Monday, December 10, 2007

Book recommendation: Join the conversation

A former colleague of mine (Joseph Jaffe) has published his 2nd book on what he calls “new marketing”. Joseph is often quoted in the business press and is a thought leader in the marketing field. His first book was titled “Life After the 30 second spot” commenting on what businesses should do now that the 40+ year old 30 second spot is dying out in effectiveness in the age of TiVo. The book was a top seller on Amazon — one of the top selling business books the year it was published.

The next “new marketing” book that’s been published reflects the explosion of social networks, empowered consumers and what has been called “conversational marketing”. His book “Join the Conversation” is applicable whether you are a business or a public official. The book has been as high as the #2 top selling business book since it was released. Recently, many a business has suffered by thinking they shouldn’t enter the fray and engage in the “conversation”. People no longer accept being ignored by businesses as they have in the past. Companies like Dell suffered mightily when they ignored the conversation (Google “Dell Hell” to see an example) and have subsequently fundamentally changed how they approach their customer base.

Here’s a blurb from the book cover…

Book Description
With the continued fragmentation of the media and proliferation of media options, the balance of power has shifted from the marketer to the individual. In Join the Conversation, Jaffe discusses the changing role of the consumer and how marketers must adapt by joining the rich, deep and meaningful conversation already in progress. This book reveals what marketers must do to become a welcome and invited part of the dialogue, and how to leverage and integrate the resulting partnership in ways that provide win-win situations for businesses, brands and lives.

From the Inside Flap

Throughout the history of advertising and marketing, communicating with consumers has been a one-way street. Marketers produced and disseminated messages and customers consumed them whether they liked them or not. Today, every person sees thousands of advertisements a day—and totally ignores the vast majority of them. Yet, companies still spend billions of dollars each year yelling at customers who don’t want to hear it.

In this follow-up to his bestselling book, Life After the 30-Second Spot, author Joseph Jaffe explains how marketers must adapt to the brave new world of the Internet, social media and networking, consumer-generated content, blogs, and podcasts by joining the rich, deep, and meaningful customer conversations already in progress.

Consumers today are active participants in the advertising process, not silent targets and sitting ducks for one-way communication. Forget about the medium being the message; today, consumers are both the medium and the message. The future is bright for organizations that can join the ongoing dialog and leverage their customer relationships to build win-win situations for businesses, brands, and individuals. Through the power of community, dialog, and partnership, marketers finally have the power to talk with consumers rather than at them.

Traditional marketing is a red flag smart consumers can see from a mile away; an outdated idea lurching toward them with the same predictable exhortations and tired come-ons. They’ve had enough, and it’s time to change the dynamic. When marketing is a conversation, marketers can get to know their consumers as individuals, not as silent members of a faceless demographic subsection. Join the Conversation uses real-world brands and companies, real case studies, and real conversations to reveal how to talk to customers—and how to get them talking about you.

It’s time for marketing and marketers to become more meaningful and authentic, or they will both become obsolete. Totally practical and brilliantly revolutionary, Join the Conversation reveals the future of marketing and how you and your company can march boldly into it.

Join the conversation today at or through Jaffe’s daily blog and podcast, Jaffe Juice (


Friday, July 20, 2007

Love at First Site

This was forwarded to me in an email so I don’t know the author or I’d give him credit. I think this a good story/lesson for positioning a company for funding.



Love at First Sight

Yesterday I joined my fifth board and my first for Crosslink.

Years ago I had just received a term sheet for Series A venture capital and went looking for a looking for a bank.   My accounting firm suggested we consider a certain banker at Summit Bank (New Jersey).  I came home that evening to my little rented house, called my friend Steve, and declared I had just had lunch with the perfect woman for me.   We have been married for 21 years. When you know, you know.

My partner Gary Hromadko and I met with a small SaaS company about six weeks ago.  (I will keep the specifics out, as they have not yet announced the funding.) Not knowing what to expect, we sat down and began to listen.

What unfolded was a crystalline and complete story.  The whole package was so clear and compelling, I walked out of that meeting 90 minutes later with a sense of déjà vu. We had just met the perfect deal for us.  When you know, you know. 

So what was it that rang such an obvious and compelling chord?  I can easily enumerate the points.

Greenfield Opportunity
SaaS is a platform shift in the delivery of software.  Every bozo vc knows that by now.  And we all know that existing product markets always get replicated on new platforms, resulting in new businesses built in the ashes of old ones. is built in the ashes of Seibel.  Netsuite is trying to build itself in the ashes of SAP or Quickbooks.  This one was a SaaS version of a category that was multi-billions in annual enterprise software revenues, and there is no clear leader in the SaaS version of the category, yet.

