All of Facebook's growth comes from mobile

Facebook had an earnings call, and Business Insider has put together a chart showing their composition of revenue sources:


Quite simply: Absolutely all their revenue growth the last few years comes from mobile. BI focuses on how well they have managed the transition into being mobile-centric, which is true. In any case it is stunning how important the mobile part is for Facebook in particular and ad revenue in general.

Imperfections of personalized advertising

I am pretty excited about the possibilities of blending online and physical traces to deliver more relevant content and ads. So Kjartan and the guys at Unacast are chasing a huge opportunity for sure.

That being said, there are certainly smaller fish to fry - so to speak - first, because even the current cutting edge personalization engines (of the likes of Google) are so far from perfect.  I would even say they are totally broken. A few samples from the last two weeks:

• I was on a day trip to a city in the south of our country last week. On the airport I briefly checked if it made sense to rent a car instead of jump into a taxi or bus (I was picked up in the customer's Tesla in the end...). Since then, there have been ads for car rental in that particular city all over the Internet. 
• The last thing I bought on DX.com is shown me all the time, and the same applies to my last MPX.no purchase. Since I just bought these things, the ads are less relevant than ever.
• My Google Apps CRM shows up in ads for me all over the place, even if I am already using it daily.

As an engineer, I have no problem understanding that it is difficult to know what is (still) relevant for me. Some of the cases would require deep integration into ecommerce systems connected to ad platforms, and possibly raise additional privacy issues. But as it is, I would say that personalization in these cases make the ads less valuable than if they were not personalized. 

So before having my browsing of cars in the physical world affect the ads I see online, I would like to see the more basic problem fixed. Maybe the solution will come from the same provider (and I am sure it will be bought by Google) that cracks the "beacon code"?

Teaching what cannot be taught?

Today I started a teaching gig in Entrepreneurship at NITH again. Hopefully it is going to be good fun (at least for me) and I try to make it as practical as possible. The students will work out their own Business Model Canvas and hopefully get experimenting (they are going to hear me quote Steve Blank's "get the heck out of the office" more, in fact I said it twice already...) for real as soon as possible.

Some groups have already founded companies, while for others it will remain mostly a normal school subject. It will be a challenge to make it interesting for such a diverse group of people, but like I said in my intro, I truly think (even if it may sound a bit cheesy) that if they'll give it all, it will for sure make it the best school subject they ever had, and it might even be life-changing if they come out in the other with a successful company founded.

The group is a bit large, so the final pitch/presentation is going to be done via handing in a video. Goods and bads about that, but will be fun to see what the students come up with. I told them "screen capture of your presentation with voiceover is fine", but I certainly hope some of them will take the opportunity to get a bit more creative.

Trying to explain stuff is at least a good way to force yourself to think stuff through, which is also my main motivation for doing these gigs (besides fun and what one might call the CSR side of it - the pay is truly awful). And this semester I will be doing much of the same exercise my students are doing, but for real with my own company (as mentioned in the previous post, I will be going to a tech incubator in Palo Alto with TapBookAuthor this autumn). After the best summer in 30 years in Norway weather-wise, let's hope I'll experience the entrepreneurial equivalent this autumn both with my company and my students.

PS. My answer to my own rhetorical question, if you can really teach entrepreneurship, was that I can at least try to teach them a bunch of techniques that will be very useful for them as entrepreneurs...

WeVideo got the time to succeed - and boy they seem to use it

WeVideo just raised $19M from a venture capital firm. Knowing these VC guys are not playing the 50% increase game, this certainly raised the bar for WeVideo - I guess to be a real success now by their definitions, we are talking $250M+ valuation or so... Crazy. And crazy exciting. I do of course know that the reason for such multiples is that the likelihood of going to a $0 valuation is also very real. Any way you put it, this is a huge compliment to the team lead by Bjørn and Jostein and a great opportunity to take a real shot at being and staying number one video editor in the cloud.

Just after the news about the funding, WeVideo announced their extended partnership with Google (they are already on YouTube.com/create) and that WeVideo was compatible with Google Drive from launch day. And this week, Disney launched their Avengers Remix campaign powered by WeVideo. And not long before that, WeVideo launched their first mobile app that seemlessly let you add clips from a mobile device into a collaborative video project. Busy bees indeed.

