Fox v Time Warner Cable - and the winner is...

As everyone knows, R Murdoch decided to play a little high-stakes poker with Time Warner Cable the other day. I don't think anyone really thought that it would reach the point where consumers of TWC were not able to get Fox programming - but as a negotiating tactic I can see how it would appeal to Murdoch. It's all very "turn-of-the-century robber baron" which really suits not only his style - but also how out of step with the times his company has become.

And now we get to see just how out of touch TWC is. A deal has been done, and we're already hearing that the result will likely be increased cable bills. If TWC does this - it's a clear indication that they have entirely lost the plot. I know... I know... their costs just went up. So prices need to go up. But.... here is the rub....

Off in the corner this whole time - watching Zombie Murdoch and Zombie Britt growling and snapping at each other - sit Apple and boxee and Netflix and all the other new smart people. They know that the more damage both these old monsters do to the other - the more they accelerate the decay. And the faster that happens - the sooner these new smart companies step into control.

I mean... what are they people thinking? So say you can't get Fox on TWC. What does that do? It causes more people to switch. And say you suddenly have to pay more for cable? What does that do? It cause more people to switch.

And what will they switch to?

I'm sure Zombie Murdoch and Zombie Britt say "Dish Network" and "ABC" etc.

But no.

They switch away from cable.

They switch away from traditional TV.

I think most of us know that the story is over. All that's left is to determine which of these new smart fast companies is the one to own the spoils from the big scary zombies.

But the zombies, as we all know, are already dead.

Influencer Marketing on Twitter (a conversation starter)

I think everyone knows (or at least SHOULD know) that brands should be doing targeted influencer marketing on Twitter. At the same time, it seems like no-one knows HOW to do this (or we could say that few if any are doing it WELL).

In a conversation with a good friend, I came up with the following model as an illustration for how you might go about doing influencer marketing using twitter. This (of course) is not only purely illustrative - but should really be treated as a thought experiment and conversation starter rather than something prescriptive.

GET all twitter_followers OF brand_twitter # 'brand_twitter' is of course the twitter account of your brand

FOR EACH follower FROM twitter_followers

GET klout_score # klout.net gives you a (rough) scoring model for influence

IF klout_score > X # tune X to be whatever you want the cut off for "large network influencer" to be. Minimum should probably be 30 and maximum should probably be 70

ADD TO @persona_list

ELSE IF klout_score > Y # tune Y to be the cut off for "small network influencer" to be Minimum should probably be 20

ADD TO @connector_list

FOR EACH persona FROM @persona_list

SEND offer_1

FOR EACH connector FROM @connector_list

SEND offer_2

WHERE

offer_1 == DM something like "for each retweeted mention by you of BRAND get one PRODUCT at 10% discount"

AND

offer_2 == DM something like "for each new follower referred by you get one PRODUCT at 20% discount"

The idea is to identify influential follows of your brand and then market to them based on their type of influence. In this case you're looking at differentiating Acquisition Marketing from Awareness Marketing by the type of influencer.

This could obviously be far more sophisticated by modeling the KINDS of things these influencers tweet, how many links they send, traffic driven from these links, retweets of their tweets, if they have blogs, etc.

But... I think this is at the very least an interesting starting point that illustrates why this is a powerful medium - and why twitter really is important.

Update. In addition you can see an interesting business model angle for Twitter in this (a sort of modified hybrid lead gen / CPC model.

"new school" venture funds

Over the last six months I've spent a fair amount of time responding to people who have made claims to me like:
"Venture Capital is broken/dead"
"Venture Capitalists are an unnecessary evil"
"VCs don't add value"

My responses can be summed up as "there is no one 'Venture Capital' anymore (if there ever was) and this sort of generalization is really problematic."

Inevitably in these conversations, I've mentioned a new type of Venture fund - a sort of "grouping" of sources of early round capital - that I'm quite positive about. When asked about this "new school" of venture I've always ended up simply listing a bunch of people and/or companies that make up a core of what I am calling "the new school." I've had a hard time actually defining what it is - beyond who is in it.

Today there are two blog posts (from two of the "leading lights" of this new school) that to me are incredibly good illustrations of some of the very big differences between this new school and the previous model of Venture - and which can be used to understand what the new school is.

First up is from Fred Wilson (a sort of eminence grise of the new school). In his "The 'We Need to Own' Baloney" post, Fred goes after Venture Funds that talk about the percentage of a portfolio company they need to own.

The VC business is not about grabbing the largest slice of the pie. It is about getting involved with very big pies. If you let your need for the biggest piece keep you out of the pie eating contest, you will lose eventually.

When I used to consult for entrepreneurs, I used to constantly run into the emotional challenge many entrepreneurs have when it comes to "giving up" percentages of their companies. With all too many investments, arguments came down to "I don't want to give up 22% of the company." I constantly tried to explain that 95% of $1MM is far less than 55% of $10MM.

