FOBM Technology Business Media Panel

(Still thumb blogging via BlackBerry)

Neil Ashe (CNet), Bob Carrigan (IDG), Om Malik (GigaOM), and Greg Strakosch (TechTarget).

Highlights:

NA:  CNet is now approx ESPN-sized, expanding scope laterally beyond tech core into games, TV, parenting, food

NA:  have high expectations for BNet, a business property -- most business content is business sports (who's winning, who's losing, who got caught cheating), we want to focus on how-to style help

BC:  in 2000, at the peak, there were 130,000 ad pages in tech print.  In 2006, there were 35,000.

GS:  Goal for TechTarget is to be #1 place to research tech purchases

BC:  We plan to re-launch The Industry Standard in a new form in December.  We're looking for an editor.  It's an experiment and we want to have fun with it.  Our biggest fear is that it will kindle new-Bubble type flames.

NA:  CNet has $400M in revenues and 140M users.

Future of Business Media Conference Opener

I'm thumb blogging via email from my BlackBerry at this conference. The opener was an interview by Rafat Ali with Roger McNamee, Elevation Partners (a Forbes investor) and James Spanfeller, CEO of Forbes.com.

Quotes:

• RM: don't reproduce the magazine on the web; bad idea

• JS: I don't think of the web as a medium, but instead as a platform

• RM: one reason I invested was because Steve Forbes said: "the web is a different from magazines as film is from live theater.

• JS: we get 20M uniques per month and publish 3K stories/day

• RM: don't think editorial out, think audience in

• RM: we have no idea what things will look like 3 years out ... The whole business will change radically over the next decade.

• RM: people won't say you made a great magazine, so you're going to make a great website; they're going to look at it de novo.

Personally I love McNamee's commentary at this type of event. However, I have less of a sense of how the rather mainstream magazine publishing audience views him. I'm from Silicon Valley and love the whole disrupter angle; I'm not sure the disrupted will welcome him with equal enthusiasm.

Carried Interest: Income or Not?

Today's San Jose Mercury News has an editorial entitled Faulty Tax Fix Could Reduce Investment in Innovations that I felt compelled to share a few comments on. The editorial, written by two venture capitalists, suggests that fixing the AMT problem by treating carried interest as income (instead of capital gains) for VC and private equity partners could stifle innovation in Silicon Valley.

So, at the risk of irking some of my VC friends, here are my views:

• I think there is a false linking of two unrelated concepts: fixing the AMT and the taxation of carried interest, the 20% slice of gains that both venture capitalists and private equity partners pay themselves in addition to a ~2% base fee. (Note: I think they may have become de facto related because some proposed bill includes provisions related to both and makes an argument about one to pay for the other. That said, whatever bill aside, they are unrelated ideas / problems.)

• If stock options gains for employees count as income (which they generally do -- sauf ISOs held for a year and pre-exercised options under rule 83b), then I don't see why VC and private equity's slice of the gains shouldn't be income, too.

• If you believe in preferential capital gains rates on the risk argument (i.e., you should get a big reward for having taken risk), then carried interest shouldn't count as capital gains. VCs and private equity partners, in the majority, aren't risking their own money. They're risking the money of the limited partners who invest in their funds.

On the topic of whether changing the taxation of VC and private equity partners compensation will reduce innovation in Silicon Valley:

• It's not the VCs who are innovating; it's the founders and entrepreneurs -- yes, with VC money.

• I believe there is a glut, not a shortage, of venture capital available in the market, so we don't need to worry about a shortage of VC firms or funds wanting to be invested in VC.

• While perhaps not true in green energy and biotech, the types of IT companies founders are creating (Web 2.0) strike me as less capital intensive than those in the past.

• I believe the general quest for uncorrelated investments will continue to mean strong investor-side demand for venture capital and private equity products/funds. (Though perhaps more the latter than the former as I'm told that VC returns are averaging down over the years, particularly for fair-to-midland VC firms.)

• I believe a bad venture capitalist makes $1M/year, a good one makes $10M, and in good years a great one can make more than $100M/year. I think private equity pay is even higher. Whether you tax $100M at 15% or 35%, the post-tax $85M or $65M is still, well, a lot of money and it's hard to argue that people won't be incented to earn it.

I am citizen of Silicon Valley. I love Silicon Valley. I have friends who are VCs. I've invested in VC partnerships. I've personally been part of an experiment to create Silicon Valley in Paris, and ergo know irreproducible it is. I think the VCs I know are generally the smartest guys I know -- it is, after all, the top of the food chain job in Silicon Valley.

But in my view, income is income. If you get paid to invest other people's money in startups and part of your compensation is 20% carried interest, then (1) congratulations because you've given yourself one heck of a compensation plan, and (2) please pay your ordinary income tax on that just like everybody else.

When I see guys on street corners with "Will Invest and Take Board Seat for Food" signs, then perhaps I'll change my view.

Removing Windows Desktop Search (And A Whole Lot of Other Stuff, Too)

One of our field technical consultants pointed me to this utility to both generally clean-up my machine (e.g., temp files, leftover DLLs, etc.) and to remove software that doesn't seem to include itself in the standard Windows add/remove program control panel.