And a last quick note: This week a book co-authored by Andreas Goeldi, who I went to MIT Sloan with, came out; Video Marketing for Dummies. Reportedly he says about WeVideo that it is "Likely the closest thing to a full-blown video editing application in the cloud". Couldn't agree more!

Full disclosure: I am not exactly neutral to WeVideo. I am a member of the board of Inspera, the company that developed the technology in WeVideo and spun it off as a separate company. That being said, my very tiny stock ownership in Inspera (that is now a minority shareholder in WeVideo) is not likely to make me truly rich, even if the ball flies totally out of the park. But rich on experiences for sure! Through my company Innovation Consulting I am playing a modest role in making WeVideo tick and appreciate both the forward looking days and the more firefighting-style we might have from time to time in the run-up to a big launch.

Competing with "Free"

My company has spent the last two and a half years developing what we think is a kick-ass publishing tool (authoring tool) for apps in general, and school book apps in particular[1]. About a month ago iBooks Author was launched by Apple, with no cost for the product itself.

Having a competitor launch a free product, aimed right at the niche where you have invested thousands of hours, is seldom good news. And when the competitor is possibly the world's most admired for innovation (I for one find it absolutely stunning that they still grow almost like a startup and with profits the size of Google's revenues!), and at times the most valuable company in the world, is all lost? As it turns out: No.

I will freely admit that I was nervous before the product launch, given the rumours (which were true). And five minutes into the launch video, I was scared. But five hours later, some analysis helped calm the nerves. I created this little matrix, you can click to enlarge it, showing that the lunch was clearly not free this time (either):

So for the time being, I see the launch as positive. The product and the marketing around it clearly highlights the need for innovations in apps for school books (and maybe broader in learning) and with the product's current shortcomings, it is not that hard to still try to sell "an expensive alternative". But if iBooks Author's output products ran smoothly on Android with no restrictions on the content produced, I would probably go back to being scared. Or maybe just work even harder on the online-collaborative angle. Go David against the innovation Goliat!

[1] - This sketch, again click to view larger version, shows the principle of how the system works:

A more technical version is that the core is HTML5-based. When building the app we pull out the HTML5 content, wrap it with a set of native extensions (using PhoneGap) and build for the relevant iOS (mostly iPad, but also iPhones for books for children) or Android platform.

The response of a potential customer being shown it live in a meeting previous week was "Magic!". I smiled.

Getting beyond the first sale for a micro ISV

...or: putting a long time failed goal public.

In 1999, about the time I was ending my first year in college, I had created a few very simple Java-based games and established my first company. I discussed with my girlfriend (now wife) who was skeptical about paying for a domain/web site, but we (?) decided to do it. Then, with a strike of luck, the largest telecommunications company in Norway - Telenor - found and liked the games and wanted them and similar games for their ISDN-touch screen platform. In total I created 7 games. The payment wouldn't impress anyone (certainly not me) too much today, but as a student it was definitely significant and I also managed to do the deal on a yearly subscription basis rather than as a single payment.

Getting that big customer will probably be classified as luck. The problem is that a micro ISV[1] cannot rely only on pure luck in the long term. Thus the key question becomes: How can you increase the chances of being lucky? And more specifically, how can you get beyond that first project sale?

In my experience recurring revenues are often calculated when pricing a complex software projects (ever heard the "but the next similar project will be much more profitable", only to find that the next project was not that similar in the end?). To talk about “productization” is easy, to successfully do it is not.

I will argue that you can increase the chances of being lucky by (1) securing your rights to the product, (2) thinking about it like a product, (3) building it as a real product and finally by (4) doing the marketing for the product - often only with the guerilla methods available to small firms.

I will go through each of these four points in order and I will use a system I made the first version of in 2003 as a working example. This system is a web-based recruitment system currently used by a single recruitment agency. I will try to see where I did wrong, comments regarding the specific project is inline in italic, and hopefully get some of it right in the aftermath of this blog post. Since I have NOT been successful in trying to sell this to customers beyond the first one, you are now watching live the first structured attempt at changing this (and could argue who am I to write this blog post[2]…).

By putting the failure public, will I finally manage to do it? Anyway, on to the four components I will go through, starting with the intellectual property rights (IPR).

