Archive for September, 2004

Online Advertising: Test, Test, Test

paulballen — Wed, 29 Sep 2004 23:19:24 -0700

It's been a while since I actively ran an online banner ad campaign. Mostly I help companies get started in search engine marketing (pay-per-click first, then SEO), then email and affiliate marketing, and at the end of my list of tactics is online banner ads. They always seem to underperform the other tactics, at least until you find the perfect combination of creative, landing pages, offers, and sites that perform well. This can take months if not years, and it requires constant testing.

I remember sending one of my marketers to a conference where Seth Godin spoke. He said if you're not testing 5 new banners per day, you're not doing your job. What we learned was that little tweaks could make a big difference. When we finally stumbled on the perfect wording and creative that worked extremely well, we were able to profit from it for years with only slight modifications. But finding banners that generate enough clicks, and landing pages from banner traffic that converts, is extremely difficult.

Advertising.com just released a study that reinforces the need to test color, size, and most importantly, use calls to action in online ads.

Online Marketing Works

paulballen — Wed, 29 Sep 2004 23:09:52 -0700

LDSAudio.com has seen significant growth in its web site traffic in the past few weeks as its online marketing efforts start kicking in.

The company was waiting for its deal with Deseret Book which will provide users access to hundreds of audio books, talks, and songs before accelerating its online marketing effort.

In addition to its pay-per-click effort, some search engine optimization, and the free audio Book of Mormon giveaway, the company is launching its affiliate program this week. The affiliate manager will be contacting hundreds of potential affiliates. One free way to track online marketing success (visitors, but not revenue) is to use Alexa.com. Alexa shows the site traffic growth at LDSAudio.com.

It's easy to build a web page (maybe only for you to see) to keep track of the Alexa rankings of all of your web sites or your competitors' sites. Here are two links:

WebSideStory Completes IPO

paulballen — Wed, 29 Sep 2004 00:09:43 -0700

WebSideStory began trading today on the NASDAQ. Symbol is WSSI. This company has wanted to IPO for nearly 4 years. Last year it had revenues of more than $16.3 million and losses of just under $2 million. It turned profitable in the first six months of this year. The stock is trading above $9, up from its opening price of $8.50. They apparently sold 5 million shares in the IPO. My rough research shows about 15 million outstanding shares, giving this company a market cap of $135 million.

WebSideStory's competitors include Coremetrics and Omniture. Coremetrics (Austin, TX) got a new CEO in March 2004 and had 60 employees at that time. Websidestory reported in its S-1 that it had 120 employees as of June 30, 2004. Omniture has the strongest story by far of the three companies--with faster revenue growth and more marquis customers, including eBay and AOL.

The largest company in this space may be NetIQ, which acquired WebTrends in 2001. NetIQ had revenue of $68 million in the quarter ended June 30, 2004 and a narrowing loss of about $7 million, but it offers many more services than just web analytics. It's hard to tell how much of its revenue comes from WebTrends. The company had more than 1,200 employees in mid 2002.

Every serious internet business must use powerful web analytics services. Web developers and marketers rely on these tools to determine how many visitors your site has, where they are coming from, the ROI of marketing campaigns, what products are selling, what paths customers take before purchasing, and how site design changes impact revenue. There are free and cheap web stats packages everywhere, but once you've used a high-end package, you realize they are the key to eliminating guess work from your marketing and design decisions and turning your web site into an optimized revenue generating machine.

Many of our (Infobase Ventures) companies use Omniture SiteCatalyst.

Term Sheets and Valuations

paulballen — Tue, 28 Sep 2004 12:10:53 -0700

I blogged a few months ago about the book Term Sheets and Valuations. Now, while one of our companies is negotiating a term sheet, I'm finding this resource very helpful.

The author is Alex Wilmerding, a VC for more than 10 years. He explains many of the sections that can be found in a typical term sheet from a venture capital firm or sophisticated angel investor. "A term sheet serves as an outline of a transaction, so there are usually 8-15 sections."

He explains how each section can be written to favor the investor, the entrepreneur, or be balanced. (I actually tink that most of his "balanced" examples are actually quite investor-favorable!) He gives sample language for 16 possible sections of a term sheet.

