Archive / July, 2009

Blackboard E-Learning Patent Revoked In Courts

29 Jul 09 / by Mark Bao / Business / / Comments

Gist: Blackboard got 0wned. (courtesy jlb)

Blackboard’s (BBBB) attempt to patent an entire sector, the e-learning sector, in Patent #6988138 “Internet-based education support system and methods” which they used to essentially sue the other for-profit competitors in the area, was struck down yesterday. The patent itself seemed like it was broadly structured for it to become a) a monopoly in the e-learning market and b) a monopoly by vehicle of being a patent troll and suing everyone. The main competitor they were suing was LMS provider Desire2Learn.

An excerpt of the patent is as follows:

A system and methods for implementing education online by providing institutions with the means for allowing the creation of courses to be taken by students online, the courses including assignments, announcements, course materials, chat and whiteboard facilities, and the like, all of which are available to the students over a network such as the Internet. (via)

The real clincher in the article is when TechDirt makes the important observation:

Only took a few years and millions of dollars wasted in legal fees for Desire2Learn. Too bad such money couldn’t have gone towards actually improving e-learning.

Animosity and belligerence only creates loss of value.

(via TechDirt, thanks Jason L. Baptiste)

When Business Alliances Become Ugly: Apple and Google Edition

28 Jul 09 / by Mark Bao / Business / / Comments

attappleA few days ago, Apple (AAPL) removed various Google Voice apps from their iPhone App Store, as well as (speculated) Google’s own official Google Voice iPhone app, as they created in conjunction with the Google Voice apps for BlackBerry. Google (GOOG) Voice allows users to have a single phone number with Google, that allows it to ring multiple phones at once, receive voicemail in audio and transcribed text form, SMS sent through, and more. Apple said that the applications were duplicating the iPhone’s own functionality.

This is when business relationships, and specifically friendships or alliances, become ugly. Google’s CEO Eric Schmidt serves on Apple’s Board of Directors, and the relationship between the companies have been historically amiable. The two collaborated on the iPhone’s Google Maps feature as well as countless other Apple/Google related escapades in the past.

Alliances between technology companies can become rocky, as been described here. The only other alliance related to Apple’s Board of Directors is probably Intuit, which has a fat chance of being offended by an Apple action. (The other executives on Apple’s Board of Directors are in the sectors of clothing, skin care, biotech, and the like.) Although Eric Schmidt’s interest and influence over Apple as part of their Board of Directors is most likely limited, Schmidt must not be the happiest with the decision to pull the application.

What’s more important is the big picture: Apple is fearing Google is becoming a competitor in the area, because of their seemingly competing interests in the voice space. (Which makes absolutely no sense, because Google Voice is not replacing voice communication, for the time being, but facilitating improvements to it, which increases use of the voice network.) But it’s not really Apple for the most part.

It all boils down to one important alliance that changed a lot of things: AT&T (NYSE:T). Apple’s alliance (read: exclusivity contract) with AT&T constricts it within the rules of AT&T to validate that agreement, which I imagine wasn’t an easy thing to pound out. AT&T’s influence over the iPhone product and Apple in general is immense, and essentially caused the conflict of interest with Google.

Recently, Apple shafted Google by forcing them to make their new Latitude iPhone application an iPhone web app only, instead of a full-fledged iPhone app. As such, the application is limited in functionality. Apple reported that it would be confused with the Maps app.

This is part of an ongoing, and ongrowing feud between Apple and Google: Google now has their own mobile operating system and is constantly venturing into Apple territory. Let’s see how Schmidt responds to this.

It’s hard to choose friends when the candidates are at war.

Amazon.com Acquires Zappos, Zappos Becomes Subsidary, No Layoffs

22 Jul 09 / by Mark Bao / Business / / Comments

zappos-logoGist: Amazon acquires Zappos. Zappos management staying, they’re becoming a wholly owned subsidary. No changes at Zappos, no layoffs. Very fitting acquisition for both companies and will result in many benefits to both.

They did it — Amazon.com (AMZN) acquired Zappos today. The two online retail megagiants combined today, with Zappos as a legally and wholly owned subsidary of Amazon. Zappos’s mangement isn’t leaving, nor are any layoffs being done, in an acquisition that (I think) is beneficial to everyone.

