FutureTech Business

Whither Wikis?

By Eleanor Haas

Wikis, those indispensable reference resources - Web sites where anyone can add or update content - are still “cutting edge social media” after nearly 13 years, “with best practices an evolving target,” says John Blossom, president, Shore Communications, who organized and moderated a panel on the subject at a recent SIIA Brown Bag Lunch.

Wikipedia has proven user-generated content can be very high quality and can be accepted as authoritative and reliable when done right.  As proof of this, social media sites increasingly come out at top of a Google search. What's next?  Video and photos are bound to play a greater role as equipment quality continues to go up and prices to come down.

What the wiki delivers that’s different from a search engine is “a well-packaged story,” said Michael Sha, co-founder and co-CEO of Wikinvest, a new wiki, still in beta. That speaks clearly to their market appeal. Their diversity is an equally clear indicator. The key to their quality control, the primary topic, varies:

• Wikipedia, the granddaddy of them all, was founded in 1995. It achieves quality, said Mark Pelligrini, senior editor/contributor, by enabling quality to evolve in real time through policies requiring verifiable information, a neutral point of view, accuracy on a par with the encyclopedia Britannica and peer review. All the filtering is manual.
• Newsvine, a new kind of news site, does it with an algorithm that causes content to fall away to an archive after 24 hours unless it gets enough votes, said Chris Thomas, top contributor. “Filters catch advertisers and astroturfers – corporations and other vested interests who try to create the appearance of a grassroots net movement,” he continued.            

Content is provided by both professional journalists as well as everyone else to create a comprehensive ecosystem of both subject areas and contributors that mirrors the real world. New user content lives in the “greenhouse,” a purgatory with no live links for search engines to follow. After users prove themselves, their content gains full access.       

• Wikinvest, an investment information site, has “a broad population of people who are knowledgeable about certain areas” of finance – people “passionate on the topic who desire to interact,” Mr. Sha stated. “Filtering tools bring out the best,” he added.  The tools identify the most valuable contributors, those requiring the least review. This wiki can be a great platform for asset managers, positioning them as authorities on investment strategies.

The site consists of objective summaries of companies and of investment areas, or industries, subjective bull or bear commentary on each, and descriptions of the contributors creating the content – already more than 100,000 of them.

Transparency is Wikinvest’s secret of quality control. Every edit can be tracked.

• WikiAnswers, a Q&A community acquired by Answers.com last year, consists of questions and answers, each entered by the same or different contributors, each open to edits by anyone, reported Bruce Smith, Chief Strategic Officer. Over100 supervisors – all with day jobs – control quality in their specific subject areas.

What motivates contributors? Fun – pure enjoyment - is the No. 1 reason, according to a recent MIT study, with which panelists agreed. Contributors are enthusiastic about their subjects and enjoy sharing their knowledge and interacting with like-minded individuals. In addition, they can improve themselves and advance their careers by building a reputation and even driving clients. Newsvine adds one further dimension: it shares advertising revenue with contributors whose content attracts the ads.

But how does free content generate revenue?

• Wikipedia solicits individual and corporate contributions.  It also sells feeds to subscribers, big search engines and cell phone providers. Some people license the database and post a mirror site with advertising. On-site advertising is not feasible because the community reacts “very negatively.”
• Wikinvest will test syndication. If it moves to charging for premium services, these charges would never involve content access. Advertising is a distinct possibility for the future.
• WikiAnswers will monetize with AdSense and with ads when answers can add user value by being on an iPod but, like Wikinvest, will not charge for Web access to content.
• Newsvine carries ads and pays 90 percent of ad revenue to contributors.

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Mayday or Payday?

By Eleanor Haas

Just how far-reaching is the fallout from July’s credit crash? Major financial markets firms took big hits, and two lost their CEOs – Merrill and Citi.  Morgan Stanley just lost a co-president. News commentators wonder aloud whether we’re headed for a recession. In fact, news media are full of gloom and doom. But perhaps their heads are too high up in theoretical clouds to see the reality that the sky has not fallen - smart investors are still making money.