While I've not used this to remove Windows Desktop Search (because I think I've effectively beheaded it), I did use it to clean up my machine and remove some other programs, and to remove some programs from the startup process.

I can't vouch for it other than saying I've used it and it seems to work. Caveat user.

Here it is: ccleaner.

Autonomy Posts a Good Third Quarter

Just a quick post to highlight Autonomy's 3Q07 financial results:

• Revenues of $89.6M (up from $60.2M in 3Q06)

• Revenue growth of 48% over 3Q06 (including inorganic growth from acquisitions)
  

• Profit from operations (IFRS) of $17.5M

• Operating margin of nearly 20%

• Organic license growth of 24%

The company's earnings release is here.

Compared to the #2 enterprise search vendor Fast Search & Transfer, Autonomy is a very well run company indeed. However, since they're already reporting in dollars, I do wish that Autonomy would dual-list on the NASDAQ and report according to GAAP (as we did at Business Objects).

Autonomy now has a relative market share to Fast of about 2.5x, so they have really pulled ahead in the past year or so. Part of that is due to Autonomy's acquisitions outside core search, such as Zantaz (archiving and e-discovery) which I'd guess is providing $25M or so a quarter, and which makes the numbers a bit incomparable. Part of that was greatly aided by Fast's implosion from doing (shall we say, inflated) $50M quarters to doing $35M ones.

Autonomy is continuing their buying spree with this week's acquisition of Meridio, a Northern Ireland-based provider of records management software.

Paul Kedrosky Presentation on Venture Capital and Catastrophism

I am a big fan of Paul Kedrosky's Infectious Greed blog. He's clearly a data junkie, finds some remarkable pieces of data and representations of them, and makes some great, non-intuitive connections across different data sets and applications.

While I did not attend his speech yesterday in San Francisco, I did pick up this very interesting and very topical set of slides off his blog.

If you go to Slideshare, you can see a bit of of the (very necessary) voice-over in the comments. I love the slides on venture returns, the increasingly correlation of hedge-fund strategies, the dearth of .400 hitters in baseball, and the examples of Web 2.0 collaboration and communication during the Southern California fires.

| View | Upload your own

Windows Desktop Search Malware

I'm here working a bit late, trying to dig out from a lot of travel and guess what happens?

That little yellow shield saying "you have Windows updates" appears. I say, OK install the darn things. It takes forever, as it sometimes does. Then it pops up the Faustian dialog box I so love: "restart now or later." (Which always reminds me of my old friend Ed Horst, who once quipped that when it came to product planning, that the Ingres engineering department always gave marketing a choice: left barrel or right barrel.)

I swear I clicked "later" and then the machine then promptly shut down and restarted on me.

It restarts, which takes forever, and then more-than-forever because every software package thinks its critically important and needs to be pre-started at boot time just in case I ever want to use it.

Then, there appears a new toolbar saying "Windows Desktop Search."

What is this, I think? Did I have this already? Did I accidentally right click somewhere to add this toolbar?

No, I didn't. Windows decided that Trojan Horsing their new desktop search onto my machine was their way to get back into the desktop search game. But, you see, I don't want Windows Desktop Search (I'm happy with Google's -- though it does stink at indexing email, perhaps because I keep everything in offline folders).

But what do I want even less than Windows Desktop Search running on my machine?

1. The creation of a redundant index of the content on my computer
2. Having my machine run like molasses all the while it's doing it

I go straight to control panel --> add/remove programs. Remove Windows Desktop Search. It takes a while. Then I reboot in a cleansing ritual to purge the virus / malware that I never wanted. The machine restarts.

Then I see another of those little yellow shields. How can that be? Is it possible there's been another update while I've been messing around with my computer?

Well I've lost 15 minutes already messing around with this stuff. I decide to at least get the job done right. Yes, install updates. And what do I see:

"Installing Windows Desktop Search."

So they give it to me. I don't want it. I remove it. And now they give it back to me. And I still don't want it. But it appears for as long as it's not on my machine they're going to light up the yellow shield (can you spell Windows Updates abuse?) and if I ever say yes again to any updates I'm going to get it -- like it or not.

So I install it again, accepting the inevitability of my grim fate. And then I figure out how to turn it off, which wasn't trivial either.

Here's how:

• You need to remove it from the auto-startup
• You need to change your index settings so it indexes nothing (turn off indexing on various folders in documents and settings, desktop and my documents)

And hopefully now it's as gone as it can be. Why don't people like Microsoft again?

For more how-to's on removing Windows Desktop Search, you can go to this post (danger, it has you messing with the registry editor), here (a discussion thread on Microsoft support that also hacks the registry) or here (another discussion thread where a Microsoft program manager directly replies, but -- warning -- it's complex and you're hacking the registry again.

Why is it easier to unlock an iPhone than disable Windows Desktop Search?