Secure your rights

This might be basic, but if you plan to reuse the software from a project either in other projects or even in a product you must get the IPR correct from day 1. In my experience this is usually possible, but may vary according to type of customer.

On this point I was not too bad, I was sure to get full IPR (giving a partner pricing scheme to also get full IPR to changes developed over the years), but I had to give my customer exclusivity in Norway. In retrospect, a few enquiries have come over the years from Norwegian firms wanting to license the system - so negotiating away that clause at the outset might have paid off. My customer, although always constructive, did not want to give up local exclusivity the one time a customer that was ready to buy actually emerged.

Think about it like a product

Next, I strongly believe you have to think about your product as exactly that – a well defined product. It is easy enough to say that the core of some project is a “product”. But what is the product exactly? Be specific - thinking about exactly which user interfaces and functionalities are part of the product forces the thought process around the product.

Likewise, be specific about who is going to buy the product and what is their willingness to pay? What is important to the customer might be different from what you assume. One way of finding out is getting partly founding for new features from early adopters. This forces your pilot customers to put their money where their mouth is.

Think about the most likely competitors. If there are none you can either hope to be a true genius, but it might also indicate lack of market. Don't let a number of competitors scare you away, a micro ISV can be nimble and develop in new directions quicker than they can! Often it is great to be small and not have a lot of legacy code and customers that use it to think about.

On this point, I just have to say Mea Culpa. It was more a vague hope than a clear strategy behind the product thinking. A few years later it seems to clear to me this is not a volume product (also given what we can support) and it will be priced between the simplest competitors and the offerings from huge ERP/HR vendors.

I have tried to think more about it like a product lately, will return to that when I cover marketing, but first on to building the product.

Build it as a real product

It is not enough to think and talk about it like a product, if you are going to support it without too much grey hair and get the scale effects, you also have to build it like a product. This has practical consequences all the way down to the details of the technical architecture and the underlying data models.

Regarding user interfaces there is also a need to be clear on what is part of the product and what is customer specific – and find a clear cut way to manage that. If you throw hard coded texts or data fields specific to the first customer around the user interface, it is not a product. Also, if you have to fix the same error for all customers, it can be an indicator of a flawed architecture or structure.

In most cases you won't have partners selling your product from day 1, thus you need to think about supporting (and possibly hosting) the product professionally. Then it matters a lot that it is built in a way that grows maintenance work in a sub-linear way with the number of customers[3].

Again, on this point I did not do to well at the first attempt. When trying to generalize this now in 2010 for the new version, some rework had to be done to make possible installation for the next customer smoother. I also made what I think was a smart move by trying to provide easy hosting, or letting the customer forget about hosting all together, through possible single sign-on with their existing solutions. I also made connecting to enterprise systems easier by exploring a module that will run PHP (in which the original system was built) inside the Java application server Resin, called Quercus.

Marketing for the product

Many entrepreneurs seem to almost lose interest in a product once it is approaching something that looks (remotely!) like production quality. Then it is on to the next project, although they might claim they are both "products". Well, it might be fun (I think so!), but if doing so one should be honest enough to simply call them projects, not fool oneself by calling them products. That being said, it is nothing wrong with trying out several product ideas – if you can make even one of them fly, to me that is just plain fantastic – but remember that not all projects need to become products.

A product should have a name. Try to find a good one. Create some, if very simple, marketing material and try to get it spread. These days many channels are available, but it is still much easier said than done to create the amount of buzz needed to reach just those potential customers.

If you really believe in the product and it has a great potential, here is the area you are most likely to need professional outside help. It can be from partners or external investors (VCs). Marketing and internationalization can be frightening expensive and for a software company founder to be excellent at it is probably the exception rather than the rule.

If your product is consumer oriented, the Freemium model has gotten quite a bit of attention lately (some would say too much, it is certainly not a one-size-fits-all silver bullet). Andreas Göldi covered some properties on when the Freemium model can be successful in a blog post in 2009, it comes highly recommended. If the free version is great, maybe the word of mouth can help your marketing? In addition to pure guerilla tactics including wise use of social media[4], some forms of targeted advertising might be feasible. Very targeted search word advertising and doing talks and/or stands at conferences or conventions might be worth exploring. I am not the best example of this (again, look at the 7 years of a great system still with that single customer!), so I am sure you can come up with more creative ways of doing this than I can!