My friend John says his HNI friends (High Net Worth Individuals) are fleeing to the security of mutual funds. My friend Jeff is having success raising a new venture fund.  My friend Arthur is judiciously managing his portfolio of real estate investments, buying or selling, wherever the best advantage lies.  Three different kinds of opportunity for three different kinds of savvy investors.

In other words, financial life goes on. maybe It’s not mayday after all – at least not yet.

Speakers from three private equity funds bore this out last evening in the course of a panel discussion on Exit Strategies and Fundraising in a Changing Environment, which was sponsored by WAVE (Women’s Association of Venture and Private Equity). Opportunities abound for those who know what they’re doing.

Timing is everything, said Raquel Palmer, a partner with KPS Capital partners, which buys troubled companies and fixes them. “We had nine exits in fourteen months,” she said, “the foreign market is still open. The US is on sale. European and Japanese strategists get good value.”

“The market is open, but selectively, by company and by sponsor” said Linda LaGorga, Managing Director, Financial Sponsors Group, Goldman Sachs, who sees good exits for strong assets in the $50 million EBITDA and above market. “The financing market is volatile. It’s there for some assets, not others. You have to get ready and time it.”

“Strategics were not hurt by the bank pull-back on financing, as private equity funds were,” said Bill Jarrett, Managing Director, Lower Middle Market, Goldsmith Agio Helms/Lazard Middle Market. “We’re more selective. Some industries are out of favor – housing. Service industries are dong well, for companies with good cash flow and EBITDA.”

Services with good cash flow and steady growth, which are not cyclical, sell well in this market, and buyers are out there, agreed Ms. Gorga. Large private equity funds want to buy by the end of 2008, so they play at the lower level, $750 million, look at smaller assets in order to put money to work. PIPES are another way to put equity to work now and be in a good position later.

Niche companies in their segments - often with consolidation - are a good bet. Mr. Jarrett sees “lots of buyers for rollups and synergistic acquisitions. An international component to the transaction can be a deal sweetener – a foreign buyer or an international component of the company.

What private equity buyers have to look at in making an investment is the exit opportunities, so they look for companies with strong market share – a good niche player with a franchise, Ms. Palmer pointed out.

What about valuation, pricing and terms?

• There’s still a backlog of leveraged loans, and this      impacts big buyouts, as does concern about a potential recession and the      volatility of the housing market. Most deals in the $50 million and above market have covenants,      going back to the more traditional deal. Leverage has come down. It’s      2002 all over again. The market      will recover.
• Valuations are down. There’s a shifting of risk – escrows, warrants, liabilities. Sellers may take lower multiples if the      terms remove certain escrow commitments. Seller financing is coming back, which can help bridge the gap      between expectations and valuations.
• The lower middle market depends on smaller banks for      financing. The pullback is at the      high end of the market, not this one, where lending may now be a 3 times      EBITDA as opposed to 3.5 times. Smaller banks are cautious now, but they’re still financing      transactions.

What kinds of deals have you had since the credit crisis began?

• KPS is having “great deal flow” because companies      can’t readily get bailout funds. Two of four companies KPS is looking at are operating in Chapter      11. This makes them easy to clean      up and recapitalize. KPS expects to      see more of this. Investment banks      used to dictate pricing with staple financing, but people are not seeing      these any more.
• The Middle East has huge amounts of money -  multiples of the largest US funds - and offers good ways to sell a company. New lenders are stepping up – new banks are entering the market. Mezzanine funds are key. Goldman has a $9 billion fund that is stepping in and taking a subordinated part of the capital structure.
• Typical deals take six months but now often take longer. On the other hand, a strategic - a domestic strategic – just did a deal at 10 times revenue in two months – with no book. International buyers take longer.

What about buy side opportunities?