Zappos is known for their focus on customer service (their slogan is Powered by Service), and it shows as they constantly receive rave reviews for their customer service on the web, as well as appreciation for their regular process of upgrading shipping to overnight for free. Their corporate culture is light and they maintain an open culture. Similarly, Amazon is also an e-tailer respected by its customers, with good customer support, fast shipping, openish culture, and their cloud services at Amazon Web Services.

The acquisition represents a hand-in-glove combination of two differently-focused companies: Amazon, while they do have a selection of clothing and apparel, doesn’t have the selection of Zappos, which is a footwear plus clothing focused e-tailer. The combination of the two will allow them to share products and leads within their environment, leading to an improved experience for both of their customer bases.

All in all, an excellent acquisition. Zappos CEO Tony Hsieh has written a detailed letter about the definitive agreement to their employees, released to the public, here.

Why the Internet is Dead as an Investment (if it even is)

19 Jul 09 / by Mark Bao / Analysis, Business / / Comments

webvanGist: Investor Jay Altucher says the internet is dead as an investment. Internet may be a dead investment, but only if others are. Old media certainly isn’t immune either. However, the internet does suffer from drawbacks that do make it a prime easy shot for “this sector is dead”ing: immediate accessibility, lax focus on profits, the free vibe, and the IPO market being as exciting as drying paint.

In a Dow Jones Newswire Column, asset management investor Jay Altucher argues that the internet is dead as an investment. He cites public companies in the technology/internet sector that aren’t really doing so well, despite looking it, as he says:

Time Warner (TWX) would rather keep their legacy old-media businesses like People magazine than hold onto one of the biggest Internet companies out there, AOL. And News Corp. (NWSA) is shaking up its MySpace business as it figures out its next steps. (News Corp. owns Dow Jones, publisher of this newswire.) Microsoft (MSFT) has spent billions on Internet strategy without a dime of profit. And even Google (GOOG) can’t seem to find any other business model other than the one they stumbled into when they bought Applied Semantics in 2001 that had a little piece of software called AdSense. And the new guys: Twitter and Facebook are still scrambling for profits despite blistering usage growth.

Altucher cites these examples to substantiate that the internet is a dead sector that, while the public requires, he doesn’t require in his portfolio. The internet sector seems like it doesn’t make any money, or at the best, has P/Es of 15 (that’s… alright?).

What about the nuts-and-bolts guys? Cisco (CSCO), at 15 times earnings, trades in line with the S&P 500. Buy them when they start giving a steady dividend.

This is a pretty interesting argument that to the reader instills the idea that the internet is not an excellent sector to invest in. However, you’ll also see old-media struggling with revenue generation. For a staggering example, try the New York Times Company (NYT) that since Jan 2008 has seen its stock drop 70%, and hasn’t paid a dividend for nine months after paying dividends every 3 months since 1987.

Altucher says that the new companies to invest in, instead of the “…infinite margins, 1,000% productivity gains, and growth of market throughout the universe…” kind of securities that are apparently representative of internet stocks, are the “boring,” but effective, stimulus receivers.

However, there are some problems that skew the public perception of the market:

  1. The internet is immediately accessible. The products of a certain public company in the internet sector are, for the most part, available online. This gives a close connection between investor and investment. Whereas one of the examples he cites, “…LNN, Lindsay Corporation, that does boring stuff like highway repair (they make those orange cones) and helps upgrade water infrastructure” — this is certainly not very accessible to the investor. Perhaps a bit different story if you turn off your mind and simply invest on fundamentals, but the appeal of instantaneous connection on the internet gives a different mindset to the investor.
  2. The real deal is profits. The internet has few monetization channels, right? Right? Not true, but that’s the vibe. Nothing but the user is stopping a web company from having the user take their wallet out and pay hard cash. It’s not just advertising, but that’s the only thing we’re seeing from some of the companies that Altucher cites: Microsoft with their advertising strategy, Google with their advertising strategy (and almost literally not making money from anything else; on the contrary, being in the red), and Twitter and Facebook. Advertising isn’t the only way. It’s a way, but it’s a way that requires volume and very smart execution.
  3. The free vibe isn’t over, either. Free is still an extremely popular option for startups that most take, and that some require to generate scale and volume. However, things have to stop somewhere, and that’s where most startups make mistakes. (And honestly, it’s very, very, very difficult to get it right.)
  4. I can count how many notable IPOs there have been this year on one hand. It’s simply not the environment for IPOs, or even funding at all.

Startup Takeaway: Monetize. Now.