I never quite put my finger on the flip side of this equation as one of the key differentiators between the old school and new school VCs. But it's a perfect illustration IMHO. Whereas the old school built models around assumed percentage ownership stakes (22%, 30%, whatever) - the new school has models that do start from this model. In part - this is because the new school VCs are not fixated on control. And yes - that's a pretty profound statement I'd say.

The second post is from Josh Kopelman (one of the VCs in this new school who is most respected by the others within this classification). In his post, "Company Math vs VC Math", Josh responds to Fred's post above - and extends it to take on the fundamental models underlying traditional Venture that require the focus on percentage ownership (and control).

Most importantly, Josh extends the logic to demonstrate not only how these models have created the problems behind many of the "Venture Capital is broken" articles, comments, etc., but also how these models have created conflict between entrepreneurs and investors.

A company's outcome should drive VC returns. When VC's required returns drive company's outcomes, it's a recipe for trouble.

The move from the original (traditional) Venture Fund model to the "mega Fund" model that arose during the dot-com era has created some significant problems all around (detailed not only in these posts but in many other bits of writing and discussion all over the place).

It has also, however, created opportunity. And this is where the "new school" of VCs fits into the equation. These new VCs have set up funds that are reactions to the issues with the mega Funds. In some cases they are returns to the traditional models of Venture. In others they are brand new models. In all cases, they seek to address the fundamental problems that have been created as a result of these mega Funds.

These new school VCs have, in common, a focus on the entrepreneur as the "customer" (rather than the LP as the "customer" or even worse the partners themselves as the "customer"). They are focused on smaller funds and smaller investments. In many cases they're focused on capital efficiency.

In most cases they are not focused on huge multiples on their wins. They usually do not require set (specific) ownership percentages. They do not have the massive minimum investment size that the mega Funds have.

What is really interesting is the implications of these changes in the model. Many of these VCs are far more active advisers than partners at the mega Funds. But a lot of the time they don't really care about (or even don't want) Board Seats. They're not control freaks. They're really likely to invest in entrepreneurs over businesses (and often in products over businesses). They often invest very early (and very quickly). They're often more open to looking at start-ups that are not perfect fits for their portfolio strategy (and are often willing to look outside the usual network/greentech/biotech/consumertech software focus area).

And... they're getting a lot of the good deals.

All I know is that if I were working at one of the large funds - especially one of the mega Funds - I'd be paying a LOT of attention to these guys, because they are looking like the mammals to the mega Funds' dinosaurs.

Brilliant quote from an odd source

Facebook is a social network. Twitter is a media/marketing vehicle disguised as a social network. Big difference. And if you don't think it's changing the way that information is dispersed, for good and bad, you're insane. -- Bill Simmons, ESPN

I could not have said it any better and as such - I have no additional follow-up comment other than "Right on!"

Controversial Thought of the Day

My primary issue with the Design Thinking movement is that those involved seem to think that every other discipline should learn from them - while they don't have anything to learn from any other disciplines.

Note: the issue is with the movement, not the theory.

A Darwinian Moment

Miles Nadal (from MDC) had a very interesting point today. He commented that we are, currently, seeing a Darwinian Moment like never seen before in the Advertising Agency world (and in Marketing Services in general).

I think this is entirely true. We're not just in a period of enormous change - we really are seeing potential mass extinction of an entire species or two.

But I believe that the changes that are going on are not evolutionary in the usual sense of the word (where we would simply see new, refined, versions of the species emerge due to competitive improvements - "survival of the fittest").

I actually believe this is (to extend the Darwin metaphor to the breaking point) the result of cataclysmic environment changes. The obvious (and overused) analogy is the Death of the Dinosaurs. Dinosaurs were ideally evolved for the ecosystems of their time - but when there was sudden and massive climate change, they were unable to adapt quickly enough and their niches in the ecosystems were filled by entirely new species that were better suited to the new environmental conditions.

I think something similar has occurred with Advertising. I honestly don't believe the "Agency" as we know it is going to survive (or at least in any form that we currently recognize) because I don't believe that the new ecosystems will support them - and in fact won't support what we have always called "Advertising." I believe that the needs and functions of both the Agency and of Advertising (the "niche" as described above) will at least largely be filled by new entities that are optimized for these new environmental conditions - and within this new ecosystem.

If you put me on the spot - I would say that the attributes that these new emergent entities will likely possess will be:
- a focus on consumer experience
- a focus on word-of-mouth
- nimble, flexible (and likely small and/or de-centralized)
- fixated on the consumer rather than their customer (the brands)
- deeply knowledgeable about memes, viral spread and influencer marketing
- at most marginally interested in traditional "advertising" and media

I think there is going to be truly massive opportunity in this space - but it's going to come at the cost of a lot of traditional players.