Experience and Domain Knowledge
The founders had strong credentials (both business and academic) with a record of real achievement in exactly this product category.  They knew who the customers would be, why they would buy, and why a SaaS version would be appealing.  They also recruited strong, experienced marketing and sales executives whose experience and approach to the job were context-appropriate.  The sales strategy is the right one for the business and the VP of Sales has deep experience with exactly this kind of sales process.

Clear and Simple Product and Roadmap
The product demo was short (10 minutes) and drove home all the key points.  The key success factors were well established in the earlier part of the pitch, making it very easy to see how the product met those market requirements, and why the scheduled future releases amplified the core story and did not take the company in a new direction.  The product can become a franchise.

We Came Prepared
We knew what we were looking for.  As a firm, we have been developing a SaaS practice for some time.  While we were looking at this company, Gary was finalizing our investment in OpSource, which was announced about two weeks ago.  We also are investors in Omniture, which has blossomed into a franchise in SaaS web analytics, and several other smaller SaaS companies.  I had come close to two other SaaS investments earlier in the year.  So by the time we showed up, we had a clear idea of what quality looks like, how to value it, and how to assess it. 

Our diligence confirmed our instincts.  Not only did the team check out as we expected, the customers raved about the product.   When we asked customers about switching, we uniformly heard the “from my cold, dead hands” response.

Why am telling you all this? It is not to puff up the Company. This is part of why I left the company specifics out of the story.   The truth of this business is that it is often one of love at first sight, or never to be loved.  It is rarely the case that the second or third impression is the one that charms.  Probabilities asymptote to zero, not to one. Test yourselves against the first three points, because this is the simple set of criteria most investors use.  Test your audience against the fourth.  Are you talking to someone prepared to appreciate the opportunity you are presenting?

I think we went from first meeting to term sheet in about 10 days. It did take me a little longer than that to get married after that first lunch.  She needed to do a lot more diligence than I did.  When you know, you know



Tuesday, June 26, 2007

Curious what life as a startup founder is like?

Marc Andreessen (founder of Netscape) nails it describing the good and the bad. Here's a taste of his post...

    First, and most importantly, realize that a startup puts you on an emotional rollercoaster unlike anything you have ever experienced.

    You will flip rapidly from a day in which you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again.

    Over and over and over.

    And I'm talking about what happens to stable entrepreneurs.


Thursday, March 22, 2007

Sidewalk: Insider's view of why & how it was killed (aka sold) and why Steve Ballmer now regrets it