Some of the issues he addresses include:

The need for a cap table in the term sheet (showing ownership before and after the transaction)
The desire for investors to permanently have board seats; and why they desire them
Dividend requirements, and the difference between cumulative and non-cumulative dividends
Liquidation preference and typical multiples
Redemption rights by which investors force a company to achieve liquidity or pay back their investment within a certain amount of time
Conversion and automatic conversion
Dilution protection: full ratchet vs. weighted average conversion
"Play or lose" provisions
Voting rights of various classes of stock
How investors can increase their control of a company by requiring board approval on many issues, such as compensation, debt financing, leases, stock option plans
Information Rights
Registration Rights
Right of First Refusal

One of the authors main points is that entrepreneurs should never start negotiating any single item with investors until they have a solid understanding of the deal in its entirety.

From my experience, it is very easy for sophisticated investors to slip in language into any one of the above sections which will completely skew the deal in their favor, at the expense of the entrepreneur or of all the common shareholders.

Sometimes investors insert terms that might sound harmless (like cumulative dividend rights or liquidation preferences with a multiple of 3 or 5) but these terms might end up giving the investor all the return of the entire deal and leave nothing for the entrepreneur and common shareholders.

Sometimes investors just like to handcuff entrepreneurs because they can. It doesn't really give them any financial benefit, but it gives them more control.

CEOs should not only study books like Term Sheets and Valuations but they should seek counsel from experienced legal and financial professionals before negotiating and signing a deal that might jeopardize other shareholders.

Harnessing the Power of Photosynthesis

paulballen — Fri, 24 Sep 2004 17:00:47 -0700

From Forbes:

. . . researchers at the Massachusetts Institute of Technology say they have used spinach to harness a plant's ability to convert sunlight into energy for the first time, creating a device that may one day power laptops, mobile phones and more.

A few weeks ago I read about the bacteria that can convert sugar into electricity, and now scientists are capturing the power of photosynthesis to create electricty which may some day power portable electronic devices, with no waste.

Both technologies are years away from application. Cool stuff.

The Power of PR: go SearchGuy go

paulballen — Thu, 23 Sep 2004 03:09:35 -0700

For months, I've been watching with interest the publicly traded search engine company headquartered in Mountain View, CA, just miles from where I lived during the dot com bubble. SearchGuy.com went public in May through a reverse merger. For SearchGuy.com, the bubble is not over. The company runs from press release to press release as it tries to grow into its valuation.

The company had 100 million outstanding shares and at one point had a stock price of $0.75, giving it a market capitalization of $75 million. Today, it is trading at $0.589, but last week it "retired" 50 million shares, so now it has only 50 million outstanding shares and a market cap of just under $30 million. Sill, that's not bad for a company which has never announced revenue and whose company headquarters in Mountain View are actually just an executive suite. (To keep overhead costs down.)

Today, in an exciting announcement, the company announced it is partnering with Valueclick's Search123 for paid search results. This is significant because it isn't just SearchGuy announcing something it is thinking about doing, or telling us what it is going to work on next, like so many past press releases. This time, it's an actual partnership with a good company.

Searchguy's traffic is still extremely low, but a couple of times it has broken into the Alexa top 100,000, usually after a good press release or two.

I may sound a bit sarcastic, but I'm actually extremely hopeful that SearchGuy will grow into its valuation through execution and deals. I want to see small startup companies be able to access capital from public markets.

Attention Entrepreneurs: Search for Angels, not VCs!

paulballen — Thu, 23 Sep 2004 02:09:02 -0700

I recently blogged about the book Angel Investing, which I think every entrepreneur should read. The book, written by two Harvard Business School professors in 2000, claims that thirty to forty times more ventures get funded each year by "angel investors" than by venture capital firms.

I don't think entrepreneurs get this.

I'm testing a new search engine optimization service from one of my companies called Searchability(TM). It helps me select keywords that I can easily get a top 10 ranking for in major search engines and then helps me build pages and recruit links until my ranking is high enough.

One of its features is to calculate how many total queries are performed on the internet for any keyword that I'm interested in.

I typed in "venture capital" and "venture capital firm" and found that about 150,000 searches are performed each month on these two terms combined.

I then typed in "angel investor" and found that only about 10,000 queries per month are performed on this phrase.

I'm sure people besides entrepreneurs are using search engines for these particular search terms, but the ratio here is interesting. Does this mean that entrepreneurs are 15 times more likely to look for venture capital firms to fund them than angel investors? If so, they're "looking for love in all the wrong places."

My advice to first-time entrepreneurs: find angel investors to back you. It's easier, it's faster, you'll get a better valuation, and more help from your investors. Start with an "advisory board" of 6-8 seasoned business people who are well connected and willing to help you find investors and build your company. Give them some equity in return for their help. (I think 1% equity for 2-3 years of assistance is good for an early stage company). Some of them may end up investing in your company; others will open doors for you that lead to capital.