• There’s still a lot of liquidity in the market. People will have to put in more equity,      and sellers have to have more reasonable expectations. Private equity funds raise funds to buy      debt and then take on debt to do this. That’s high risk. Many      private equity funds won’t be successful raising funds because they can’t differentiate or create value for investors. Smaller PEs will vanish.
• It’s a good time to buy a business and to buy it      cheaper, and lots of companies in distress is an incentive to buy. Hedge funds are tempted. Their managers know how to run funds but      lack experience with Chapter 11 and restructuring. They’re getting smart about Chapter 11      strategies with distressed companies.
• Seller expectations will come down, i.e., valuations. The credit market will stabilize. 2002 buyers did very well. You just can’t predict the timing of the cycle.
• PEs continue raising a lot of money. This adds to the buy side. Boomers are aging, are concerned about possible increases in the capital gains tax and so want to sell now. Corporate performance is strong. The stock market is off but companies still make acquisitions. Smaller banks will continue to lend.

To quote the French, the more things change, the more they are the same. Those who remember 2002 and other periods like this have the confidence to make wise decisions. Those who know what they’re doing do it right. For them, it’s payday. For the unknowing or under experienced, beware. For them, it could well be mayday.

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Advertising is dead! Long live advertising!

By Eleanor Haas

As everybody knows, paid media advertising is declining in effectiveness. Why? Because audiences have too many options. They have more and more media to choose among. They are deluged with messages – to the point of information overload. They have found ways to skip TV ads.  And they are captivated by new kinds of media, such as You Tube and Facebook.

Three technology-enabled alternatives to the status quo were discussed this morning by a panel sponsored by the law firm Frankfurt Kurnit Klein & Selz. The focus was on who owns creative content and how these ideas are paid for. What the new accepted practices will be will have to evolve over time. But clearly, advertising is undergoing a metamorphosis.

The challenge is what it has always been: how to come up with a compelling creative concept that will make the cash register ring for a product. Technology has added a new twist. Aren’t ads simply a form of content? Can’t they be interactive games or songs? How does user-generated content figure in this as opposed to ads created by professionals?

But once ads become content, the creative brains behind them take on an importance greater than that of a hired hand, something comparable to that of a star screen writer or songwriter. That’s when you get into serious questions of intellectual property ownership and compensation.

One new direction comes from OpenAd.net, which calls itself “the world's first online marketplace for buying and selling advertising, marketing and design ideas.” OpenAd wants to democratize the ad businesses by enabling students, professional free-lancers and ad agencies to compete side by side. In addition, it wants to give creatives a chance to benefit financially from really great ideas that work.

Creatives all over the world who have registered with OpenAd create ads in response to briefs from ad agencies or advertisers. Buyers who have enrolled as OpenAd members get access to diverse creative approaches and can license these ideas as they use them. Creatives are compensated proportionate to the value the buyer perceives in their ideas - as expressed in frequency of use - as opposed to the traditional one-time fee based on time and materials.

Grey Worldwide has been pioneering another new direction for at least five years: creating ad content as branded entertainment. It’s also helping brands get ownership of songs they use as well as using songs as key branding tools. The agency becomes the brand’s A&R consultant, proposing artists and songs as well as their interaction with the brand. In one ad, for example, Rihanna plugs both her own album and Cover Girl products in a format reminiscent of MTV. In another the Black Eyed Peas chant hip hop lyrics owned by Dr. Pepper to promote sales of Dr. Pepper soft drinks.

GO Film, a production company, collaborated with McCann Erickson to produce two music videos by Christopher Guest that pitch Intel processors through original songs that incorporate technical terms specified by Intel. The videos, which were posted on various techie and non-techie Web sites, are designed to deliver pure entertainment value as a basis for an enhanced brand image. One video tells a story about a soft-rock singer – representing Intel software – and a hard-rock singer – representing Intel hardware – and the pleasure they bring their audience of office workers.

Advertising is still a message controlled by a sponsor who is identified and who pays for distribution. But the nature of the message is taking on radical new dimensions, dimensions that at times seem to erase the line between entertainment and advertising.  The times they are a'changing!

