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[StrongList] Whats an important startup lesson you learned from launching truemors and if you were ever forced to compete against Facebook what would you do?

[Guy] If bloggers say negative things about your idea, it doesn’t mean you’ll fail. If bloggers say good things about your idea, it doesn’t mean you’ll succeed. To compete against Facebook, I would do several things: a billing system for developers to charge for applications, POP access to the site’s internal email messages, and a primary emphasis on video.

• a little bit about Guy Kawasaki on wikipedia
• Guy Kawasaki’s blog

Backpack was originally a personal organizer. Recently 37signals added some new features and changed the focus of Backpack to a company Intranet.

When 37Signals released more information about the changes to Backpack on their blog, the feedback wasn’t all positive it was mixed bag.

Now why would 37Signals change the focus?
Dont know? Read a previous post for a hint.

Think about it, if they change the focus of Backpack from a personal organizer to a company intranet they can charge more for it.

People will pay for a web service if it helps make them money.
A personal organizer, while useful, won’t help you make money. A tool that helps your company will.

Before the change Backpack had 3 plans, and charged either $5, $9, or $20 per month.

Take a look at their new fee schedule.

Would you pay $49, $99 or $149 for a personal organizer? Probably not. Would you pay that much if you used it as a business tool and it helped you make money?

Ofcourse.

Seesmic is dubbed as a twitter for videos. That’s a great tagline but does it work in practice?
Im on the fence.

Fundamentally I don’t think the idea works. Conversations dont seem to flow. Unlike text you can’t quickly scan a video to get a sense for the quality of the piece. This is Seesmic’s biggest problem, and its a major one. Seesmic’s all about video conversations and that aspect of it just doesn’t seem to work efficiently.

Its difficult to say if Seesmic will achieve mainstream success.
One of the reasons for Twitters success is that its so quick and dirty to fire off a text message. Uploading a video isn’t as convenient.

Speaking of convenience, I didnt like the all flash interface. There were a few times where pressing the back button didnt have the desired effect. Also I didnt like the fact that when hovering over a link with my mouse the cursor didnt change to the hand icon. This may sound like a minor gripe but believe me usability experts would be all over this.

Seesmic naturally has to worry about YouTube. All YouTube has to do is create a “conversations” subdomain, and replace text comments with video comments and it will either help Seesmic by shining some light on this space or it will be lights out Seesmic. Im guessing it would be the latter.

There doesn’t seem to be a business model in place. Im sure at some point it will be monetized by ads but right now its not clear how Seesmic will make money.

At first I wasn’t sure what was so special about “video conversations”. That is, what does the video aspect add to a conversation. It took a bit but it soon became clear, the videos do seem more personal. You seem to be a bit more connected to the author, since you can pick up on visual and audio clues such as tone of voice and style. After watching a quick video of a particular user it was clear to me that he was the lazy, eccentric type. These types of traits can’t be realized as quickly when dealing with just text.

Since its easy to connect with users because of the personal nature of videos, it should be very easy for Seesmic to foster a community.

Another positive Seesmic has going for it is its backers. Checkout the bottom of this post (how I started Seesmic and raised 6 million) for a list. I wouldn’t bet against these guys. While there is no guarantee of success, with those backers Seesmic will have every chance to succeed…

… but its going to be an uphill battle.

Digg started out focusing on technology news. They had to grow so they did the obvious:

• they expanded the news section
• and they added community features.

Alot of sites add community & social networking features, even if there is no need for them. Why… because an active community increases a sites stickiness. An active community = $$$

Why expand the number of news sections?
Mainstream news = potentially larger audience. The Digg formula works just as good for non-tech news so why not try to transition from the tech niche to mainstream news.

Ok now Digg has expanded their news section and they’ve added community features. These additions have been a success. Digg is a success, so whats the problem?

• Digg has peaked. The expansion of news sections and increased community features where no brainers, those additions where inevitable. There’s no more obvious features that Digg can add that will have a large impact on its traffic.
• Plus bigger isn’t always better. I preferred the focused tech content provided by the tighter 2006 community than the current diverse content on todays Digg. That is, at this point I think that the more users Digg has the worse the quality gets.