Later on you can graduate to venture capital, but only after you have a track record and a team and a clear exit strategy that can be accelerated by the largest investments VCs make.

Google is likely working on a Mozilla-based browser

paulballen — Thu, 23 Sep 2004 01:09:43 -0700

ZDNet broke this story today in the UK and Australia--but I can't find it on the US web site yet. Google registered gbrowser.com in April. They've hired some browser developers and hosted the Mozilla developers meeting last month.

Meanwhile, Google's stock price continues ticking upwards as more and more people realize how search dominance can springboard Google into so many other business opportunities. And unlike the first generation search engines, Google is too smart to clutter up their search results. But they can keeping launching and acquiring other services (Gmail, Orkut, Blogger, Picasa) and end up with a huge number of successful web properties.

I'll be very surprised if Google's market cap doesn't exceed Yahoo's by the end of Q1 2005; and I'm sticking with my earlier prediction that it will exceed Microsoft's before 2020.

Web on Cell Phones

paulballen — Wed, 22 Sep 2004 16:32:58 -0700

More than 1 million people have installed the Opera browser for cell phones. In addition millions of copies have been pre-installed. It won't be too many years before a billion people will have access to the web from their cell phone. What will this mean for your life, and for your business?

How Much Would You Pay For An Extra Hour Every Day?

paulballen — Tue, 21 Sep 2004 19:05:13 -0700

I'm an efficiency freak. I take great pleasure in learning a new Windows or Internet Explorer shortcut that might save me a few seconds a few hundred times a year. In my working hours, I try to pack as much communication and research in as possible. I type emails as fast as I can. I get headline news and stock quotes on my MSN Direct Watch. I get my daily news from the best aggregators, like www.newslinx.com, and MyYahoo. I take a book or magazine with me wherever I go, so that I can steal a few glances whenever I have a moment. I'm an Audible subscribers and listen to audio books that can keep me sharp. (I only wish I could listen in "fast-motion.") I use Google News Alerts to notify me of breaking news on all the topics and companies that I track.

But the most valuable tool I have for increasing my productivity is my RIM Blackberry 7230. I've been a Blackberry user for about 5 years now. I'm on my third model, the blue Blackberry. This one has a built in cell phone as well.

Why is this so valuable for me? Because it literally buys me an extra working hour every day. I get about 100 emails per day, and send about that many as well. Before Blackberry, I had to sit at my desk for an hour or two to get through all my emails.

Now, I usually stay caught up during the day, in near real-time. My Blackberry vibrates when I get an email message. In between meetings, or during other down time, I can type out a few email replies. Fortunately, I've mastered the thumb keypad, and can type between 50-55 words per minute! (I also use the Blackberry to take notes at church and in other meetings where I want to remember what is said--sometimes I have to whisper to those around me that "I'm not playing games, I'm taking notes!")

I attended a Jupiter Conference in October 2000 in Napa Valley, CA, where Mark Andreesen, founder of Netscape, was the keynote speaker. I'll always remember him holding up his Blackberry and saying that it was his near exclusive email client. He predicted that humans would evolve smaller thumbs as a result of this technology.

If a person makes $100,000 per year, and spends one hour (or 1/8th) of every work day just sending and receiving emails, then the company is paying them $12,333 just to do email.

For between $30 and $50 per month you can have unlimited email service on your Blackberry. If you carry this with you wherever you go, and learn to type fast with your thumbs (new idea: Mavis Beacon Teaches Two Thumb Typing), you can literally reduce your time tethered to your desktop by an hour or more per day, for less than $600 per year! Companies should pay for Blackberrys for any employee with sufficient email volume to justify it--and I would say that would be 10 or more emails per day.

So many times I shake my head in disbelief that companies will pay $50,000 or $100,000 or $150,000 salaries for talented employees, but they won't invest a few thousand dollars in training (sending them to key conferences, trade shows) or a few hundred dollars in simple tools that can increase their productivity by 10-20% or more.

My advice? Buy Blackberrys for all your key employees and train them on how get more out of each work day.

WebSideStory IPO Update

paulballen — Fri, 17 Sep 2004 20:09:14 -0700

WebSideStory, whose IPO was delayed in August until after Labor Day, plans to sell 4.4 million shares; pricing is expected to be $8-9 per share.