For real fun, and to save you the click, here are the directions from Bill Connors of Microsoft posted in the last link, above. Ironically the title of the thread is "Simple Instructions to Remove Windows Desktop Search." Here goes:

The following instructions are taken from the Windows Desktop Search Admin Guide which can be found in the Announcements section on the forum's top level
page. Please let me know if this works for you.
Thanks,
Bill
Connors
Program Manager, Windows Desktop Search - Communities

Uninstalling Windows Desktop Search
When uninstalling
Windows Desktop Search on individual systems, it is recommended that the product
be removed using the Add/Remove Programs functionality provided in Windows
Control Panel. When uninstalling from Add/Remove Programs, be sure the
check the Show Updates option and uninstall the newest product or product
updates first.

While using Add/Remove programs to uninstall WDS
2.6.0 or later you may receive a message dialog stating “Setup has detected the
following programs on your computer:” followed by a list of updates. This
dialog also states that “If Windows Desktop Search is removed; these programs
may not run properly. Do you wish to continue?”. This is a due to
the fact that WDS is installed using an update.exe package and is listed with
other Windows updates. Some products updates are dependant on previous
updates and if one is removed, it may cause issues. This is not the case
with WDS and removing WDS will not disable or impact any other programs or
updates listed.

When uninstalling Windows Desktop Search through a
script or third party product, if the Add/Remove Programs feature is not
an option, it is suggested that the uninstall package (Spuinst.exe) be used, for
the most recent versions. Although Windows Desktop Search does create a
system restore point as part of the installation it is not the recommended
method of removing the product from users systems.

To uninstall
Windows Desktop Search, use the Uninstaller package from the following locations
for the following
versions:

Version
Location
2.6.0.2083
%systemroot%\$NtUninstallKB907371-V2$\spuninst
2.6.0.2057
%systemroot%\$NtUninstallKB907371$\spuninst
2.6.5.Beta

%systemroot%\$NtUninstallKB911993\spuninst

Uninstall
Options:
1.
Interactive – Spuninst.exe is run without any command-line arguments.
Uninstaller prompts for restart at the end.
%systemroot%\$NtUninstallKB907371-V2$\spuninst\spuninst.exe

2.
Quiet – Spuninst.exe is run using the ‘/q’ or ‘/quiet’ command-line argument.
Uninstaller forcefully restarts the system without informing the user after
un-installation is complete

%systemroot%\$NtUninstallKB907371-V2$\spuninst\spuninst.exe
/q

Or

systemroot%\$NtUninstallKB907371-V2$\spuninst\spuninst.exe
/quiet
3.
Passive – Spuninst.exe is run using the ‘/passive’ command-line argument.
Uninstaller prompts for restart displaying the wait time in seconds for
automatic
restart.
%systemroot%\$NtUninstallKB907371-V2$\spuninst\spuninst.exe
/passive

Other command-line options are available in /help message.
Please run the “spuninst.exe /help” command-line to see the other available
options.

Uninstalling versions 2.5.0.1082 and 2.5.0.1119
Note:
Version 2.6.X will not install properly on a system currently running version
02.05.0.1082 or earlier. You must first uninstall the older version then
install the newer version.
Use the Msiexec.exe program to uninstall.
Below are two suggested methods for uninstalling these packages.

Using the Product Code
To locate the Product code in the
registry, click Start then Run and type “Regedit” in the Open drop down box and
press enter. Next browse to the following
location:

HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\MSN Apps\MSN
Toolbar Suite

The Product Code will be listed in the value of the
PC key. For example version 2.5.0.1082 PC registry value is
7d1dcbba-f6f5-42b4-b90b-f04ace4dfd6c.

Execute the following command
line, listing the product code with in brackets. For Version 2.5.0.1082
the command line would be as noted below. Please note the brackets “{}”
are required for this method to be successful.
Note: The /x
switch causes Msiexec to uninstall the product and the /qn switch will ensure
that there is no display while uninstalling. Please see msiexec.exe help
(type msiexec /? From a command prompt) for more information regarding command
line options for Msiexec.exe.

Msiexec.exe /x
{7d1dcbba-f6f5-42b4-b90b-f04ace4dfd6c} /qn


Using the MSN
Search Toolbar Windows Installer (.msi)
The MSN Search Toolbar Windows
Installer (.msi) is located in the following
location:

%windrive%\Documents and Settings\All Users\Application
Data\MSN Search Toolbar\\en-us

In the path
listed above “” is the version of the product being
uninstalled, for example 02.05.0000.1082.

Use the following command
line to uninstall the product.

msiexec.exe /x
":\Documents and Settings\All Users\Application Data\MSN Search
Toolbar\\en-us\MsnSearchToolbar.msi"
/qn

First method is preferred because the only required variable is
the product code that is taken from the registry. For the second method, we need
to give the and the of the product
installed in the command-line.

Microsoft Buys 1.6% of Facebook for $240M

See this story that just hit Yahoo!News.

This puts the valuation precisely at the rumored $15B mark. Rumors say that Facebook will do $150M in revenues and $30M in profit this year, so the valuation is 100x revenues and 500x EBITDA.

See my posts on Zuckerberg at the Web 2.0 Summit or on Facebook (Go Check Out Facebook, Now) for more background.