I wouldn’t be surprised if Digg was aggressively being shopped. It looks like it peaked, what do you think?

REVERSAL- Why it may make sense not to sell Digg yet
Digg probably won’t need to raise any more money. Since Digg’s advertising partnership with Microsoft there may not be an impetus to sell.
Also if you take the point of view that generally over time the value of an asset will increase (eg real estate) it may be worth holding out for more money.

[StrongList] In you books you talk about how fast and nimble startups can compete against older slower established companies. Well how can new startups compete against companies that are also quick and nimble. Many of the established web apps are already run by teams that are highly efficient. [Example: Youtube]. How would you compete against them?

Seth:You don’t. There are a million lousy companies to compete against, a million lame organizations with second rate products. Pick one of those.

The essence of marketing (and in being a startup) is that you get to CHOOSE. So don’t make a meatball sundae. Don’t try to out youtube youtube. Why bother?

• a little bit about seth godin on wikipedia
• seth’s blog
• seth’s books

Good luck…

WooHoo your app is done and you’re ready for the world to check out your site.
So you email TechCrunch. “They’ll review my app and help get the word out” -you tell yourself.
You eagerly wait for a reply…

• No response…
• “Hmmm they must be busy, they’ll get back to me”
• A couple of more days pass by
• Still no response
• “Maybe they didn’t get my email. Ill try again”
• Still no response

Then it sinks in. You’re not getting reviewed by TechCrunch, they’re not even going to reply back to you.

Sure they probably get more email than they can handle, this is speculation on my part, but Im guessing TechCrunch doesn’t reply back for the same reason VC’s don’t tell you “no” when you’re asking for funding. Guy Kawasaki explains:

This is because there’s no upside to communicating a negative decision. Entrepreneurs will simply hate us sooner–instead the game is to string along entrepreneurs in case something miraculous happens to make them look better.

So the odds are your site wont get reviewed. Heck you wont even get an email back.
Don’t take my word for it. Try it yourself right now, email TechCrunch and introduce yourself and your site. Most likely you wont get an email back. This wont change when you’re ready to launch, and be reviewed.

If you think that TechCrunch will be a major part of your marketing.

Think again.

REVERSAL
IF your app does get picked up & you do have a worthy application, be prepared for a wild ride:

• You’ll get instant traffic
• Your site will get picked up by a bunch of TechCrunch follower blogs
• You’ll meet some new contacts. TechCrunch has a deep following. Expect a few emails from people genuinely interested in your site

In a nutshell:

• Improve hotmail. Regardless of what it costs get Jason Fried on the job.
• Buy promising web apps, especially if they are leaders in their space. Youtube and Myspace have justified their lofty valuations. Don’t lose out on any more market leaders.
• Start Fresh. Create a new online division. Create 10 teams with a start up mentality. Get them cranking on web apps that excite them

More detail:

Savvy web users are using Gmail over hotmail. Hotmail needs a makeover. Get Jason Fried of 37signals on the job. He has mastered interface elegance and simplicity.

Jason’s first goal is to develop a new clean look and feel for hotmail. Hotmail appears old and dated. If you don’t own a web app you’ll be amazed know how many people sign up using Gmail address’s.

The new hotmail will become the hub for all of Microsoft’s new web apps. All of Microsoft’s apps should be listed on hotmail and users should be able to login with 1 click.

For under 2.5 billion Microsoft could have owned all of the following:

• Youtube 1.65 billion
• Myspace 580 million
• delicious 10-15 million
• reddit
• stumbleupon 75 million
• feedburner 100 million

That’s quite the portfolio. All for under 2.5 billion and considerably less than the 44 billion bid for Yahoo.
As a bonus you lose the bloat and redundancy that comes with a purchase of Yahoo.

While they missed the boat on these app/services they should make sure they snap up the inevitable new ones that pop up.

And how about creating some web apps on their own? Microsoft has the resources but it looks like they have lost their way.
They need to rekindle their long gone mean lean spirit. Create some autonomous teams and let them have at it.

When you have money life is easier. Its no different for companies. Microsoft has the money.