Executive Search Firm Nets $128 Million for 2001 Google Recruiting Search

paulballen — Fri, 17 Sep 2004 07:22:40 -0700

This is amazing. In 2001 Google hired executive search firm Heidrich & Struggles to help recruit a CEO. As their fee, the firm negotiated warrants which allowed them to purchase 1.2 million Series B shares of Google for $0.30 per share. After exercising these warrants, they sold their shares today and netted $128 million. Not bad for finding one Chief Executive Officer.

The firm will now have to change it name, since there will be no more Struggles for these folks.

Lesson: it's not a bad idea for professional service providers (and contractors at early stage companies) to negotiate for stock or warrants (maybe in exchanged for reduced or waived fees) with promising companies. I know many early stage CEOs who would trade stock for services, since cash is often more precious than equity early on.

XM Satellite Radio To Offer Internet Subscriptions

paulballen — Fri, 17 Sep 2004 01:09:33 -0700

Very smart move today announced by XM Satellite Radio. They'll be leveraging all their content and programming online. Now you can subscribe to "satellite" radio with its hundreds of ad-free channels without owning a satellite. The XM stock chart is looking very good. Market cap is $6.25 billion.

New Domain Registrations Keep Going Up

paulballen — Thu, 16 Sep 2004 13:31:36 -0700

From CNET. Verisign reports that people registered 4.6 million new domain names in the second quarter of 2004, up 2.5 percent from the previous quarter. The registrar said the last time this many domain names were registered in three months, it was the late 1990s.

Star Trek Online Game

paulballen — Wed, 15 Sep 2004 09:09:40 -0700

BBC Reports that Star Trek online will be launched in 2007, attracting potential millions of customers. "DFC Intelligence forecast that the worldwide market for online games will reach $9.8 billion in 2009."

Yahoo Buys Music Match: Adds 225,000 Subscribers

paulballen — Tue, 14 Sep 2004 22:09:19 -0700

Yahoo is paying $160 million for San Diego-based Music Match. With it, Yahoo gets 225,000 subscribers who pay $8 per month for the all-you-can-eat subscription service that offers 700,000 songs to computer users. This is similar to RealNetworks Rhapsody service, which has more than 550,000 subscribers. Napster is the first to offer an all-you-can eat portable service, which utilizes DRM technology from Microsoft to allow you to "rent" all this music and play it on your portable device--but it will expire if you discontinue your subscription. This model is far superior to the pay-per-download model--a better value for consumers and an annuity for the provider.

With Yahoo buying into the subscription model, and with Microsoft aggressively promoting its Janus DRM service, I think the demise of pay-per-download services (like iTunes) is accelerating.

Largest IPO in Utah History

paulballen — Tue, 14 Sep 2004 22:09:09 -0700

I blogged recently about the IPO of Extra Space Storage, which may have been the largest IPO in Utah history.

But that IPO will surely be dwarfed by the forthcoming IPO of Huntsman Chemical. Some speculate it may raise as much as $1.5 billion. The company has debts of approximately $5.8 billion, which it needs to pay down.

Now it will be interesting to see Huntsman's market capitalization. I have a Utah Portfolio on Yahoo Finance which tracks all the publicly traded companies in Utah, and with Utah ties. Zions tops the list with a $5.5 billion market cap. Questar is at $3.3 billion. Nu Skin is at $1.8 billion. Huntsman, with 15,000 employees and revenues approaching $10 billion annually, may top them all.

Sites Track Political Donations

paulballen — Tue, 14 Sep 2004 20:28:46 -0700

Several web sites allow you to find all donors to federal election campaigns.

Coming Soon: Hard Drives in Cell Phones

paulballen — Sat, 11 Sep 2004 20:26:51 -0700

It won't be long now.

http://www.pcworld.com/news/article/0,aid,117741,00.asp

In the next few years, most cell phones will have hard drives, so hundreds of millions of people will get hooked on listening to their favorite music and audio books wherever they go--not what radio broadcasters play. XM and Sirius satellite radio are already changing the landscape for radio stations. MP3 players are proliferating. And now this.

I'm hoping it will become practical to

Shopping.com IPO reduced slightly

paulballen — Fri, 10 Sep 2004 07:32:09 -0700

From CBS Marketwatch: Shopping.com will raise $126 million instead of $143 million in its IPO.

The Israeli e-commerce firm said that it'll offer 5 million shares and that inside stockholders will sell 1.9 million shares, down from 2.9 million previously. The company still plans to price the IPO at $14 to $16 per share. Goldman Sachs and CS First Boston are underwriting the deal. Shopping.com, which received about 38 percent of its 2003 revenue from the company's relationship with Google (GOOG: news, chart, profile), plans to list its stock on Nasdaq under the symbol "SHOP."

