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November 16, 2007

Recap from NewTeeVee and Dinner with a Ninja

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On Wednesday I was at the NewTeeVee event in San Francisco. I have to say it was one of the better digital media conferences of the year. I can't really pinpoint why (it still seemed to focus on the same subjects we've heard at conferences throughout the year: a) "advertising will be big," b) "social networking is really important for video," c) "consumers want HD, and d) "let's hear from YouTube or MySpace..."), but quite a few people I talked to thought it was a great event.

For two anecdotes from the event, click to the rest of the post.

I had a lot of fun on Wednesday night at a dinner hosted by Om Malik and Accenture. I randomly sat next to Mark Trout of Accenture (Mark runs the West Coast Tech practice) and Kent Nichols of AskANinja.com. You couldn't get two more opposite ends of the spectrum - Accenture is a $20B global corporation, while AskANinja is "two guys and a ninja."

I do think what the Ninja guys are doing is pretty interesting, though, as we look forward for the future of digital media. Kent and his partner created and run the site on a shoestring, but get more than 700,000 monthly visitors and are making real money (sounded like it was in the hundreds of thousands of $) through advertising. There are weak shows on broadcast tv that don't reach those numbers. I'm not the first to ponder this, but with the writers' strike, don't you think more of the creative types in LA will look to the Internet as a low-cost way to distribute their ideas - and get paid directly, without studios and others taking a giant cut? If nothing else, go to Kent's site and watch a few videos - they're hilarious.

One of the more poignant insights at the conference was made by Quincy Smith of CBS, who said "Old media executives have made more of an effort to learn new media than new media has bothered to learn old media." There's some strong advice in there for technology vendors...

November 09, 2007

Net Neutrality v2 on Will Richmond's Blog

Today on Will Richmond's blog VideoNuze he goes into more depth on the Net Neutrality topic (see my previous post on October 19th) - will can take a much more aggressive stance - he's a journalist, I'm not). Will's post came out of a long and involved dialogue we had on Wednesday night over a few drinks at our Kontiki User Conference in Atlanta. As will points out, my OFFICIAL position is neutral on this subject, but I will point out that a few of the folks who posted comments on Will's blog make some good points :).

November 08, 2007

Interesting Data for Technology Entrepreneurs

VentureWire this morning published the results of a recent survey called the Dow Jones Venture Capital Deal Terms Report. The good news for entrepreneurs - a relative return to "normal" terms where a dollar invested buys closer to a straight dollar's worth of equity - most likely driven by the high number of funds chasing a relatively limited number of deals. For the synopsis in VW today, click to the rest of the text below. To read the full coverage, go to VentureWire and sign up.

The quoted text below are from the email from VentureWire today. The report is called the Dow Jones Venture Capital Deal Terms Report. The report is published by Dow Jones & Co., publisher of VentureWire, the fifth edition of the report surveyed 375 U.S. and European companies that closed venture rounds from July 2006 through June 2007.

Entrepreneurs are selling less of their companies to venture investors in a strong market for promising start-ups, according to the latest Dow Jones Venture Capital Deal Terms Report, which is being released today.

The median share of companies sold to investors in first rounds has declined to 38% from 50% two years ago. Company-unfriendly provisions that gained notoriety after the tech bubble burst remained relatively rare, affecting mostly companies whose business had faltered.

Published by Dow Jones & Co., publisher of VentureWire, the fifth edition of the report surveyed 375 U.S. and European companies that closed venture rounds from July 2006 through June 2007.

Three quarters of U.S. companies closing second rounds, which are a strong indicator of the state of the venture industry, said their valuations increased. And 80% of U.S. companies said they received a term sheet from at least one potential new investor, indicating healthy interest from company outsiders.

In most U.S. deals, investors settled for liquidation preferences equal to the amount they invested. Only 20% of companies reported a preference higher than 1x and most of those said it was 2x or less. Company-unfriendly full-ratchet dilution protection appeared in 16% of financings surveyed, most often in financings where the company's valuation fell from its prior round.

Pay-to-pay provisions, aimed at keeping investment syndicates on the same page if a company runs into trouble, are becoming less common. Only 21% of U.S. respondents said their term sheet included this clause, down from a high of 37% in the survey covering April 2003 through March 2004. Under this provision, investors who fail to participate in a subsequent round in which the company's valuation falls, can have their preferred shares converted to common stock or stripped of certain rights.

The report also found that founders and prior investors usually did not sell shares to investors in the latest round, despite a longer wait for liquidity. But with more founders bootstrapping companies before seeking an initial venture financing, the rate was highest in first rounds with 16% of those deals affording founders the opportunity to sell some stock.

Another New Media Blog Worth Reading: VideoNuze

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We had Will Richmond, President of Broadband Directions, speak at our Kontiki User Conference this morning. Will's recently launched a great blog called VideoNuze which covers the new media space with a deep focus on broadband. Check it out.

November 06, 2007

What is "Commercial P2P" and Why Should I Care?

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The Ferrari and the Vespa. Both are in the class of "motorized vehicles," but I think we'd all agree they're at opposite ends of the spectrum when it comes to the classification. Kind of like "Commercial P2P" vs. "filesharing" technology (or "non-commercial P2P").

