backcountry.com also operates several “branded” outdoor equipment ecommerce sites (see Tramdock.com and Dogfunk.com).

Well, it turns out WhiskeyMilitia is a Backcountry.com site too. These sites are great examples of effectively e-commerce branding. Kids who like to think they’re skier punks (of which their are a surprising number) want to buy stuff from a site that looks like WhiskeyMilitia…overgrown kids like myself like to think we’re big mountain skiers want to buy stuff from a site that looks like Tramdock. Burton Snowboards has always done extremely effective branding within this same consumer group. Burton, just like REI, EMS, LL Bean, Columbia, Patagonia, Arcteryx and many other outdoor brands before it, was super popular its early years. However as many brands tend to evolve, the first wave of popularity was quite strong but it quickly waned when the mavens started moving to less mainstream brands. Burton broke the mold in this group and was able to quickly create several affiliate brands (R.E.D., Anon, B by Burton, Gravis, and newly acquired Channel Islands) which have helped Burton retain market dominance…through brands intentionally segregated from the mother Burton brand.

Backcountry has taken the effective woot.com promotional strategy and combined it with effective branding that is 100% within website design. Equipment ordered from Tramdock, Dogfunk, and WhiskeyMilitia all come from the same warehouse outside of Salt Lake City and in many cases the equipment is the exact same stuff, but the design of the site on which it was purchased makes a huge impact on the buyer. This type of branded e-commerce is certainly not limited to outdoor equipment retail and will soon become the norm on the web.

Well, it looks like they didn’t settle…and things have gotten ugly. Apparently Tiffany & Co. tried to include infringement of 11 additional trademarks on the eve of the trial, after nearly three years of discovery. eBay filed a motion in limine to exclude the trademarks from the litigation:

Defendant eBay, Inc. (“eBay”) respectfully submits this memorandum in support of its motion in limine to preclude plaintiffs Tiffany (NJ) Inc. and Tiffany & Company (collectively, “Tiffany”) from introducing evidence at trial concerning eleven Tiffany trademarks identified for the first time on the eve of trial….Despite having solely relied upon the seven trademarks mentioned in Tiffany’s Complaint for nearly three years, on April 2, 2007, in its Proposed Findings of Fact, Tiffany revealed for the first time its intention to seek damages with respect to eleven additional trademarks that have never been a part of this proceeding. Of the eleven trademarks that Tiffany is attempting to put into play, four relate to Tiffany’s packaging, advertising, and collateral materials, two relate to the word ATLAS, and five relate to ELSA PERETTI, PERETTI, and PALOMA PICASSO branded merchandise. Shortly after learning of Tiffany’s improper attempt to end-run the Federal Rules of Civil Procedure by, in effect, amending its Complaint on the eve of trial and long after the close of discovery, eBay requested that Tiffany withdraw these trademarks from its Proposed Findings of Fact and from this proceeding. Tiffany refused, asserting instead that it intends now to include these newly-introduced marks in this action and to seek statutory damages on each of them…Not only has Tiffany unduly delayed in attempting to inject the eleven new marks into this lawsuit, but its pretrial submission is highly prejudicial to eBay. Significantly; Tiffany’s newly asserted marks raise the specter of an increased damages award, as Tiffany has requested statutory damages of $1,000,000 per counterfeit mark per type of goods or services.

Tiffany’s opposed the motion.

OK so I’ve fallen for the sneaky tricks of the Southern District of New York once already…and later learned that all cases there are referred to a magistrate judge to discuss settlement before going to trial. Are all cases there referred to magistrate judges twice? This I don’t know, but I know it’s happened again with this one.

This time I uploaded the doc to scribd.com here…might get some attention there, which could be interesting. Sorry I can’t embed. WP won’t let m.

A post by Guy Kawasaki directed me to Slideshare.net’s “World’s Best Presentation Contest” winners…some of my readers will recognize the content of the winner…

1st Place

2nd Place

3rd Place

Guy: “The commonality you’ll see in these winners is big fonts, big graphics, and a ’storytelling’ orientation. These are three crucial qualities of a good presentation.”

They all also have more than 50 slides, which go against Guy’s 30/20/10 rule…but maybe he thinks that is just for VC pitches?

Alarmclock is reporting today that Liberty Media is buying out Backcountry.com. I am a huge fan of Backcountry.com. They have amazing selection and customer service and have tons and tons of affiliate relationships with other outdoor gear retailers. If you search for any sort of outdoor gear online, virtually all of the retailers you see are actually Backcountry affiliates. As the alarmclock article mentions, they are based in Park City, UT, started from scratch in ‘96 and have done a great job with their entire business, including rolling out specialized sites like tramdock.com (freeride/big mountain skiing) and steepandcheap.com (highly addictive woot.com format for outdoor gear). Just last week I got an amazing deal on a high powered headlamp on steepandcheap. Stay away from that site if you like gear – it is seriously addictive! I know a bunch of folks that work at Backcountry.com and they all love it.

Apparently Jim Holland wrote this to his employees about the deal:

This past Saturday, John and I completed a transaction for the sale of the majority of Backcountry.com. Simultaneously, The Gods delivered an epic powder day at The Bird, so we consider that to be a good omen. Our new partner is Liberty Media , a large holding company that owns interests in a wide array of cutting-edge ecommerce and media companies.

John and I remain significant investors in Backcountry.com and we will remain in our positions. Liberty is an appealing partner for many reason, but first and foremost we liked the approach they use where they leave companies like ours to run ourselves. They don’t intend to make any personnel changes and they won’t be sending any employees or managers to us; no suits roaming the halls. The company will run just as it has, with the same people and the same goals and vision. Liberty’s management team loves where we’re going and they’re psyched to help us get there.