Newspaper Publishers are Greedy Bastards

And just when I think that we here in the US have the craziest, greediest, most arrogant and most ignorant media barons in the world... The Europeans trump us.

International publishers demand new intellectual property rights protection to safeguard the future of journalism. "Hamburg Declaration" continues to attract signatures from top media owners. (press release)

This insane bullshit from the newspapers needs to stop.

Seriously.

Let's look at the situation from a reality (rather than fantasy) based perspective shall we?

We continue to attract ever greater audiences for our content but, unlike in the print or TV business models, we are not the ones making the money out of our content. This is unsustainable. Publishers failing will benefit no-one, least of all consumers, or indeed the search engines and other aggregators who currently make huge profits on the back of our intellectual property. -- Gavin O'Reilly

OK... so what you're saying is:

1. The audiences for your websites are growing.
2. You are not making money.
3. If you don't make money you will go out of business.
4. If you go out of business, we'll be the ones who suffer.
5. The reason you're not making money is because search engines and "other aggregators" are taking your profits.

Yes?

Okay. Let's see if I get this straight. Your audience size is growing. And the way you make money is by charging advertisers for access to your audience (advertising). So you should be able to make more money from your advertisers. But for some reason (which you claim is Search Engines), you are not able to charge advertisers for access to your (growing) audience.

Is that right?
You do realize that sounds completely crazy right? Search engines (which drive this ever-increasing audience to your site) are making it so that you can't make money from this audience. Despite the fact that you've had more than a hundred years' experience getting good at making money from your audience.

Well... let's pretend that you're not smoking crack. Let's move on and let me quickly point a few things out...

There are numerous content sites out there that are not aggregators (that generate original content) that have growing audiences and are making money. These site are very happy about Search Engines - because in most cases these search engines generate between 40% and 80% of the traffic to the websites. In other words... these "enemies of publishing" are responsible for around half of the revenues of these content sites. So what is the difference between them and you?

Well... they are web companies. They don't have vestigial print publications or legacy radio stations or other businesses that use furnaces that burn bullion to heat their offices. And they don't have the bloat that traditional media companies have - with assistants for anyone who has a title Director or above and company cars and private jets. For the most part, the people who are getting paid in these businesses are the people who do the work.

So they are web companies... but more than that... they are NEW companies. They don't feel entitled to a lifestyle and an expense model that is unsustainable.

While you all... you are fat, lazy and greedy.

Listen up... the problem isn't your revenues.
It's your expenses.

We need search engines to recognize ACAP as a step towards acknowledging that content providers have the right to decide what happens to their content and on what terms. The European Commission and other legislators call on our industry constantly to come up with solutions - here we have one and we call upon the regulators to back it up. -- Gavin O'Reilly

Sigh....

Gavin, Gavin Gavin....

Either you're an idiot or you think we're idiots.

I'm going to assume you're an idiot first (since the alternative is really insulting).

There is this thing called robots.txt (it's a simple text file). You can ask the web guys that you had hired that work down in the basement where you used to store the executive staff's supplies of Port and Sherry before shareholders got cranky about that perk. They'll know what it is.

Have them change it to read the following:

User-agent: *
Disallow: /

When they do this - it will result in none of your content being indexed by search engines. In other words, Google et al will no longer be able to "steal your content." You'll be in total control.

You can talk to those web guys about this - they'll tell you can even (shockingly enough) exclude only Google, or only Yahoo. You can even exclude specific content or specific types of content! And Google, Yahoo, Microsoft -- they actually all provide tools to quickly re-index your content, so as soon as you've changed this single file you can start all the search engines removing all your precious IP and you can make some real money without these pirates! w00t!!!


Now... assuming you're not an idiot - but think we ARE idiots...

Listen up Gavin.

We know what you all are up to. You don't want to give up your cushy limo. You don't want to fly business class (much less coach). You like being able to expense your links fees and your club memberships and your dinners and drinks. You like having an assistant (or two) who can run out and buy birthday presents for friends and family and pick up your bespoke suits at the dry cleaners for you.

You are scared of this new web world. You feel like you're losing control

And you see all the money Google is making - while your business is burning cash.

You know that I'm calling your bluff with the robots.txt file nonsense. The last thing you really want to do is cut off Google. Christ - that would cut off half your traffic (ie half your audience numbers)! Advertisers would shit a brick.

So like any old school greedy bastard, you're going for the shakedown.
To be honest, I've got nothing against that.

But trying to get folks like me to do your dirty work?!?!
Trying to scam me into thinking that you all are somehow special and need to be protected?

Not cool.

News needs to be protected.
Fair, ethical and honest journalism needs to be protected.

But publishers and media executives like you? You all have skimmed so much money off the top for so long that you should be able to take care of your damn selves.

News doesn't need you.
Journalism doesn't need you.
And sure as hell we don't need you.