Google’s Brilliant Cloud Conversion Plan

18 Jul 09 / by Mark Bao / Startups, Technology / / Comments

google_appsGist: Google gives campuses free, branded, ad-free usage of Google Apps, their cloud offering, familiarizing the students with the product, which will result in workplace purchases (which do generate revenue for Google.) They hold almost a 60% market share in campuses that recently migrated to cloud email and services options. Google’s smart in targeting campuses: they are also the perfect adoption point for Google Chrome OS.

Advertising Age recently profiled Google’s brilliant Cloud conversion plan targeting college campuses. It’s a fantastic article documenting how Google is going for wide adoption of their OS.

For more than two years, Google has approached colleges and universities with a near-unbeatable offer: provide unlimited hosted e-mail and other applications, all branded by the institution and delivered free of charge.

The colleges take the hook of using Google (GOOG) for replacing their IT infrastructure, and it gives an immense cost-benefit. AdAge says that Google signs up 70 to 75 campuses per quarter (!), an astounding rate, given how large of a market they have. With a total United States number of two-year and four-year colleges of approximately 4,000, Google’s cloud offering is gaining 2% market share each quarter (not to mention word-of-mouth marketing for a perhaps increasing derivative of market share gain.)

Indeed, Google already holds incredible market share in the campus cloud market, as the article quotes: “On campus, Google is making inroads. In its annual study of the role of technology on campus, the Campus Computing Project found that two-fifths of participating campuses had either migrated to outsourced e-mail and services or planned to. Of those, 56.5% opted for Google, 38.4% for Microsoft (MSFT) and 4.8% for Zimbra, an open-source software maker owned by Yahoo (YHOO).”

Not only does the campus receive free, branded, and ad-free email, calendar, and various other services from Google through the cloud, Google also gains three things. One, familiarity of students to the service. Two, and connected to one, future use of the Google cloud offerings on their own after college. Three, knowledge of this cloud service, and with a positive experience, this may transfer into the workplace which will allow Google to convert more business (profit-making) customers for their Google Apps cloud offering. (Interestingly, this is similar to why the piracy of Photoshop is beneficial for the application: users of Photoshop make their workplace aware of the positives of the software package, and the workplace purchase the application, generating revenue for Adobe (ADBE).)

Furthermore, these campuses are the perfect place to target for the adoption of Google Chrome OS. The cloud-only, thin-client offering (discussed here in Google Chrome OS: Google’s Master Plan) to run on netbooks is a perfect offering for college students running on the cheap: cheap netbooks, open-source software, Google Apps cloud including Google Docs, Google Calendar, Gmail, and all other university-branded solutions that are already available to them, and Amazon one-click delivery of ramen. Google is undoubtedly aware of campuses as the perfect adopter of Google Chrome OS, and they’re smart to target the campus at first for a can’t-say-no adoption offer for Google Apps.

Startup Takeaway: Although Google presents itself as an immovable market leader (and offering these services for free, even), take away the power of other methods of marketing. Google’s marketing play here is brilliant: target users from the ground up, by offering an exceptional service for a price that can’t be argued against (free). Find other sources of marketing that can be used to bring, primarily, awareness, and let the product follow through for a positive experience.

Seed Funding: Why Regional Doesn’t Work

18 Jul 09 / by Mark Bao / Startups / / Comments

Everyone wants a Y Combinator in their town.  I’d love to see one in Miami or other cities not known for being startup hubs, like Chicago.

I recently proofread an article for Jason L. Baptiste on why regional seed funding doesn’t work. Spot on (except with huge business hubs, such as NYC.) Check it out.

Y Combinator Winter 2010 Applications Now Open

14 Jul 09 / by Mark Bao / Startups / / Comments

Picture 16Seed funding and mentoring firm Y Combinator has now opened their Winter 2010 application. They’ve changed their funding amount: previously their funding was $5k + $5k per founder, but now they are investing $10k + $3k per founder.

Effective winter 2010 we’re changing the amounts we invest. Previously we invested $5k + $5k per founder. So a startup with 1 founder used to get $10k, 2 $15k, 3 $20k, and 4 $25k. (We’ve never funded a startup with more than 4 founders.)

Starting in winter 2010, we’re going to invest $11k + $3k per founder, for up to 3 founders. So now 1 founder will get $14k, 2 $17k, 3 $20k, and 4 $20k.