Quick Comment on Business Objects 3Q Financials

Business Objects (BOBJ) today announced 3Q07 financial results that were in-line with the company's pre-announcement on October 7th, the same day the Business Objects announced its acquisition by SAP.

In terms of valuation, I'm impressed that Business Objects was able to get a 20%ish premium over its recent (pre-acquisition) stock price, given that the company was announcing a shortfall that, in theory, should have caused a 20% stock price drop. That is, in theory, offering yesterday's stock price on the day of pre-announcement is roughly equivalent to offering a 20% premium. What Business Objects got, by my back-of-the-envelope analysis, is closer to a 40% premium. Bien fait.

One thing caught my eye today in reading Pat Walraven's (JMP Securities) coverage of BOBJ's third quarter. See this sentence from his report entitled Business Objects: Expecting License Revenue to Fall Off (or from the company's earnings release).

Cartesis S.A. and Inxight Software contributed approximately $21 million in total revenues.

Wait a minute, I thought. $21M strikes me as low.

Business Objects paid $76M for Inxight, which I'm guessing was 3x $25M in TTM revenues. Business Objects paid ~$300M for Cartesis, which was 2.4x $125M in revenues, as mentioned in the boilerplate of the acquisition press release. So whats $150M divided by 4? $37.5M.

So normally, I'd have guessed that Inxight and Cartesis together would have provided $37.5M in revenues -- not $21M -- and that's not accounting for any growth. Not sure if anyone else caught this, and / or if they have a good explanation, but to me $21M seems light given the revenue histories and prices paid.

IBM Report: The Fight Ahead on Media's Mean Streets

Just a quick post to highlight a relatively recent report by the IBM Institute for Business Value, entitled Navigating the Media Divide: Innovating and Enabling New Business Models.

It's a 29-page overview, based on live interviews with 75 senior media executives, industry analysts, economists, and technology visionaries supplemented by 125 interviews done by the Economist Intelligence Unit with executives from media, portal, and telecom companies.

For anyone involved in the new vs. old (or should I say west coast vs. east coast) media battle, this report is a must-read. Here's an excerpt from the executive summary:

We have ten specific recommendations for media companies, as they face immediate
threat from the new media world and a possible new industry order:

1. Put consumers at the center of your business and boardroom.
2. Convert consumer data into competitive advantage.
3. Give control to get share.
4. Deliver experiences, not just content.
5. Leverage virtual worlds.
6. Innovate business models.
7. Invest in interactive, measurable advertising services and platforms.
8. Redefine partnerships, while mitigating fallout.
9. Shift investment from traditional business to new models.
10. Create a flexible business design.

To execute these recommendations, media companies will likely need to make changes in business practices, acquisition strategies, operating models, organization designs and infrastructure, just to name a few areas. The current clash between traditional and new media is reaching new heights. Industry incumbents are responding – but perhaps not quickly or completely enough. While they compete in new ways on this front, traditional media cannot ignore the growing division in its own ranks. Hence, media companies must prepare both for new industry roles and a divergence that may redraw industry lines.

We work every day helping media, entertainment, and publishing companies with points 1, 3, 6, 9, and 10.

Twine Time: Web 3.0?

Just a quick post to highlight Twine, a startup competing in the semantic web space who dubs itself the first mainstream semantic web application. Frankly, in taking a quick look at it through these two posts (Twine: The First Mainstream Semantic Web App and Twine Launches A Smarter Way to Organize Your Online Life) it doesn't strike me as a semantic web application at all.

When I think "semantic web" I think about three things:

• The concept: to make the web machine interpretable as opposed to simply machine deliverable.

• A set of core technologies (e.g., RDF, OWL, SPARQL) which by and large have not taken off in the market.
  

• Inferencing to create new information from the web itself. For example, if site A says that Bandit Kellogg is a Bernese Mountain Dog and site B says that Bernese Mountain Dogs eat socks, then you can induce that fact that Bandit Kellogg eats socks (which he does, voraciously).

Perhaps mine is a traditional or outdated view of the semantic web vision, but I'm not sure. See this post by Nitin Karandikar entitled The Promise of the Semantic Web for his take, which is similar to mine. (The post is based on an interview with Nova Spivack, CEO of Radar Networks, makers of Twine.)

When I look at Twine, I see more Web 2.0 technologies

• Tagging
• Collaboration
• Wikis
• Diggs
  

Yes, it appears that Twine does automatic entity extraction (which they call Smart Tags) against things that are bookmarked. And they say they use a bunch of semantic web technologies inside the system to figure out relationships between the tags and between people and tags. Excerpt from the Read/WriteWeb:

Where Twine is differentiated from the likes of wikipedia is that its underlying data structure is entirely Semantic Web. Spivack told me that the following Semantic Web technologies are being used: RDF, OWL, SPARQL, XSL. Also he said that they plan to use GRDDL in the near future. Spivack had an interesting term for what Twine is doing with Semantic Web technologies, riffing off the Facebook Social Graph. Spivack is calling Twine a "Semantic Graph", which he says will map relationships to both people and topics. So Twine's Semantic Graph actually integrates the Social Graph.