How did I do on this point? I simply didn't. But I have settled for a name in the process of upgrading the solution this year. RightCruit.com is going to be the proud new name of the product. And I have now written this blog post (and not least done the analytical work both leading up to it and starting doing the operational work coming out of it). I have to admit that my blog with very limited traffic is not ideal, but it is a starting point.

In addition, and more important, I have good ambassadors in my customers that have used the system since 2003. I still think the most likely way of doing a sale is through them and their international contacts.

So by posting this I have made public the goal of making the first international sale for RightCruit. If it happens, have no doubt there will be a follow up post or comment on this page. In the short term, I will use the comments field here to give a quick update as I progress in trying to make it right using my own medicine. The next month or so, I intended to record a small presentation video and maybe buy some Adwords ads for those to see if that can generate any qualified leads.

I welcome comments, both on the theoretical argument and on what I am still doing terribly wrong with my practical attempt at selling RightCruit to new customers. At least can't be the name? ;-) I thought it was utterly clever with a word play on “recruit” and good meaning to it as well...

[1] - ISV = Independent Software Vendor. When using the term "micro ISV" I generally mean companies with only a handful of employees, for most of the time in the specific example it was actually less than one FTE. But some of the argument above is valid also for somewhat larger companies struggling with the tension between customer projects and product development.

[2] - If I were to argue back I could mention that I have been involved in some successes as well :-)

[3] - This might sound easy. It is not. I have seen examples of the time spent being almost exponential and when having the first small handful of customers, the coordination and attempt to do projects for customers along with product development almost stalled progress completely for a while.

[4] – I don’t claim to be the biggest expert on social media usage. I do have opinions, however. Without attempting to lay out rules and certainly not a social media strategy here, I would say that adding some value to a discussion or offering something of value (I hope this blog over time shows some of how I think) is always a good idea. And always, always, always be honest about who you are and who you represent.

Also, thinking about real life parallels can be useful (in a party, would you go “hey, this guy that none of you know just said that something I wrote was great and I will repeat that without any other comment to all of you”?), even if it is not always straightforward to find a relevant analogy.

Fast mobile and fun TV...

...some even quicker observations on keynote of Google IO day 2.

In short, the new and faster version of Google´s OS for mobile devices, Android version 2.2 codenamed Froyo, was launched as expected. There was some picking at Apple with references to their famous "1984" superbowl commercial calling their approach Draconian, push APIs were launched "not to address basic shortcomings in the operating system of the device, such as lack of multitasking", demonstrating tethering in Android with the words "now let´s turn to a device that doesn´t have connectivity, how about that iPad?", etc.

The Android momentum is high, with 100 000 activations per day. The Flash plugin (10.1 public beta) was announced as expected. I am looking forward to see how it performs, as pointed out yesterday Flash on the mobile has yet to deliver (when I supervised a MSc-student in 2005 doing context-based mobile app that it was supposed to be half year away from being great, which I think it has been since...). Hopefully this will be it!

Google TV was also launched, not quite as pre-announced as the Android Froyo, but not unexpected either. Personally I am more interested in "Chrome OS for TV" - to have a lightweight connected OS with browser (for public screens etc.) in TVs than the PVRish and EPG aspects that it was focused on in the announcement, but I guess it can be used for both.

It will be interesting to see if Google will be the ones to get voice control right. It has been tried (several times) before, including getting similar wow-demo-effects to the ones we saw in the keynote working. With all the data to improve their algorithms, they might just be.

Oh and to leave you with a maybe non-exciting note that I forgot yesterday: App Engine are getting SLAs and standard SQL databases, which might in fact be of the more important announcements for CIOs considering running apps in Google´s cloud.

Quick reflections on today's Google IO keynote announcements

In today's keynote at the Google IO conference, a pretty impressive list of announcements was made official. [And tomorrow everyone is keen to see news about Android, I guess?] I want to quickly comment on two or three that I find particularly interesting.

Web video: Opensourcing the VP8 video codec

This was expected to happen at some point, after Google acquired On2. The list of companies supporting the new format is interesting and Microsoft has seemed to confirm that IE9 will support it.