I was one of the first dozen or so members of the Sidewalk team at Microsoft that swelled to over 300 at one time. Personally speaking, it was the best of times and the worst of times. In my dozen+ years at Microsoft, it went from being the strongest team I'd ever seen assembled at Microsoft to my first evidence of Microsoft being infected with politics and big company shenanigans. In the 12 years or so since Sidewalk's inception, I've yet to see an accurate story of what really happened with Sidewalk. The local newspapers who reported on it not only didn't have an inside view but they also had a clear agenda to cheer Sidewalk's demise (e.g., the Seattle Times would never even publish Sidewalk's name). The industry trades simply took the story that was spun by Microsoft's PR and didn't dig deeper. Even astute industry commentators like Jeff Jarvis, Tom Evslin (an ex-Microsoftie), Frank Barnako, Stowe Boyd, Dan Gilmor and Fred Wilson, who often comment on the local Internet scene, aren't aware of some of the sordid history of Sidewalk.
I hadn't thought much about Sidewalk since I left that team in late '97 after spending a couple years on the team. However, a few things have brought back those memories and I thought people might find it instructive or at least somewhat entertaining to hear the story and share some perspective on the application of those lessons in today's web environment. It also shows how hard it is to incubate a new business inside of a behemoth corporation given the lack of patience that is often exhibited.
The following is an excerpt from a recent Herald Tribune article:
In 1999, Microsoft sold Sidewalk, an online city guide service. It seemed a wayward foray outside Microsoft’s software business at the time. “But Sidewalk was really aimed at what we now call local search,” Mr. Ballmer says. “Sidewalk is one we should not have gotten out of.
Sidewalk was purchased by Citysearch in 1999 which is now a part of Barry Diller’s empire (along with Expedia, also started by Microsoft...he tried to purchase other Microsoft assets but that's another story). I recently had the pleasure of meeting Charles Conn (founder of Citysearch). Coincidentally, we now live in the same town and are on a non-profit committee together. Though I’d never met Charles, I was very aware of who he was (one of my Sidewalk colleagues had been a McKinsey partner with him) and we always had respect for Citysearch as a strong competitor that had some innovative go-to-market approaches. After sitting down for a coffee with him and sharing some battle scars, I realized that as the acquirer of the business, he’d gotten spun a good story that didn’t mirror reality yet that story is what is broadly understood to be the “real” story about Sidewalk. The reality is quite different although Charles shed light on things from Citysearch's perspective which was enlightening.
I realize that describing what led to Sidewalk’s demise is a bit like a blind man describing an elephant. There are several perspectives but I had a pretty well rounded view not only from my own experience but that of several people in other parts of the organization that stuck around longer than me. I jumped off what I saw was a sinking ship when I got the opportunity to fulfill a career goal of being a general manager of a business at Microsoft (
One of the impressive things about Microsoft is its patience and determination. However, this tends to apply to traditional technology businesses (e.g., Windows and the Server businesses for Microsoft took ~ 10 years to pay off) versus the customer side of the business or media businesses that it has yoyo’ed in and out of. If I had a nickel for every time I heard Ballmer, Gates et al say “we aren’t in the media business”, I’d be a very rich man. I always felt this was naïve or disingenuous and would say to others “if it looks like a duck and quacks like a duck, it’s a duck”. Ballmer was quoted in the Herald Tribune article as saying “One of the biggest mistakes I’ve made over time,” he acknowledges, “is not wanting to nurture innovations where I either didn’t get the business model or we didn’t have it.” I saw this in a previous role when I was one of the first two people in Microsoft doing vertical industry marketing. Ballmer would ask us, "why don’t you guys handle more than one industry per person" when we’d grown to all of eight industries (e.g., I started Microsoft’s healthcare business). We’d just shake our head when we knew our competition had anywhere from 20 to 300 times as many people tackling each industry as we did. Thankfully, Ballmer finally got it when he saw how much money we were bringing into the company with this approach (last I heard, the healthcare industry effort I started was ~$500M in annual revenue). Believe me, when Ballmer gets something watch out as he is wicked smart and just takes awhile. The successor to that vertical industry marketing org now has 2,000+ people in it. Unfortunately, it was going to take Sidewalk a lot longer to bring in positive cash flow as it had large product development costs (and this was known from the get-go).
When the original “founders” of Sidewalk pitched their business plan to Gates & co, there was an expectation that we’d sink $500M before making a profit but that we were building for the long haul and that the $67B or so spent on local advertising was a prize worth going after. Unfortunately, a few factors transpired to prevent that vision/plan from being realized. At the same time, MSN was a complete cluster*&$# and was hemorrhaging money with some failed experiments such as Bob Bejan’s “shows” that were about 10 years ahead of their time and countless other wacky content plays such as “Microsoft Dogs”. Meanwhile Sidewalk was hemorrhaging money (as planned) and there were many other media/e-commerce plays that were driving the senior execs crazy particularly when some of the them presented conflicts with corporate customers. These customers threatened to stop buying Microsoft software if Microsoft didn’t kill or spin-off some businesses (e.g., a key reason Expedia was spun out as it was an irritant to major corporate customers such as United Airlines). Barry Diller , Charles Conn and others were savvy enough to realize there was some "throwing the baby out with the bathwater" effect when Microsoft was trying to get out of content oriented businesses (some it later had to duplicate investment in later such as in Entertainment, local search, etc.).
