My Net Neutrality Experience: Frontier Hijacking Searches

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While home in West Virginia for the holidays, I had an interesting Internet experience.

I noticed when I Googled “Amazon” from my browser search bar, I got the Amazon home page, not the Google search results page I expected.

After some digging, I found that the ISP (Frontier Communications) was hijacking all traffic to www.google.com, and (in at least this case) inserting their own results.  For my search, they were redirecting to Amazon.com with their affiliate code, presumably to scrape some commission dollars.

The technical details are documented here.

I know ISPs have been hijacking DNS for a while for typo-traffic, but I’d never seen a case where they were directly hijacking Google searches.  It seems egregious to me, and I’m paying more attention to the net neutrality debate.  Assuming Frontier has standard Amazon affiliate terms, why should Amazon be paying Frontier merely for a subscriber who Googles “amazon”?  (And we all end up paying in the end, with higher product prices).

I ended up writing letters about this to Amazon (Jeff Bezos) and Frontier’s CEO.   We’ll see if anything comes back.

UPDATE:  I heard back immediately from Maggie Wilderotter, Frontier’s CEO.   They’ve investigated, found a vendor doing this in violation of Fronter’s business rules, and have shut it down.

Fast first drafts on the iPad

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My iPad usage has settled down into some regular patterns.  At home, it’s cut deeply into laptop time, for quick email checking and as a general purpose reference device.

I got Apple’s productivity suite (Pages, Numbers, Keynote), but wondered when I’d ever use them.  Beyond short emails, the iPad isn’t great for content creating.  (By the way, Numbers is an excellent spreadsheet browser. Instead of printing out a spreadsheet before a meeting, I load it on my iPad for browsing and “what ifs”).

But one content creation scenario has emerged for me:  writing first drafts.  I’ve always had the best results when I write the first draft as quickly as I can, then gradually edit and iterate it into a final result.  I’m finding the iPad is a good tool for this (with an external Bluetooth keyboard).  I use Pages:  formatting is a pain and cut-paste editing is a little unwieldy, which forces me to focus on just the text.  There are no other apps on the screen to distract me.

When the draft is done, I just email it to myself and finish it in Word.

Games Are Different

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I’ve become generally negative on most pure software projects.  I think it’s very hard to build large value there, for a variety of reasons:

  • It’s insanely crowded; lots of people code these days
  • Open-source stacks make it easier than ever to crank things out
  • Cloud-based hosting (e.g. EC2, S3) removes most up-front capital requirements
  • If you’re successful, it’s easy to get copied

It’s a great time for consumers — the innovation rate feels higher than ever.  It’s just tough for entrepreneurs:  there will be some nice software exits, but returns are becoming so skewed, it’s more like a lottery than anything based on skill.

One exception to all of this:   games.

Games are different, for a variety of reasons.  One big reason is content:   many games aren’t pure software projects, they’re really engines wrapped with levels, puzzles, art, 3d models, textures, sound effects, designs, characters, AI, story lines, scripts, music, etc.

This makes the rules a bit different.  Content takes real time and money to create, and it’s harder to copy (copyright law tends to apply more). You can enjoy the online gambling games such as prediksi togel that can bet and make money. Playing online casino games like happyluke is getting really popular in the gambling community. However, content-centric games, like movies, can have limited re-play value.  Which in turn leads to a franchise strategy for the biggest titles (e.g. Halo on Xbox).

So, one question:  will we see any large, content-centric, non-game software businesses?

How Many Groupons Can We Stand?

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Groupon, the deal-of-the-day company, certainly left a trail of salivating investors from their last round of funding.  Now, it’s rumored that they’re seeking funding at a valuation around $3 billion.

First, congratulations to them:  they’ve built a real business with real revenues, and created a whole new category in the market.  That is a real accomplishment.

But, this is now bordering on crazy.  It reminds me of the early days of email marketing, when marketers were paying $0.15 (yes, 15 cents) per email.  It was a new medium, so nobody knew how to price it.  And, in those early days, it actually worked well.

Then email fatigue set in with customers, and effectiveness dropped.  Some high-flying, fast-growing email marketing companies saw revenues stall, then drop steeply.

I think the same thing happens with the deal-of-the-day category.   As more offers become available from various companies, effectiveness fades and fatigue sets in.

Also, some existing content sites are much better positioned to offer daily deals as a feature, not as the premise for the entire company.  For example, Yelp’s first deal of the day in San Francisco reportedly went quite well.

I wish Groupon (and clones) the best, but at a $3b valuation, I want to go short.

Disrupting Education: Khan Academy

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I think Salman Khan is onto something with Khan Academy.  I’ve been wondering when we’d see Internet-style disruption coming to education, and this might be it.

Sal’s found a way to leverage the power of the Internet.  He’s a great teacher, and his videos package up that teaching ability, for anyone, anywhere to use, at virtually no cost.  For a system that’s depended on teachers being physically present with their students, this is a way to take our best teachers and make them available to everyone.  I don’t think this will fully replace a face-to-face education (and it shouldn’t), but it can surely augment it.

Also, he’s using video very well.  Instead of a talking head or a lecture podium shot with fuzzy slides, we see what’s most important — the shared “paper”.   Also, he’s kept the videos short, and single-topic.  Too many people are still using traditional video production principles (e.g. long segments, talking heads), and Sal’s showing us a much more effective way.

Finally, I wish Richard Feynmen had been able to do this before he died.