I'd like offer more commentary on Twine but it seems their newfound popularity is impacting their website -- I couldn't successfully register for the invite-only Beta. When I clicked "register" it just hung forever. I'll try again in a few weeks and if it works and if I get invited to the Beta, I'll share some first-hand feedback.

Meantime, see the two posts cited above or check out Nitin Karandikar's email interview with Nova Spivack on his Software Abstractions blog.

Did EMC Really Buy X-Hive?

You'd think so given the announcement made oddly through an E-Week exclusive story entitled EMC Buys Dutch Software Company on 7/20/07.

But now it's been more than 3 months since the announcement and you can find nary a trace of X-Hive on EMC's website. For example:

• X-Hive isn't even listed in the software A-Z index. (Guess it somehow skipped X.)

• Nor is X-Hive listed in the content management software section.

• When you search for X-Hive on EMC's software site, you get only two hits. One links to a 186-word blurb announcing the deal. The other links to a webinar they did with Flatirons on Dynamic DITA content delivery.

If I were in a sarcastic mood, I'd say that if I bought X-Hive I'd be reluctant to admit it, too. :-)

As for Mark Logic, thus far the impact of the deal has been negligible. We continue to complement Documentum's core content management system and to provide customers with best-of-breed XML content delivery. The whole situation reminds me a bit of my life back at Business Objects and our relationship with Oracle.

On the one hand, Oracle didn't like us because they sold a competing BI tool, Oracle Discoverer. On the other hand, having a great BI tool available helped Oracle sell big data warehouse deals. An Oracle salesrep's logic was if a best-of-breed BI tool can seal a demo that sells a $3-5M data warehouse, then Business Objects can have their $500K worth of BI revenue.

I think the same argument holds with EMC / Documentum. While ECM infrastructure is nice, what customers actually see is content delivery: so content delivery should be done best-of-breed. Put differently, cheap BI tools, cheap parachutes, and cheap XML content delivery platforms are all bad ideas.

Just as Oracle bottom-skimmed the BI market with Discoverer and co-existed with Business Objects for many years, so I predict that EMC will bottom-skim XML content delivery with X-Hive while co-existing with MarkLogic for the large part of the market that realizes content delivery is not the place "go cheap" in the content value chain.

Visit Mark Logic at KMWorld and Intranets 2007

Mark Logic will be exhibiting at the KMWorld and Intranets 2007 show at the McEnery Convention Center in San Jose from 11/6 through 11/8/07. The show is being keynoted by James Surowiecki, author of The Wisdom of Crowds, who I'm sure will provide a fantastic presentation.

We've long believed that KM systems are the problem with knowledge management, not the solution to it, and that the future of knowledge management will look more like:

• Loading content where it is, as is, rather than requiring a big-bang approach
• Automatic conversion of that content to XML, and potentially enriching it using text mining tools (e.g., email is a great example of a knowledge-loaded, easily converted, and easily enriched format)
  
• Building content applications -- that know how you are and what you're trying to do -- on top of those XML repositories
• Leveraging web 2.0 features (e.g., mass collaboration, tagging, digging) in building those applications

So please be sure to swing by the booth and say hi if you're attending the show.

I should also note that Mark Logic's director of product marketing, John Kreisa, will be speaking on 11/7/07. John's presentation is Beyond Search: New Platform for Next Gen Apps and is a free exhibit hall presentation, so anyone can swing by and watch. Here is his abstract:

A new platform — the XML content server — has arrived, enabling a new wave of business applications called content applications. Today’s leading-edge content providers and publishers are transforming their search offerings into applications tailored to specific audiences, delivering information products based on knowledge of the users’ roles, their activities, and the overall processes in which they work. This session features examples of content applications used by publishers such as Elsevier, O’Reilly, and Oxford University Press.

The End of an Architectural Era

I picked up via this post on the High Scalability Blog a new paper by Michael Stonebraker, Nabil Hachem, and Pat Helland entitled The End of an Era (It's Time for a Complete Rewrite) presented at the VLDB 2007 conference in Austria on September 23rd through 27th.

From the paper's summary:

"In the last quarter of a century, there has been a dramatic shift in:

1. DBMS markets: from business data processing to a collection of markets, with varying requirements
2. Necessary features: new requirements include shared nothing support and high availability
3. Technology: large main memories, the possibility of hot standbys, and the web change most everything

The result is:

1. The predicted demise of “one size fits all”
2. The inappropriateness of current relational implementations for any segment of the market
3. The necessity of rethinking both data models and query languages for the specialized engines, which we expect to be dominant in the various vertical markets"

As you know, I'm a big believer in the special-purpose DBMS meme. Any database historian knows what Codd was thinking, and more importantly -- what he wasn't -- when he designed the relational model. Again, from the paper:

"Ted Codd’s idea of normalizing data into flat tables has served our community well over the subsequent 30 years. However, there are now other markets, whose needs must be considered. These include data warehouses, web-oriented search, real-time analytics, and semi-structured data markets."

The complete paper can be found here.