Congrats to Backcountry! Hopefully they can stay the course and continue to provide great service and great deals on great gear. I will definitely continue to be a loyal customer so long as this is the case.

I had the opportunity to moderate a panel discussion this afternoon, hosted by my school’s JD/MBA association, entitled “CEO Hiring, Firing and Compensation in a Post-SOX Private Equity Boom.” The panelists were Professor Steven Kaplan (GSB), who testified to Congress about CEO compensation and HR 1257 in March of this year, Professor Douglas Baird (Law), the global authority in the academic world on bankruptcy and reorgs who has written on the importance of CEO hiring and firing vs. compensation structure, and Professor Todd Henderson (Law), who is delivering the annual Chicago’s Best Ideas lecture tomorrow and will argue that CEOs are actually underpaid in today’s marketplace.

The discussion was extremely interesting and focused on why CEO has reached the levels it has today, whether it is deserved, and whether it is societally beneficial for it to continue to increase. In short, Kaplan thinks in large part that CEO pay is not overinflated and bases much of his argumenton the fact that the market for top managerial talent has gotten more expensive thanks to hedge, private equity, and VC fund payouts. Henderson’s beliefs that CEOs of public companies are underpaid are in part based on the fact that SOX has increased CEO liability and scrutiny, and that their payscale has not adjusted accordingly. Baird generally believes that too much time is spent on compensation package structure and not enough on picking the right person to do the job.

We were limited to an hour and did 15 minutes of Q&A so we were really only to brush the surface of the issues. I was hoping to be able to hear their thoughts on the “upward spiral” theories (aka: the Lake Wobegon effect) of CEO compensation which posit that since all major CEO hires involve compensation consultants, and every company hiring wants their CEOs to be compensated in the top 1/4 or 1/3 among their peers, the comp packages are blindly increasing as every new hire raises the bar…I guess we’ll have to get to that next time.

This is pretty cool. As I’ve posted before, I think Red Hat is a very interesting company and Linux is generally fascinating.

GigaOm, the best telecom blog around, has the scoop on the most recent development of the drama between the major carriers v. Iowa telcos & the freeconference.com ilk of service providers. Apparently the FCC told the major carriers to stop blocking and or artificially degrading the quality of calls to the Iowa services set up to arbitrage intercarrier compensation rules.

“If you have a dispute about the intercarrier compensation rules, you can file petitions, and come to the commission to get redress,” Martin said. “But you can’t just stop letting consumers make those calls.”

Muy interesante. These calls allegedly cost AT&T more than $250 million this year already. The intercarrier compensation rules were first made in 1984 post AT&T break up. The FCC decided to “fundamentally re-examine” the rules in 2001 and have been debating how to do so ever since.

I read a Valleywag story earlier today about how Digg was banning users that posted a hexidecimal number used to unlock DVDs. The Valleywag story noted that users were getting upset because Digg never bans anyone and the way the site has built community is through the premise that what gets voted to to top or voted down from the top is completely up to the users. Digg admins didn’t interfere…until today. My buddy Joe just gave me a heads up that Digg is complete chaos right now. Every post on every front page either contains the hexidecimal number or is about the number.

It will be interesting to see if they can recover from this one. They have built a huge loyal user base, but they may be at the point where they can loose the diehards and keep flurishing. The only issue they may have if that is the case is the fact that their diehards are hackers who may just mess with them for a long, long time.

Maybe Stumbleupon will get an exit just in time? Their userbase of bizarro but very docile 38 year old single female gardners in Sioux City, Iowa never looked so good.

Update: Digg founder Kevin Rose posted to the Digg blog last night that the users had spoken and that Digg would no longer delete posts about the encryption key. So the Digg users won, and Digg has basically told them that posts about hacking and stealing content will not be moderated. I think this is going to hurt Digg in the long run, especially if they ever want to sell to a larger PR sensitive media company.

TechCrunch today points to a Business Week article that indicates settlement talks are not underway between YouTube and Viacom and that the Google is going to fight this one out with their ninja trial team. Like Napster tried to do before them, YouTube will be banking on the DMCA in their defense.

It will be extremely interesting to see how closely YouTube will stick to the Napster trajectory. When Napster was sued by RIAA, RIAA asked the district court for an immediate court ordered injunction barring Napster from facilitating all peer-to-peer swapping of copyright protected material. RIAA argued that Napster was causing the record companies irreparable harm and waiting until the case went to trial would be too heavy of a burden for the companies to bear. The court agreed with RIAA and ordered Napster to block 100% of copyright material from their system. They were able to keep approximately 99% off their system using music “fingerprint” technology (now SnoCap) but weren’t able to maintain 100% compliance. Thus, they broke the terms of the court ordered injunction, were ordered to shut down completely to comply, and were never able to full argue the DMCA in court.

If YouTube follows this same trajectory, Viacom will argue that YouTube is causing them irreparable harm now and ask the court for an injunction. If the court grants the injunction sticks to the 100% threshold used in the Napster injunction, YouTube will then have to keep 100% of Viacom content (Comedy Central, MTV, etc.) off the YouTube system and if Viacom can spot one instance of their content on YouTube after the injunction is granted, the courts will order YouTube to be shut down to comply.

Granted, the 100% threshold in Napster was extremely harsh, and it is very likely that a court would see a far greater “legitimate use” in YouTube than they saw in Napster, but either way, there will be some very interesting drama down the road.