This might put H264 on death row as a candidate for the video format for web and if adoption goes as Google hopes, it will pose Apple with an interesting dilemma. This will indeed be the case if the flash player will be among the first environments to deliver a good user experience for WebM. [Another sidenote: Again, it will be interesting to see tomorrow if Flash on Android is finally approaching what Macromedia and later Adobe has been preaching about Flash Mobile for more than five years... If it is, Apple might get push from their user base, me included, to get access to cool apps on their iPhones and iPads.]

Web applications part 1: VMware teams up with Google trying to deliver "the cloud OS"

Tim O'Reilly wrote a great post on the development and State of the Internet Operating System a few weeks ago. VMware secured a deal with Salesforce recently to allow developers use their Spring platform there. Today it was announced that it will also be readily available on Google App Engine and also integrates more easily with the Google web toolkit.

VMware's Paul Maritz was even quite explicit about the goal, saying something along the lines of: "If the cloud is the new hardware, you can see this as the operating system." That could mean easier cloud-to-cloud (private or public) interoperability for both ISVs and companies, which can only be good. Of course, there are other main players in this space. One should not underestimate good old Microsoft - they certainly have some experience building successful platforms that third party developers deliver applications for...

Web applications part 2: Browser capabilities and a new webapp store

There was also a few cool demos of what can be done in plain browser based applications without plugins today (so called HTML5). The rapid development in this area of course also accelerates the movement of applications to the cloud. As far as I noticed, there weren't any specifics on Chrome OS [Tomorrow morning?], but it makes more and more sense to have a OS totally focused on web for every day that passes.

It remains to be seen if the Chrome application store will be a success, but it must probably be viewed in the scope of the Chrome OS to be judged fairly. It might give an option for independent developers and small companies to monetize on their products, much like Apple has championed for mobile apps.

It is very interesting times. In my company, I am doing product development in the mobile/augmented reality space and I am amazed with all the libraries, frameworks and options available to a startup these days - it is a huge difference from only a decade ago. Google is in my opinion one of the companies that seems to get the balance between open and proprietary innovation quite right, so kudos to them for helping to drive this exciting progress.

Development in software business models – and the power of hindsight

When I recently was selecting a mail solution for my new company, I went for Google Apps. I did this after also considering a small business edition of Exchange, as well as just continuing to use the built in email service from my domain hosting provider that I already had up and running. Also my current client, i.e. my previous employer Inspera, has moved to Google Apps from an in-house Exchange solution, they just finished the transition last weekend.

These two decisions made me think back to what I wrote in my thesis on software business models in 2007 (part of my MTM degree, an MBA in technology management from NTNU, MIT Sloan and NHH - link to full foreword/abstract is provided for anyone interested):

…[even if] there is no “one size fits all” for business models in the software industry, if I had to place one bet on which business model innovation that will have most impact based on my findings, my decision would be clear: My money would be put on SaaS – on-demand subscription based software. Predicting paradigm shifts is a risky business, and especially so with shifts that have been predicted similarly without really happening before. Nevertheless, my take is that enough enabling factors have changed so even if it will not replace the traditional license, it may radically change the way software is sold, distributed and developed the coming years.

So the million dollar question is: Is this actually happening for mainstream applications for mainstream companies as we speak?

Extrapolating from the two samples (yep, two years since I last touched academia and reading the daily Dilbert since...) the conclusion has to be: “Sure”. On the other hand, I have also worked for some big companies over the last year that just wouldn't even start to consider Google Apps. But still, major changes in buying patterns often start with smaller companies and over time becomes an option also for the larger enterprises requiring time-tested and mature solutions.

Even if I feel the last two years have added support to my hypothesis of a possible “disruption from below” ala Christensen, I think the jury is still out on the question if SaaS will replace the traditional license based model as the dominant model at any point – or just be a supplement. (And to me financing a traditional license – making it look somewhat like a subscription – does not make it SaaS, by the way.) Cynics might also add that the predictions of net-PCs given in 1998 are not much different from the SaaS and “everything in the cloud” visions of today, they might argue that it has been coming in large scale “real soon now” for over ten years...

Reading the abstract two years after also drew my attention to another thing I wrote, that ...lines between data, applications, software and services can sometimes be blurry. This I at least think is even truer today than it was in 2007 – or to ask rhetorically: Is Twitter worth a zillion because of its software?