Awesome Free Desktop Search Tool

paulballen — Thu, 09 Sep 2004 16:54:04 -0700

So I've tested Copernic Desktop Search. It's a free download from www.copernic.com. My conclusion: I greatly prefer it to X1, which I paid $99 for earlier this year. Copernic has a way better user interface, is far easier to use, and clusters "hits" in nice date range groups. The only downside is it seems to take more CPU indexing my hard drive in the background. X1 didn't make an observable difference in my computer speed.

I like Copernic so much that I sent this email today to all the employees of Infobase Ventures portfolio companies:

I think you all know how much I value knowledge capture and retrieval. I have been using Folio VIEWs for 12 years to collect and retrieve knowledge.

Tivo Hits 1.9 Million Subscribers

paulballen — Tue, 07 Sep 2004 20:31:38 -0700

The Tivo/Netflix deal rumors added to each company's stock price today. Tivo now has 1.9 million subscribers; they are projecting 3 million by the end of this fiscal year. The company's market cap is about $407 million today. Their 52 week high is 2 1/2 times that. The stock price has been hammered because there is so much competition in the DVR market. But look for it to soar if the Netflix deal happens and if Tivo continues to march towards 10 million subscribers, which PVRblog.com says the company expects to reach in a few years.

Google and Instant Messaging

paulballen — Tue, 07 Sep 2004 09:09:39 -0700

There are news stories about Google getting into instant messaging (IM). Google's client is rumored to be based on the open source Jabber protocol. I blogged about instant messaging back in April, when I wasn't using it. I said then that I thought Google would develop the first IM client that I loved. Since then I've become a regular user of Microsoft's Windows Messenger, but would still be willing to switch to a better service.

LinkedIn.com Passes One Million Users

paulballen — Mon, 06 Sep 2004 21:11:06 -0700

LinkedIn.com, my favorite business networking tool, has just passed one million members. I started using it last November, and was the 4th person in the Provo, UT area. Now there are more than 1,200 members in the Provo area. I am the "most LinkedIn" person in Utah, with 236 connections. But that's nothing. Thomas Power, from the UK, has 3688 connections. He's been a full-time business networker for several years.

LinkedIn.com is a business tool that is built upon the "six degrees of separation theory". It's a powerful tool for meeting new people, recruiting employees, finding a job, and doing sales or business development.

Here's how it works:

I list the people that I know and trust. I invite them to join. They invite friends, and so on. Pretty soon there are a lot of us with mutual acquaintances.

What I love most is the search feature.

Suppose I want to find a "web designer" that can help me with my next web project. I search for "UI designer" and sort the results by the degrees of separation.

After seeing the designers that I personally know, I find that there are 3 web designers who are "2 degrees" away from me.

They happen to be:

Philip G.
Lee W.
Adam C.

I can actually see their full name, who they work for, their work history, and most importantly, figure out who can introduce me to them.

I can email 3 people that I know and ask, "how good is this person at web design?" Then, if they really endorse the designer, I can have them introduce me to them.

If I'm not satisfied with these 3, then I can find 29 others who are "3 degrees" away from me. If I want to contact one of these people, I can ask someone I know to forward a request to them. It will go through one other person before it reaches the designer I'm trying to meet.

A lot of people have told me they tried LinkedIn and can't figure out what it is for, or how they might possibly use it.

For starters, unless you have a number of connections to start with, it's pretty worthless. The more 1st degree connections you have, the larger your universe of connections will be. The fastest way to get a large network is to upload your Outlook Contacts to the site (no one else can see your list--it's kept totally private). Then LinkedIn will tell you all the people you know who are already LinkedIn.com members.

Then you need to start doing searches.

Make a list of 10 companies that you want to get to know better. Then search for the companies by name and find out who you know that knows someone at that company.

Next thing you know, you might be having a phone call with the president of that company, having been introduced by a mutual friend that you didn't know you had.

Like many other free tools, it takes effort to figure out how to benefit from LinkedIn. For me, a serial/parallel entrepreneur who is always trying to grow and expand my network, this one is one of the most valuable tools I have. When LinkedIn starts charging for premium services, I'm sure I'll be one of their first customers.

Raising Money in Utah--Free Seminar

paulballen — Thu, 02 Sep 2004 14:13:48 -0700

I got this email today:

How to Raise Money in Utah

	Join us for the Institute's rotating series of free seminars entitled