They just need a plan.
In addition, they need to execute their plan without the burden of mass that comes with a company their size.

REVERSAL: why this won’t work

Most web apps don’t make any money. There’s no point buying these apps unless they make money or unless Microsoft can turn them into loss leaders.
If Microsoft doesn’t improve its search and contextual advertising they wont be able to efficiently monetize their web apps.

Only fools rush in

I came across some excellent questions you should ask yourself if you’re starting a new company. These questions will help you expose holes in your startup plan, and could keep you from “creating a better search engine”.

There are 25 total questions. Here are the most important ones:

1. What unique service or product does your company provide to your target market?
2. What exit strategy is planned – acquisition? IPO? What year? If an acquisition, to what kinds of companies? Whats the expected ROI to investors?
3. What capital is needed now and later and for what purpose?
4. Who is the target market and its size? What penetration is projected by what year?
5. What revenue models and sources will create what revenue by Year 3 and Year 5?
6. What are your margins, costs of goods, profitability model.
7. How will you market your product, how much will it cost?
8. How long will it take to get your product on the market
9. Who are your competitors and what are your advantages over them?

Related articles:

• the key to building a web app that succeeds and makes you money →

Cable TV is on the decline. Look at you, you have some free time, you’re not watching Cosby show reruns, you’re on the net.

On the Decline. All networks evening news viewership.

Cable companies need a bigger presence on the web. What should they do?

One of them, lets say NBC, should build a youtube competitor. Lets call it “NewTube”.

You can’t just launch a competitor and expect it to be successful you need a differentiator. So whats so different about NewTube?

NBC should create a daily/weekly program that shows videos from “NewTube”. Now users have an incentive to post. No other video sharing application can get your clip on TV.

There’s a lot of video out there, people want to show it, they want an audience. That’s one of the reasons they post to Youtube in the first place. They know youtube has a massive audience compared to the second best video sharing site (whatever that is).
Give people a chance to have their content on TV and that changes the game.

REVERSAL: why this wont work

• There’s not enough incentive. Being on TV is no big deal. Maybe people wont care to have their clips on TV
• Not that many people will watch a show of video clips on TV
• Youtube is so far ahead that it cant be caught.

What do you think?

1. Improve your search results. Heres a quote from Satya Nadella, corporate vice president of Microsoft’s search and advertising platform group. “The crux of our problem is how do we get existing searchers to use it [Microsoft search] more”. Is Microsoft that out of touch?

Its search division should be concentrating on providing more relevant search results period.

The live.com search results… suck; I rarely find what I’m looking for.

If the search results improved then people would naturally gravitate toward Microsoft live search.

For the user there is no cost involved from switching from Google search to another search engine. If Microsoft provided a better search engine then people would use it over Google.

This should be the number 1 priority of Microsoft’s online division: Improve their search engine so that it provides more relevant results. These results must be equal or better then Google’s.

Microsoft can get away with having equal results because their search bar is more ubiquitous than Google’s.

2. Grab Google by the jugular. Google is Microsoft’s biggest rival in the online space.

Google derives a very large chunk of its revenue from advertising.

In the second quarter Google earned about 3.8 billion in revenue, of that only 30 million didn’t come from advertising.

So Google’s revenues are vulnerable since they aren’t diversified.

Google’s revenues come from ‘adwords’ [displaying ads on Google’s network of sites] and adsense [put ads on other content providers sites and sharing the revenue].

Microsoft needs to attack adsense. Consider adsense a loss leader and give 100% of the cost per click revenue to the content provider. Google gives around 60-80% of the cost per click to the content provider.

Ok, but content providers still wont switch to Microsoft version of adsense because 100% of the Microsoft’s cost per click will in almost all cases be smaller than 60-80% of Google’s cost per click. Microsoft doesn’t have the inventory of ads to generate higher CPC rates.

So before they take on adsense they really need to increase their inventory of ads and take on Google adwords. And how can they realistically compete against adwords? Well they cant unless Microsoft improves their search results.

See #1 above. Its crucial that Microsoft improve its search. If their search improves to googlesque standards then other aspects of their online business will fall into place, as opposed to their current situation of looking busy without making real progress.