Incremental vs Big Bang

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Is it me, or does Twitter seem to do big feature upgrades (e.g. New Twitter) while Google/Amazon/Facebook do things more incrementally?  I know the big guys occasionally do big updates, but I always notice new little features here and there.  Some become permanent, others go away after a while.

The main advantage of the incremental approach is the ability to make corrections mid-stream.  It also makes it easier to abandon the (inevitable) ideas that don’t pan out:  small things are easier to walk away from than big things.

You can see this difference in approach between Facebook and Twitter with the design of status updates.  In early 2009, Facebook redesigned to be more Twitter-like, and since then, they’ve out-innovated on many aspects of the status update model:  “likes”, “likes” of comments, rich data types, presentation/aggregation techniques in the news feed, etc.  Meanwhile, Twitter still hasn’t figure out a good comment design for tweets!

But doing things incrementally isn’t easy.  You not only need an incremental culture and mindset within product leadership, but you need an implementation architecture that supports it:  modularity, good APIs, excellent release engineering (and an ability to un-release features), and measurement tools.

AngelGate: Symptom or Problem?

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It seems clear this week’s meme is going to be “AngelGate”, after Michael Arrington crashed a private meeting of West coast “super” angels, accusing them of collusion and price fixing.

Ignore Arrington’s penchant for drama for a minute, but assume there’s some truth to his allegations.   While it’s fun to get worked up, it’s far more interesting to explore why angels might want to coordinate in those ways.

The root problem (I think) is the excess of seed capital.   There are a TON of angels, venture funds now doing seed-stage rounds, Y-Combinator competitors, Betahouse clones, and new, dedicated seed-stage funds.  And with capital efficiency, many founders have the additional option of self-funding.

Seed investors are swimming in an increasingly crowded and competitive pool. It’s going to be really tough to generate meaningful returns:  seed investors are just on the wrong side of the supply/demand curve.  Given this, I’m not surprised if there’s some collusion among players (formal or informal).

First Establish a Beachhead

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I think it’s interesting that two leaders in the transition to on-line digital media each first established businesses in the existing distribution models.

Netflix has a solid DVD-rental business, and is a leader in on-line movie distribution.  Amazon dominated the book business by the time they launched the Kindle.

Repeat After Me: “Location” is a Feature, not a Product

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Two years ago, Daniel Cozza and I spent a lot of time looking at location-based apps.  We brainstormed tons of ideas and prototyped one.  But we ultimately decided not to pursue it; the space (and the iPhone app space, generally), was starting to feel really crowded.

Later, it also became clear that many of our ideas were really nice features on existing platforms, not new products.  For example, Twitter and Google have been steadily adding new location features.  And a few days ago, Facebook finally launched their check-in feature, Facebook Places, as (presumably) a first step to making Facebook much more location-aware.

Facebook’s news is interesting from a number of angles, some I’ve written about before:

  • Gorillas rule. Facebook watched the app evolution closely, then made their move.  They won’t let anyone get big enough to threaten them in any one area, and if they do, they’ll (a) use their policies to control things (as they’re attempting with Zynga and payments), or (b) take over the functionality (as they’re doing here).
  • APIs are a great way to seed an ecosystem. Foursquare’s original integration with Facebook was a huge part of their growth.  A continuous stream of check-ins in the news feed is a great way to acquire users.  Now, Foursquare’s integrating with Facebook’s new location API.  Foursquare PR spin aside, make no bones:  Facebook just grabbed a huge chunk of strategic functionality from Foursquare.  (My bet is that Foursquare devolves over time to a location-based game, or set of games).

For users, this is all great news — having Facebook be more “location aware” is hugely useful.  I can’t wait to see what new features become available.  For entrepreneurs and ecosystem players, it’s a bit more tricky:  how can you play here without having Facebook stomp you when you get too big?

More on the “Seed Fund Crash”

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Following up on the “seed fund crash” meme that I commented on last week, Chris Dixon wrote a thoughtful blog post.  His main point:

It’s not the seed investors who are smarter – it’s the entrepreneurs

He makes a fine argument about how entrepreneurs today are more informed, with new seed funding options available.  And he cites a key seed fund advantage:  they’re in early, at lower valuations, before the VCs.

However, my issue is not about entrepreneurs (or investors!) being “smarter”, it’s about the overall ecosystem.  From a macro viewpoint, I’m feeling a replay of Bubble 1.0:

  • Many new investment entities and professionals (e.g. new angel investors, new seed funds, existing VCs that want to do seed investing, etc.)
  • Excess of capital (most investors will tell you there are too few projects, and the ones that are investable, are too competitive)
  • Follow-on financing rounds driven by bid-ups, not by business fundamentals

Capital efficiency amplifies these issues, because small amounts of capital quickly make things very crowded.  I’ve written before about the “weedy ecosystem”.  Being just smart is not sufficient, because entrepreneurship is ultimately zero-sum:  a dumb, poorly funded set of competitors will still steal mind-share, confuse customers, confuse investors, dilute your brand, and make it harder to build your business.   I see evidence of this every day:   ever narrower ideas, because it’s just so insanely crowded.

In the limit, the ecosystem becomes a lottery.   We’ll see a few nice exits, I’m sure, but it will be (mostly) because of luck, not skill.  For an entrepreneur, that’s a very tough game to play, I prefer the Slotzo games.

(Note:  these comments apply to the most crowded, most capital-efficient technology projects:  such as software pure-plays, consumer Internet, “new” mobile, etc.   For ideas that have real technology, real IP, or some other non-replicable component, things get a lot more interesting, for both entrepreneurs and investors).