Web 2.0 Summit: Launch Pad

One of my favorite features of the Web 2.0 Summit is Launch Pad where a few hand-selected startups are allowed to launch / present themselves to audience. Last year, the organization was a little dubious (John Battelle described it as a "goat rodeo") so this year they took a more organized approach allowing only six finalists to present in pretty tight time windows.

The voting was originally supposed to be done using Mozes, a text messaging platform run by a fellow I recently met, named Dorrian Porter. But -- believe it or not -- they actually manage to hold the Web 2.0 Summit in a dungeon of a room whose thick walls block all cellphone coverage, so instead of using Mozes, we used audience noise-making for the voting instead.

The six finalists invited to present were:

• Cleverset
• G.ho.st
• Realius
• ClickForensics
• Tripit
• Spiceworks

The audience vote awarded best-in-show to Cleverset, a personalization company. My personal favorite was Spiceworks, a "free," ad-supported application targeted at IT in small and medium businesses. The company says that half of all IT spending is done by small and medium companies, the challenges these jack-of-all-trades IT managers face are significant, and while they typically don't have much staff, they do influence quite a bit of purchasing and should be both an attractive and otherwise hard-to-reach target for advertisers.

The service I'm most likely to try personally is Tripit. While I don't know if I'd invest in Tripit, I do think its a useful little app that helps you integrate your travel agenda.

Web 2.0 Summit: Evan Williams

I'd expected Sequoia's inimitable Mike Moritz and Microsoft's energetic Steve Balmer to be my favorite speakers of the Web 2.0 Summit and they did not disappoint. Moritz provided a fascinating, cerebral discussion yesterday afternoon and Balmer rocked the house this morning: see this CNN story on Balmer's speech with this great quote regarding Live vs. Google:

"You're just 3 years old, and we've got you in there playing basketball with a 12-year-old," Ballmer gushed and gesticulated, nearly popping out of his seat. "You're growing up quick and getting better every day, and you've got all the potential in world, and it may take you 'til you're 7, 8, 9 or 10, but you're gonna dunk and you're gonna dunk on the other guy some day, Johnny."

But the surprise for me thus far has been Evan Williams of Twitter who, in a very brief presentation, had quite a bit to say on the merits of definition by removal and focus, instead of addition.

• I want to discuss learning by the aggressive application of constraints

• Our decision to use SMS as a messaging vehicle in Twitter meant that we had to support short (140 character) format-less messages. This was a huge constraint.

• We didn't define Twitter as Blogger less comments, tags, template editors, titles, etc. But it is an interesting way to look at it. (We defined it as a ubiquitous friend status network.)
  

• What else can we define by taking away?

• In my prior life at Blogger, I spent most of my time trying to add things.

• What would happen if you had Flickr without tags and with a one photo/day limit? You'd get higher quality photos and more and better comments on them ... and you'd be Fotolog which recently sold for $90M.

• What would happen if you had Blogger without titles, tags, comments, and a 140-character limit? You'd get Twitter.

• What would happen if you had Yahoo! without the home page and just a blank screen, with a search box? You'd get Google.

• What would happen if you had MySpace but you could only use it if you were in college? You'd get Facebook.

Web 2.0 Summit: Mary Meeker

Mary Meeker, the semi-famous Morgan Stanley Internet stock analyst, gave her usual blistering, data-loaded presentation at the Web 2.0 Summit today. Rather than attempt to summarize the 48 slides she presented in 15 minutes, I will simply attach them here.

There's fantastic stuff in here. I'd take the time to read it. You can download the PDF via SlideShare, or go get it directly at www.morganstanley.com/techresearch.

| View | Upload your own

Web 2.0 Summit: Mark Zuckerberg

They opened the show with an interview of the kid from Facebook, Mark Zuckerberg. This conference has a way of making me feel old, and boy did they cut to the chase this year with Zuckerberg, who's closer in age (and appearance) to my high-school freshman son than he is to me.

Notes and impressions:

• Wow, he's young. But he's pretty poised. Almost arrogant. But quite articulate. Very calm and measured. Handles a press interview very well. Knows how to answer questions and more importantly how to not answer them. (I suspect he's got a very good PR person working with him.)

• "An IPO is definitely years out."

• "Facebook has always run on a near breakeven basis from the days when it was in my dorm (at Harvard) costing $85/month till today when revenues are ... quite a bit larger."

• "We have 300 people ... and expect to end the year with 700 people."

• They have 45M users.
  

• 20% of the crowd raised their handed in response to the question: do you build Facebook apps? Frankly, I have trouble believing it because a large percentage of the crowd are bankers, VCs, journalists and other forms of hangers-on that don't actually build and run companies. So if this were true, it would suggest that about 1/2 of the operating companies present were building Facebook apps.

• When you raise money, will you need to bring in a grown-up, a la how Larry and Sergey brought in Eric? "[No]. Our focus is on building a strong team."
  

See my prior post on Facebook, entitled Go Check Out Facebook, Now for more.