Over the last few months, we've seen a major surge in awareness of P2P technology as a legitimate technology for content distribution. Much of this can be attributed to CDN market leader Akamai's endorsement and purchase of RedSwoosh (see my previous blog post "Akamai Follows VeriSign's Lead"), but I believe it is also due to a growing awareness of the difference between what we call Commercial P2P vs. the technology generally utilized by filesharing networks (predominantly for illegal downloads of copyrighted material).

One of the reasons this topic is important is because I believe we are going to see quite a bit of P2P technology utilized by major media players in 2008 (following the lead of BBC, Sky and Channel4 in the UK). As they do so, it's critical that these companies consider the positives and negatives of using proven vs. unproven platforms. I'm not pointing this out to be altruistic - Kontiki is the most widely deployed, commercially successful P2P platform on the market - and we hope a smart buying community will result in lots of new customers for VeriSign/Kontiki.

For depth on this topic, read below the jump, and I'd also suggest reading our white paper on the subject.

In short, Commercial P2P is secure, reliable and sophisticated software and network technology that delivers a consistently high quality user experience while protecting the rights of content owners, creators and distributors. For examples of Commercial P2P in action, see the BBC iPlayer, which utilizes VeriSign's Kontiki P2P platform.

The technology utilized by filesharing networks tends to lack many of these qualities. As you evaluate P2P technology - as a customer or an end user - here are a few characteristics I'd look for in a commercial-grade P2P provider. I will also shamelessly highlight the benefits of the Kontiki platform in these areas (that's what you get - VeriSign pays for the blog :)). Here they are, not necessarily in order of importance.

1) Consistently high quality user experience. Does the platform deliver a consistently high quality user experience, and has the technology provider proven it can deliver such service to millions of users over an extended period of time? It's one thing for an end user to have a poor experience watching video from a filsharing network - they don't have a trusted affinity for the brand, they know the file was downloaded illegally, and they don't have high expectations for the experience. A poor user experience with a major media company is another thing altogether. The end user expects a high quality experience - and the media company should expect to deliver on a consistent basis. This includes relatively short download times, a high quality (DVD, HD) viewing experience, a well-designed EPG or user interface, and a quality level of end user support when required. Deliver a poor user experience and the consumer won't blame P2P - they'll blame your brand.

2) Respect the PC. If end users are consistently downloading clients that don't "respect the PC" - take a backseat to other programs, distribute and download when appropriate, consume a small footprint on the machine, etc. - P2P providers and their customers will find themselves in a very uncomfortable spot as more consumers use their applications. I give a lot of credit to Mike Homer and the founding team at Kontiki for realizing this way back in 2000/2001 and designing the Kontiki platform to work in a very intelligent fashion on the end user's pc. The fact that Kontiki has been deployed by some of the world's largest corporations for enterprise rich media delivery to millions of end users - including GM, Schwab, E&Y, Wachovia, Textron, Coca Cola and others - tells you something about its ability to work within a very tough corporate security and networking environment. Trust me, these guys do a thorough evaluation of the technology before they buy - and they don't like anything that disrupts the end user's ability to work, their corporate firewall or IT policies.

3) Respect the network. In general, the technology utilized for file sharing has very little intelligence with respect to network topology, and it drives ISPs and carriers nuts - making up an estimated 50-90% of traffic. The peers on these networks employ very little sophistication, peering essentially at random and pulling files from all over the globe. I don't have time or space to go into all the detail here (read the white paper), but a Commercial P2P application like Kontiki is topoligically-aware - and is often referred to as "ISP-friendly." You may say "well, that's the ISP's problem." It's a bigger issue than that, and recent actions by ISP's to "traffic shape" filesharing technology like BitTorrent signal a battlefront you may want to understand closely before proceeding with a non-Commercial P2P application (or one with less than 5 years of experience, for that matter). We're proud to say we think we have the most "ISP-friendly" P2P platform on the market, and have had several major carriers tell us so.

4) Security. This is an area of real differentiation for Commercial P2P, and certainly one that we emphasize as a strength of the Kontiki platform (given VeriSign's strong brand in security). With the US Congress and others evaluating the risks posed by filesharing networks, we think this is an area of real concern. There are two angles here - security around the content (digital rights), and security for the user. Both are big topics well covered in our white paper, but I'll add a few basic comments here. From a content perspective, as a content distributor I want to be ABSOLUTELY sure that my content is being distributed to the right consumers, under the right conditions, and with the right protections around my content. I won't go into the technical details, but suffice it to say I would ask your potential P2P vendor if they can demonstrate years of experience and millions of files downloaded under rights-managed, secure conditions. From a user perspective, I want to know that the files I download are clean - no viruses or malware - and that only trusted sources are distributing content to my machine. Again, ask your P2P provider for evidence of experience here - supporting millions of end users.

5) End user support. This isn't so much a technical issue as it is an operational one, and it's really important. It's only after supporting millions of users that a vendor learns the "ins and outs" of a relatively complex technology like P2P and the different issues that arise at scale. Make sure your vendor/partner has supported customers at scale well beyond your wildest projections (yes, assume you'll be successful). This ties into point #1 above, as it contributes to the users' overall impressions of the brand (in a big way) and the service.

There are lots of other items I could add in this post, but for now I'll stick to these 5. If every P2P buyer does a thorough evaluation based on these 5 items - and the technology components underlying them - we'll all benefit.