Around this same time, Microsoft had acquired a company named eShop for the technology that became Microsoft Merchant Server. eShop also had “eShop Plaza” that came along with the deal and became MSN Shopping which was part of the still-flawed model of “online malls”. Nonetheless, one of the founders of eShop was enamored with his “online mall” and wanted to fulfill his vision of being the predominant “online mall” on the web (to this day, MSN Shopping is a 2nd or 3rd tier shopping site that has had, at best, modest success). However, Microsoft had no intentions of staffing that in a way to win on the web. As I recall, for a long time, eShop had one employee and a contractor or two who heroically kept the thing going. Meanwhile, the technology guys (Will Poole and Arnold Blinn) were what the Merchant Server product team wanted so the business guy was put into a staff position working for John Neilson who oversaw Sidewalk, Expedia, Carpoint, and HomeAdvisor. Unfortunately, at a critical juncture in Sidewalk's history, its executive champion (John Neilson) was tragically struck down with non-Hodgkin's lymphoma. John was a phenomenally talented guy who was inspiring to work for and also happened to be good buddies with Bill Gates (e.g., in Bill's wedding party) and Steve Ballmer. There's no doubt he'd be one of the three Microsoft presidents now given his talent, passion and connections. On a personal note, the day I was finalizing my new role working for John in a role that spanned his four businesses happened to be the first day he was out "sick" (I later learned just how sick he was when he didn't come back).
John's illness came at a time when his dislike of content businesses such as Sidewalk was consistent with many senior execs such as Ballmer who were questioning why we were doing content. At the same time, there was a focus on cutting costs on content businesses and make the case that some of those resources should be redirected towards the online mall concept. The fact that was in Microsoft's backyard probably made the shopping angle that much more attractive vs. media businesses where Bill, Steve and others had no experience. It should also be noted that the online ad business hadn't matured to where it was clear you could make a boatload of money.
Sidewalk had a super strong group of city General Managers such as Kevin Eagan, Cella Irvine, Doug Heinrich, Chris Hearne, Anne Karalekas, Moya Gollaher and Brad Struss. They had all gotten past what was the toughest interview process I’d seen of the legendary Microsoft interview process. It was Microsoft’s heyday and it could basically get anyone it wanted to join the company. One of the key premises that Frank and the founding team of Sidewalk had was that Sidewalk was going to experiment like crazy and let these high-powered GMs have a lot of freedom to innovate. This led to a natural tension between Redmond and the cities fighting for who controlled what decisions (Redmond product people were used to having the final say on all product decisions). The new GM of the group was typical of many entrepreneurs I’ve worked with who by the sheer force of will, they succeed. Implicit in this is they have a group of people who rally behind them to pull it off. The new GM didn’t have this advantage at Sidewalk where you could get people to rally behind you as the city teams and many in Redmond were deeply skeptical of him and questioned his understanding of the local/media business where he had zero experience. This led to the Redmond vs. cities war to escalate.
Just prior to the GM taking over, one of the least pleasant things I had to do in my career was shutting down the Montreal Sidewalk office which Frank had decided to do. While it wasn’t pleasant, I 100% agreed with the business rationale. I was on point to ensure that it went smoothly from a human resources and PR perspective. It wasn’t a career highlight but I was told afterwards that it was the most successful “RIF” (reduction in force) that the company had gone through. The RIF’ed employees were treated well, there was barely a PR blip, etc. My reward? When the new GM took over, he was familiar with what I had done and basically offered what I viewed as making a deal that was at odds with my beliefs. I would take over management of all of the cities (I was managing half of them at the time) with the goal of progressively reducing the city teams to non-existence. In exchange, I would take over a substantial portion of the product team. It was the first time in my career where I had an explicit fork in the road where I could either be true to myself and what I believed made business sense (Ballmer's comments provide a measure of vindication on that front) or maximize the opportunity for promotion by being someone's hatchetman. To that point, getting rapid promotions was my primary career goal and it had worked very well for me. Ultimately, I politely declined the offer. The guy who took on the responsibility I declined became the GM of MSN Shopping. He’s a guy I like a lot but didn’t have the issues I had with killing off the city teams and was rewarded handsomely for bleeding the cities.
The new GM felt he had to reign in the cities and the pendulum swung from decentralization to centralization. Some of the city GM’s (e.g., Kevin Eagan was one of the original founders of Sidewalk and had ideas coming out his ears - I'm still surprised he hasn't started his own company) had creative ideas that were money-making ideas they’d teed up in their market, however most of those ideas were killed before they could even be tested. The byproduct was constrained revenue growth and innovation which made the case even more solid why Sidewalk should be eliminated. The case became even stronger when acquisition discussions with Citysearch were enthusiastically pursued . This would free up resources to redirect towards MSN Shopping and recoup some of the investment Microsoft had made in Sidewalk via the acquisition. To his credit, the corporate development team played their hand well as the Citysearch guys knew there were issues inside of Microsoft regarding Sidewalk but not the extent of those issues and had little idea that they didn’t have to buy Sidewalk to eliminate a competitor. The Sidewalk acquisition increased the attractiveness of Citysearch’s stock (Ticketmaster Citysearch went public December 8, 1998) and has gone on to success.
The stated purchase price for Sidewalk was $240M, but $150M of that was in a clever warrant security the Citysearch guys called the "weedwacker". This warrant was designed by BD's vice chairman, Victor Kaufman, and it had a strike price that decreased as the value of TMCS stock increased, potentially delivering huge value. But it expired unexercised when the bottom went out of the market (TMCS' stock declined to $14 at one point in the crash, well above their IPO price, but below the trigger point for the warrant). In the end they paid less than $100m for Sidewalk and once again Barry Diller et al saw the value of properties that Microsoft didn't.

