Tuesday, January 29, 2008

SIIA Previews - The New, New Things in Content

This year's SIIA Information Industry Summit includes for the second year the "Previews" event, an opportunity for major publishers, technology companies and investors to take a look at the up-and-coming companies in the content industry. There were at least 63 applicants for appearing in the Previews event, of which ten were chosen, so the quality of the companies is quite high overall. I live-blogged most of this, so some of it is a bit rough, but I think that you'll get the flow of this very dynamic event - and some good insights into some of the best of new content plays.

State of Startup Investment - PWC

Investment in venture plays remained strong 2007 according to David Silverman, Partner at PriceWaterhouseCoopers' MoneyTree report, with a 10 percent CAGR boost over 2006 overall and USD 70 billion-plus across all quaters. Software investment is down as a catgegory, but with investment up strongly in the media and entertainment industries and in business processses, it's a strong sign that technology plays are working their way up the value chain into solutions that inevitably make them increasingly content plays. Valuations on established companies are down, pushing more investors into earlier stage companies. VCs were able to turn 86 IPOs in 2007, the highest since the dot-com crash and a hopeful sign for emerging investments. There's quite a but of money that's being raised, so as the economy softens smart investors will continue to look towards venture capital plays to help them weather the down markets by building new value.

I will be providing short takes on a relatively live basis as the speakers provide their elevator pitches today, stay tuned for updates, when my batteries run out I'll post the rest this evening. The good news is that we got connectivity at the last minute for blogging.

Larry Schwartz, President, Newstex - How did the Class of 2007 Do?
Larry's quick update to last year's Preview event, apologies for scant details:

Eurekster: 5.5 million in financing, averages 25 million queries versus 10 million in early 2007.
Generate: 80 news customers, including Hearst Newspapers, Thomson Financial and Yahoo.
Near-Time: Added Wiley, CareFirst, partnership with U.S. government for "green" initiatives.
Inform Technologies: 15 million investment, 40 media clients
Pando: 16 million application installs, powering online delivery for NBC.
Attributor: Deals with AP, Reuters, speaking at IIS
Cranium Softworks: New product launches, anticipating funding in 2008
iCopyright: added 500 publishers in 2007, 5,000 transactions a day

Business & Investment Climate Update
Moderator: Bambi Francisco, CEO, Vator.tv

Brian Hirsch, Managing Director, Greenhill SAVP
Robert Levitan, CEO, Pando
David Silverman, Partner, PricewatershouseCoopers LLP
Ed Reitler, Parther, Reitler Brown & Rosenblatt LLC

Levitan: Lots of support for early-stage companies, later stage companies lot of support for known business models. VCs like to do due diligence on known business models. Our S/W deployed as consumer app, from 2 mil to 16 mil installs, everyone understands "freemium," took software up a level to corporate customers, NBC using technology between media player and software delivery network. Figures out if/when content should be downloaded, eliminates 80 percent of delivery costs. People don't know how to price this yet, it;s enterprise sales, sits on desktop, but still feeling their way through business model.
Bambi - rise of angel networks, lots of compa. nies that don't need VCs, just a few millions
Lots of CEOs using blogging to reach out to both investors and clients.

Silverman: VCs looking for established models, want to see revenues, profits when available. Might see more of a risk shift into earlier stages. Very vibrant market in NYC and beyond, downturn can happen but businesses are moving along. good opportunities for future.

Reitler: Good healthy growth 2003-2005, in current slowdown vs. internet "winter" of 2002-2003, not the same problems with recapitalization, more sustainable growth, slight uptick in early stage companies, healthier capital base. Lots of funds were insured, by SBA before, this time around plug is pulled on insurance. But deal flow is still strong, venture funds aren't investing in highly leveraged deals, mostly pure equity deals. Cash-rich institutions are taking on compelling business plans, as long as revenues come in from advertising and lead generation, should be a strong environment.

Hirsch: May be a recession, but doesn't really impact investment on innovation over past 30-40 years, many of the best companies were invented in the worst of times. But valuation is a factor, may have to give up more of your company or settle for less capital. Don't let economy stop you from starting a business if you have a good idea.

Bambi: Where are funds being deployed?
David: More of the same, biotech, med devices, in NYC internet ad companies, content creation companies, IAB/PWC quarterly report on interactive advertising, phenomenal growth, increased penetraion, more broadband, but need more technology.
Bambi: Brian, where is your money going?
Hirsch: Half of cos in marketing services, leadgen growth is accelerating, more measurable ROI, more value to marketers. Online ads, peel away Google and Yahoo still growing healthily, pure ad model challenging if you can't aggregate enough of an audience. Very careful at deploying dollars, west coast more aggressive in funding ad models. Not more risk-averse, like info-driven models, oppys for ad-driven models but pure ad-driven models can be developed via angel-backsed investments but for 30-50 million exits need to be highly efficient with capital and growth plans. Exits in social networknig are in 15-75 million exit range, not a lot of breakouts expected, cautious therefore for ad-driven.
Silverman: Big deals with nice returns, big players picking up pieces. [COMMENT: This is key, good time to pick up feautres and content that can make you stronger.]
Levitan: Video advertising is ripe for reinvention, will be nothing like pre-roll/post-roll markets today, complex algorithms will generate matches that will provide huge returns.
Reitler: Quigo had great returns. Leadgen offers still a lot of room for growth, buy media low and sell leads high, like a securities exchange, leading sellers to buyers. E.g., driveway pavers, narrow niches can be matched very precisely.