Y Combinator usually takes “6-7%” of the company, as stated on the application page.

They may also ask Y Combinator alumni to review applications with them, as last year they recieved hundreds of applications. And starting early this year, they’ve ended their Boston program and only had a Bay Area (specif. Mountain View, CA) program, which continues for Winter 2010. The deadline is 10pm PST, October 26, 2009.

Nuance Acquires Jott, Hope for Recession-Era Acquisitions

14 Jul 09 / by Mark Bao / Business, Startups / / Comments

nuance-jottGist: Nuance Communications, leader in speech recognition, acquires consumer mobile/speech rec startup Jott. Expanding into enterprise. Excellent match, since Nuance should have entered mobile a long time ago.

Nuance Communications (NUAN) acquired consumer mobile startup Jott today, another important startup acquisition, breaking another relatively quiet purchase time environment. Jott is a mobile productivity tool for consumers with speech-to-text technology. Nuance Communications is (literally) the leader in speech-to-text technology, their flagship consumer and enterprise product being Dragon NaturallySpeaking with a powerful speech recognition engine.

This is a great acquisition. The obvious route for speech recognition is by voice on the phone, and I’m not sure why Nuance hasn’t tackled this market already. Jott and Nuance are a match made in heaven.

Nuance says that they plan on building an enterprise solution with Jott. Great idea. Hopefully, though, they keep the huge consumer portion (and market and expand the consumer Jott as well, as the startup gains more leverage within the corporation.)

Entrepreneurs: there’s hope yet for recession-era acquisitions.

YouTube Dropping Support for IE6, Good for Regular Users, Doesn’t Matter in Corporate

14 Jul 09 / by Mark Bao / Web / / Comments

youtubelogoGist: YouTube no longer supporting IE6 in the near future. Will affect some consumer users. Won’t affect corporate.

Today, TechCrunch reported that YouTube was to drop support for Microsoft (MSFT)’s archaic browser Internet Explorer 6. YouTube issued a notice to IE6 users that support for the browser was to be discontinued soon. While a fantastic move by Google (GOOG) for not only themselves but for web designers and developers and end-users alike, there’s no concrete way to quantify how much of an effect eradication of IE6 from YouTube would

First, the good news. The good news is that the regular internet crowd still using IE6 and that has not upgraded already to IE7 or IE8 will most likely upgrade to IE7/8 or a newer browser. YouTube’s move will deal the death blow to IE6 in the consumer space.

Unfortunately, corporate and business users will be with IE6 for most likely years to come. The browser, released in 2001, is what IT departments depend on still tot his day. So if you’re building web applications or HypertextApplications for the business/corporate sector, IE6 is still an absolute necessity: corporate environments won’t be adamant about upgrading their browsers so they can use YouTube or Digg.

I’m going to guess that the percentage of IE6 users will decrease by 20% (from 9.37% to 7.5%). Strangely, Microsoft doesn’t actually seem to have any problem converting IE7 users to IE8—IE7 went from 53% to 30%, with most upgrading to IE8 which now has a 15% market share. Source.

Digg May Deprecate IE6 Support

11 Jul 09 / by Mark Bao / General / / Comments

ie_logoGist: Digg thinking about removing certain features for IE6 users to lessen time needed to support the browser. Through a survey, they concluded that 76% of IE6 users didn’t really have a choice to use the browser, whether imposed by workplace or otherwise. 37signals removed support for IE6 in 2008. However, both userbases may be tech-savvy skewed, so therefore may know Firefox and its improvements better.

Digg announced today that they were thinking about dropping certain logged-in features for Internet Explorer 6 users, in order to refrain from wasting an non-proportional amount of time, money, and resources supporting the archaic browser. Microsoft (MSFT) Internet Explorer 6, released in 2001, is an eight-year-old browser with notoriously abysmal web standards compliance and security. In a user study that Digg performed on their IE6 users, they concluded that most IE6 users didn’t have a choice as to which browser they used, and only about 24% used IE6 by choice, and that telling people to upgrade to IE6 is not effective.

digg_chart

A similar move was implemented by web small business services provider 37signals as they removed support for IE6 to free up time wasted performing compatibility for IE6.

It is crucial to note, however, that Digg’s general userbase is more technology-savvy than the standard index of the average website. Perhaps it is the same with 37signals as well. In other words, I don’t see Goldman Sachs deprecating IE6 support anytime soon.

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