Postscript: Several members of the original Sidewalk team went on to become successful CEOs outside of Microsoft while a few of them stayed at Microsoft. I worked with many great people during my Sidewalk tenure who have gone on to great success in and out of the work world. Google people like Michael Goff, Richard Tait, Frank Schott, Laura Bordewieck (later Rippy), Jan Even, Mike Gordon, Dan Fisher, David Harrington, Gayle Troberman, Peter Atkins, Cella Irvine, Peggy Brown, Bill Furlong, the aforementioned city GMs and many others and you’ll see that the caliber of the team was amazingly high. It’s too bad Ballmer didn’t have more patience for that team to realize its full potential. In fairness to Steve, he was sold a story that he bought that wasn’t the complete picture of Sidewalk, however he was very open to hearing that story. Microsoft’s Internet business would be in much better shape than it is today as that talent largely left the MSN arena or the company altogether.
As for me, I dipped my toes back into the local online space last year becoming an investor in (a local news and information site for the Sun Valley area resort community).To my knowledge, SunValleyOnline is one of the few local online properties anywhere in the country to be making money (e.g., Citysearch is now making a profit) and is applying many of the lessons (good and bad) from Sidewalk. For example, the web user of today is much more willing and able to contribute content to a site if the right tools are in place. If you check out a site like SunValleyOnline, you'll see that 3/4 of its content are provided by the community it serves. SunValleyOnline can also leverage off-the-shelf tools rather than have to build much of the technology on its own (it still has to have some proprietary tools but far from 100%). Whether it is leveraging blogging software (WordPress) or utilizing infrastructure of others (e.g., YouTube), it can bring new tools to market rapidly. Let me share one example of the power this has had in the greater Sun Valley area.
Blaine County is the county that Sun Valley is in. For 17 years, Blaine County had tried and failed to get a new jail built including 3 failed jail bond elections. A jail bond election took place earlier this month. Prior to the election, the Sheriff and County Commission Chairman were reaching out to the local media in an attempt to raise awareness of the issues regarding why a new jail was needed (the list was long and compelling). Traditionally, if you tried to win an election in Blaine County, there were the typical tactics (newspaper ads, letters to the editor in the newspaper, etc.). SunValleyOnline (SVO) suggested a different approach leveraging the tools of the citizen journalism movement. There were two tools in particular that were suggested to the sheriff and commissioner that they took advantage of.
1. Video. The sheriff and commissioner offered to give tours of the jail to any citizen who wanted as he knew that anyone who saw the conditions his people worked in and the liability exposure the county had would vote for the jail bond. Realizing that very few people voluntarily want to go into a jail, SVO suggested shooting a video tour and posting it on YouTube/SVO. In other words if people won't go to the jail, take the jail to the people. It was far from a Spielberg production but it got the point across.
2. Blog. Naturally, voters had lots of questions about the true need for the jail and there were some conspiracy theories about the jail (e.g., it was going to enrich the sheriff) that they wanted to explain. As a voter who was neutral on the vote, I had several questions so I offered to post the questions in my blog I had about the jail. This spurred a tremendous dialogue between citizens and the commissioner answering questions, responding to rumors, etc.
The ads the jail bond campaign purchased on SunValleyOnline simply pointed to the videos and blog.
The end result? The jail bond passed overwhelmingly with nearly 80% of the vote. The sheriff credited the video tour based on the large number of comments he got as he was out in the community. It was apparent from the comments on the blogs that people who'd previously been against the jail bond changed their vote as well. The cost of using the aforementioned tools was negligible yet it had a demonstrable effect on the community. These are the sorts of things that weren't feasible in the early days of Sidewalk.
I searched my hard-drive for some of the early Sidewalk documents (back when it was still code-named "Cityscape") and found the original business and product plans. It's interesting to see how the opportunity was described and what the product vision was. Had Microsoft stuck to the plan and let the talented team pursue the opportunity, things might be very different today. Here are a few excerpts...
"We intend to play a similarly trusted role as the yellow pages and newspapers do today in consumers’ lives, by being the first best to look for an answer or a purchase. By developing a loyal set of consumers, we will create the best online advertising vehicle for local merchants and national advertisers, and capture a portion of the $67 Billion local advertising opportunity."
"To reach the comprehensiveness described above we expect will take 6 years." The reality is the plug was pulled in essentially 2-3 years before the yellow pages/local search opportunity could be tapped and before user-generated content became mainstream and would have made the cities far more cost-efficient (something Citysearch figured out) not to mention being able to do what I'd originally been hired to do -- scale Sidewalk in more efficient ways a la TV networks/affiliates after gaining insights from the so-called "owned & operated stations".