Web 2.0 Summit: The Arrival

This is my 2nd year attending the Web 2.0 Summit and I must say the whole conference gives me an odd feeling because, to me, it's such an odd event. Where else can you:

• Pay $3.2K to attend a conference and not be able to find a seat (and then be encouraged to go upstairs to watch the conference on a video feed in the "overflow" room)

• Sit down and hear the guy behind you say something like " ... well ... I was interviewed by the New York Times ... and they asked me if I thought there was another bubble ... and I wanted to be measured [in my reply] ..." (It turned out to be Roelof Botha from Sequoia Capital who, among other things, led the partnership's investment in YouTube and is quoted in the the article I blogged about here.)

• Sit down and have the guy sitting to you next doing a real-time "Twittercast" of the conference. (Rafe Needelman from Cnet.) I'd quaintly inquired if he was doing real-time blogging. How passé!

• Find an event where a moderately disheveled, professorial book publisher is regarded as an icon, seemingly trailed by groupies? (Tim O'Reilly)

• Have such a weird agglomeration of the following people: venture capitalists, founders, startup-up CEOs, PR handlers, journalists, photographers, old media executives, alpha geeks, and a smattering of large company executives.
  

Convera Update: What Happens When You Sell All Your Revenue?

The not surprising answer: you end up a tiny company.

Convera's 2QF08 results?

• $255,000 in revenues. Yes, that's measured in dollars, not kilodollars. Approximately the amount it would take to buy an Aston Martin V8 Vantage. A nice car mind you, but a car. One car. They must set the record for smallest public company.
  

• A 275% growth rate, but off a tiny base. For perspective, if they can maintain a 275% growth rate, then in two years they'll be doing $3.5M quarters and should still be a record small public company.

• One customer accounted for 92% of revenue. So, they're actually one $235K deal plus $20K company.

• Loss of $6M in the quarter.

I've heard one Convera customer describe them as "cheap as chips." You can see it in the numbers. They still have $54M in cash, so they can keep losing $6M/quarter for a long time (i.e., 9 quarters).

It's hard for me to imagine that under these circumstances they're a stable partner on which to bet a company's vertical search strategy. But I know some folks are doing it anyway, probably based on the "cheap as chips" argument.

Those without kevlar stomachs might take a look at MarkLogic as a platform for vertical search instead. We have a different base business model (we charge for enterprise software, don't spider, and don't host). But our business development guys are starting to look at revenue sharing models for vertical search sites if that's of interest to you.

Motley Fool coverage of Convera is here. The company's official 2QF08 press release is here.

The Economist on Lap Dances

From time to time The Economist amazes me with stories of how economic analysis can be applied to test many and different theories. This one, however, takes the prize.

It's about an evolutionary psychologist who decided test a theory related to, well, here it is:

This theory is based on the idea that in evolutionary terms it benefits women to disguise when they are fertile so that their menfolk will stick around all the time. Otherwise, the theory goes, a man might go hunting for alternative mating opportunities at moments when he knew that his partner was infertile and thus that her infidelity could not result in children.

However, this should result in an evolutionary arms race between the sexes, as men evolve ever-heightened sensitivity to signs of female fertility.

Ok. It's a bit dicey and obscure. But how in the world could you test this? Believe it or not, the researcher decided to do so by measuring wages in the "gentlemen's clubs" of Albuquerque.

The full story's here, with an ever-so-English title of Hidden Charms, for those who want to know the answer.

New York Times Article on Web 2.0

The New York Times had an article on Web 2.0 and the Web 2.0 Summit today, entitled: Silicon Valley Start-Ups Awash in Dollars, Again.

Here are some excerpts:

Internet companies with funny names, little revenue and few customers are commanding high prices ... Consider Facebook, ... which is reportedly being valued by investors at up to $15 billion. ... nearly half the value of Yahoo, a company with 38 times the number of employees and ... 32 times the revenue.

The trend is described as a return to madness (by skeptics) or as a rational approach to unlimited opportunities presented by the Internet (by true believers) ...

“There’s definitely a lot of betting going on, and it’s not rational,” said Tim O’Reilly, a technology conference promoter and book publisher.

Mr. O’Reilly is credited with coining the phrase “Web 2.0,” which refers to a new generation of Web sites that encourage users to contribute material. His Web 2.0 conference, which begins Wednesday in San Francisco, has become a nexus for the optimism around the latest set of society-changing online tools.

But that has not stopped Mr. O’Reilly from worrying that the industry is minting too many copycat companies, half-baked business plans and overpriced buyouts.

The article is a must read.

My own rather cynical take is that Web 2.0 is like the Web 1.0 without the exits. Which, from a venture capital perspective, is akin to saying that it's like beer but without the alcohol. Or hockey without the fighting. Or as Woody Allen once said, sex without the love.

Yes, there are a few amazing deals (e.g., the VMware IPO, the YouTube and Skype acquisitions). And even more amazing are the valuations/employee -- e.g., YouTube was $1.6B for what I'm told was 30 people -- or an amazing $53M per head. Zuckerberg today said that Facebook had 300 people, so if Microsoft is investing at a $15B valuation, then that equates to a equally amazing $50M per head. Those are the truly stunning numbers in my opinion.

But, for the most part, these "Internet companies with funny names" aren't going public or getting acquired as far as I can tell.