 

 

Israeli Technology Delivers a Brave New World to Advertising

By Eleanor Haas

NY:MIEG, a media information exchange group, billed the breakfast event as “Cutting Edge Digital Media Trends featuring Israeli Technology Innovators.” “Cutting Edge Digital Advertising Trends” would have been more accurate.

What trends surfaced?

1. The future of advertising lies in accountability – advertising that can be precisely targeted, tracked and measured – which is to say, digital advertising.
2. Internet content will be increasingly in full-motion video, not text, as today.
3. To quote John Dillinger, “I rob banks because that’s where the money is” – and Israeli technology entrepreneurs come to New York City – not Silicon Valley - because that’s where their media customers and financial sources are. R&D tends to stay in Israel.

4. Mobile is what’s next for interactive advertising. Consumers will be connected through a device that’s always on wherever they are.

5. For new opportunities, look to services that we pay for at present to be liberated – such as what Jingle Networks is doing to “destroy a fat existing market” for telephone directory services and Skype gives users a way to bypass costly phone networks. It’s likely people will in time be paid to carry a cell phone rather than having to pay for it.
6. Telecom carriers are afraid of becoming just a pipe, like the ISPs before them, but it’s only a question of how and when the rules of the game change so that they have no choice but to go with a free operating system. Google may well be the catalyst for this.
7. Out-of-home advertising, once largely billboards, will become increasingly digital and will expand exponentially. (Taxi Tech is one example – I loathe it, as does the man sitting next to me but younger people who have grown used to having in-your-face advertising 24/7 may well take it in stride and make us seem like fossils from a bygone age of more gracious – and private - living.)

Five Israeli innovators told their stories:

• AlmondNet, Inc., (www.almondnet.com) has helped pioneer behavioral targeting and profile-based advertising since 1998 – targeting interactive ads to viewers based on a profile of   past viewing behavior. (I’m sure this works to at least some extent for travel, finance and sports, but they’ll never catch me! My viewing is far too diverse – and seldom in these easily tracked areas.)
• Pando Networks (www.pandonetworks.com) has established a managed, hybrid peer-to-peer content (and ad) delivery platform designed to maintain central control of content distribution. It enables viewers to multisource online video and music content by downloading Pando’s software, which, in turn, makes it possible to use existing content delivery networks (CDNs) to support viewers’ bandwidth. (Napster put control in the hands of viewers, who used it to steal music and video content. Pando gives control to the content owner.)
• Outbrain, Inc. (www.outbrain.com) is developing a rating and recommendation platform for blogs and RSS feeds along the lines of what Amazon.com does. (As with behavioral profiling, this just doesn't work with viewers who have insatiable curiosity about a broad range of subjects.  Amazon’s efforts to entice me with recommendations seem laughable and irrelevant !)
• Taxi Tech (www.taxitc.com) developed the touch-screen systems we’ve begun seeing in New        York City taxis, which track locations through GPS technology, provide destination and weather information (and ads) and enable passengers to pay their fares with a credit card. (You’ve already read where I stand on taxi video screens – and if cab drivers don't have better luck with credit cards than e-commerce vendors have had, it could well be the credit card companies that put an end to this.)
• Aditall (www.aditall.com) makes professional interactive video ad creation, production and delivery cost-effective by automating creation and production and partnering with distribution companies to deliver the ads by demographics and interest to relevant target audiences.  (User-generated advertising! I guess it was inevitable!)

Intel Positions Its New Chip as Eco-Responsible

By Eleanor Haas

“Eco-friendly” comes first in Intel’s description of its new 45 nanometer processors – “eco-friendly, faster and `cooler’” is the phrase. That’s good news for environmentally conscious customers and good business for Intel.

On technical achievement alone, the new processors are impressive enough for Intel Co-Founder Gordon Moore to call this the biggest transistor advancements in 40 years. Breakthroughs in manufacturing and materials boost performance, lower power consumption and open the door to future products that are even smaller and more cost-effective.