Perhaps I'm not seeing it because the IPO bar has been raised and perhaps there really is a bubble in M&A valuations and maybe more of these little companies are getting bought than I think. But what I think is happening is that a few companies are getting sold at stellar valuations and making big headlines and for every one of those there are 100 other ones living on the VC dole, with 30 guys, a few servers, and a lot of hope.

One of the nice things about Web 2.0 is the barriers to entry are pretty low. That means lots of companies. Which in turn means lots of carnage down the road. This site, for example, tracks over 2,500 web 2.0 companies in 172 categories.

Slides From My RSuite User Conference Keynote

Please excuse my hiatus in posting as I've been quite busy of late, first closing out the September quarter, then running up and down the East coast last week, and now digging out whilst in my Web 2.0 Summit hotel room at The Palace hotel in San Francisco. Get ready for a deluge of posts to catch up with my backlog and to provide some color from the Web 2.0 Summit.

First, let me do a quick post that provides my slides from my keynote address at the Really Strategies RSuite/CMS user conference last week in Philadelphia.

The title is an affectionate rip-off from one of my favorite economics books by John Kenneth Galbraith, entitled Money: Whence it Came, Where it Went.

Here are the slides, courtesy of SlideShare.

| View | Upload your own

Au Revoir Business Objects, Bonjour SAP

My former employer, Business Objects, succumbed to its logical and natural ending yesterday, first announcing a short quarter, and then announcing its sale to SAP in a well valued transaction worth $6.7B.

Here is some of my perspective on the deal:

• I left Business Objects in 2004, after we had successfully acquired and integrated Crystal Decisions. During the peak of that hype the stock was nearly $40. Since then, the stock has largely bounced between $20 and $40. Not bad if you're a trader, buying the twenties and selling the forties, but -- given that they've nearly doubled the company (largely through acquisitions) since then, you've had expected the stock to do more than this sort of sideways bouncing thing.

• Financially, Business Objects (BOBJ) has always had trouble with margins. Top-class enterprise software operating margins run from 30 to 40%. Of late, BOBJ has had margins of around 9%. Frankly, given what I have always perceived as a lot of waste, I've never understood why they couldn't have improved operating margins into the 20% range, particularly when organic growth slowed down (and I'm told they've been slashing the marketing budgets).

• Valuation-wise, I think it's a pretty good deal for BOBJ. Run-rate revenues are around $1.45B. The deal is worth about $6.7B, meaning a valuation of nearly 5 times sales.

• My guess is what makes the relatively high valuation work -- given the 20%-ish growth rate -- is margins. First, I'm thinking that if operating margins were 25% then the stock might have been at 55-something already. Second, I'm betting that SAP thinks they can fairly easily improve margins and that's helping to justify the price tag. I think they're right.

• I think that Business Objects, and the whole BI industry, suffered from a lack of vision in the past few years. From the outside, it seemed like innovation stopped and acquisitions became the only way to drive growth. And the acquisitions, with the exception of a few (e.g., the BOBJ Inxight deal), themselves seemed to lack vision, and were more about consolidating positions and market share, than expanding the vision of the category.

• A lot of this goes way beyond BOBJ into enterprise software in general. As enterprise software consolidates in a multi-layer way (BOBJ itself had bought scores of companies over the years), it seems that a company better be (1) big or (2) visionary/disruptive. There seems to be little room in the market for a company that's mid-sized, with interesting technology, but competing in a category where the big guys have serious entries (e.g., Cartesis). Increasingly, $1B doesn't qualify as big. So I think BOBJ was finding itself in the same nether-zone as many of the companies it had acquired.

• I think the Euro/Euro aspect of this deal and think it bodes well for cultural integration. While I know that BOBJ is a lot less Euro than it was when I was there, roots run deep.

While I hate to be non-controversial, my net opinion is that it's a good, logical, win/win, deal and a happy and natural ending to the success story that was Business Objects.

Felicitations to BOBJ -- be sure to throw the bouquet to Cognos (who seems a logical, and much rumored target of IBM) at the reception.

Mark Logic to Host Major Publishing Event on 11/8/07

I'm pleased to announce that Mark Logic will be hosting a major publishing seminar on Thursday, November 8th, 2007 the Four Seasons Hotel in New York City on 57 East 57th Street.

The event is entitled The Agile Publishing Imperative: Accelerate the Creation of Information Products and features two of the best speakers you're going to find in the publishing businsess:

• David Worlock, chief research fellow at information industry market reseachers, Outsell
• Howard Ratner, chief technology officer and executive vice president at Nature Publishing Group

For more information or to register to attend the event, please click here.

I strongly recommend attending if you can. This event is all about the two most important things that publishers can be doing right now: (1) figuring out how to accelerate the creation of information products so they can more quickly experiment (i.e., fail quickly and with re-useable leftovers) as they continue to move into the online world, and (2) move to an agile approach to information technology and new product creation.

If you can't predict the future you should at least:

• Try to create it (Nature Publishing Group is a leader at this)
• Be able to respond to it quickly (see this post for more on this meme)