What makes the new chips faster is Intel’s new manufacturing process, which makes it easier to squeeze increasing numbers of electronic brains on a chip by shrinking circuitry dimensions to 45 manometers from 65 manometers – a nanometer is a billionth of a meter. The new processors are said to have nearly twice the transistor density of previous chips built on the company’s 65 nm technology. This brings the number of transistors up to 820 million for quad-core processors that use the new formula.

What makes the new chips `cooler’ and therefore more eco-friendly is Intel’s all-new transistor formula, which reduces electricity leakage – something that has become an increasingly serious issue as parts of tiny switches have become smaller and smaller.

Increasing energy efficiency has become key to IT product design not only because of the environmental benefits but because of cost savings for users. In addition, environmental friendliness has been mandated by regulatory bodies around the world.

Whatever the motivation, it’s good to see environmental considerations the No. 1 selling point.

Technology for Tomorrow’s Winners

By Eleanor Haas

Change or die. The mandate to update IT infrastructures comes from today’s intense competitive challenges. A recently posted IBM white paper – Into the Future: The Technology Fast Track for Financial Markets (http://www-03.ibm.com/industries/financialservices/doc/content/bin/fss_fm_ins_into_the_future.pdf) - focuses on financial markets, as increasing numbers of equities trade orders are executed using algorithms and the data volume explosions stresses out front-office systems. But virtually all business sectors are experiencing both unprecedented competitive pressures and an exponential explosion in the volume of data being generated. And this calls for the analytic capabilities high performance computing (HPC) provides. 

The good news is that HPC is no longer affordable only by the US Government and well-financed research organizations. It has become an option for small-to-mid-sized businesses with modest budgets in the tens of thousands of dollars – wherever computational problems require significant processing power in order to have rapid access to very large amounts of data that must be processed quickly.

Hedge funds could not survive without HPC, and, when you think of it, they may have huge assets under management but are not large organizations. Biotech companies too are small and equally dependent on HPC.

Intel and AMD have brought processor costs down, and major hardware vendors, such as IBM and HP, now offer products specifically designed for smaller organizations. Applications developers too have designed products for smaller environments. To complete the picture, a great many tools now exist to enable systems that can be easily operated and maintained by companies that are not expert in IT and computing.

Companies still need to determine the best technology solution for their particular situation and then to structure a fine-tuned infrastructure of components. But now HPC is there for the taking, and taking it could have a lot to do with who makes it into the ranks of the next generation of winners.

GE Adopts Extreme Partnering

By Eleanor Haas

GE appears to be once again proving a new standard - this time having to do with partnering.  Technology innovators often try to use partnering as a key growth strategy.  They use it  to achieve  R&D, marketing/distribution and/or financing goals.   Sadly, too many blunder in without fully appreciating the complex art and science of structuring and operating strategic relationships.  The result is that the majority fail.  One estimate is that 70 percent overall fail; other, that 50 percent fail within three years.

Worst of all, they fail for preventable reasons: Mismatched companies, unmanaged expectations, lack of competency in developing the relationship and/or lack of competency in managing the processes and relationships needed for implementation.

GE is showing another side of the coin:  partnering can work successfully when you do it right.  We found it stunning to discover the extent to which industry leader GE has turned around from a “do it my way” approach to partner on an unprecedented scale. “It’s better to partner with the No. 3 company that wants to be No. 1 than to buy a tiny company or go it alone,” says CEO Jeff Immelt.

What’s more, GE is using joint ventures as a first choice to test new markets, not as a last resort Even VC firms are part of this strategy. Teams of GE researchers are today working with VC firms to discover technologies the company may want, so GE is investing in start-ups as a result. Is this the same company that has asserted for years that its management approach, and only its management approach, was the way to go?

We think partnering represents the future for any and all growth companies. To succeed requires a detailed planning process, relentless patience in seeking out the right partners and the right deals and, finally, tenacious commitment to operating the relationship as professionally as if it were an entity in its own right – because that’s what it is.