Bambi: Funding, what't it like raising funds today?

Levitan: Most VCs like to see mature business models, I enjoy being somewhere else, but telling the story requires much more education, investors need familiar benchmarks. Bambi: Do they care if you have revenue? Levitan: depends what traffic is for. As entrepreneur, a lot more people know a lot more details about a lot more business models. Kids may not have the full picture at how business models can grow. VCs are so smart, angels look more interesting for people proving ideas out, may be able to avoid VCs altogether. Previously it was a badge of honor to have a VC, but now you don't need that endorsement as much. Some VC funds will have to adapt.

QUICK TAKE: Funding is still healthy, private money has no where else to go right now, angels are more important than ever and there are plenty of people who may be able to make progress without going deep into VC money. Angels are getting more sophisticated, so the lines may be blurred to some degree.

Presentations Round One

ExpoTV: Video storytelling about products. 200K product reviews, unbiased, screened, coded, organized. Treat usergen more professionally, full rights to content and creative purchased but compensate contributors. Lots of metadata, more than in usergen platforms, leadgen revenues from ad inserts. No longer lonelygirl15, it's "lonely mom" as a consumer advocate. Syndicates to Yahoo! Shopping, Oxygen, Amazon, TimeWarner, Beliefnet, Planetfeedback. 8x video play growth, current views 2 million a month. Refer a friend program, most find it via the portal. Leadgen model is a winner, reviews are so highly targeted it should work very well. Also ad revenue.
QUICK TAKE: This is a strong play, great combination of community, structuring unstructured content for sophistiaced retrieval, syndication strategy, building revenues and reputation for contributors. Fairly high barriers to entry already with solid deals and content maintenance.

Health Monitoring Systems: Katrina hit, NOAA knew exactly what would happen, in contrast, no such event management, epidemics come but with no forecasting. Many events don't bloom into health crises, others do unexpectedly. Maps of disease patterns. 2006 Superbowl fans got sick on the way home and spread disease down I-80 in Ohio. Vision is to be national surveillance system for health. largest in U.S., 500-plus hospitals, customers in 10 states, looking fo expand data sources, provided by hospitals, they own analysis. States buy subscriptions.
QUICK TAKE: Didn't present all that well, but it's a pretty good play, that is, if they can build momentum. The "get it" factor is pretty good, there's a real market need. Low barriers to cometitive entry overall, but its pioneering position can help them build deal flow. Down economy may slow adoption. However, also possible to cross-sell into law enforcement.

LinkStorm: Pop-up content contextually related, focused on ecommerce, related products, 3x boost in click-through rates, equipped with graphics. Multi-level menu of options makes drill-down easy. Measure heavily user engagement, track click-throughs on a per-menu-item basis. Advertisers can act on insights and optimize menus real-time. GM, Overstock.com, Cisco, SAP, many majors. Estimating 100-200 million exit [COMMENT: well, with luck, never know]. "Roll Over" cue on screens demystifies use of technology, it's transparent, strictly OEM model. Take in feeds, will show all relevant products automatically, can sell sector data also.
QUICK TAKE: Great to see this technology find a home in advertising, solid investors backing it who understand markets, Makes each click much more valuable, user self-qualifies for more specific products before they ever get to actually click. Some barriers to entry given Sidman's investments in technology from other efforts, but main barrier is deal flow, he's moved very quickly into small presences and needs to expand it quickly before it gets positioned more as a feature than a platform. Pretty good bet for future growth, Google others could acquire, so exits are probably plentiful.

: 5-10 million hours of free tutoring to give away, VOIP with whiteboarding, scheduled in advance, 30 subjects, PowerPoint-enabled instructional tool. Ad-driven, CEO helps to optimize content. Big push in India, Bangalore-based, tesp prep centers, 120 million Indian students attend centers. Creating branded "private schools," Sequoia, LightSpeed on board. India has the largest below-19 population, huge market. Tutors compensated well, double what they would make at university or schools, low turnover. new, voice-based tutoring, not a chat, subscription-based but some ads. Goal is a million tutees in a couple of years. One-on-one personalized tutuoring.
QUICK TAKE: Has competitors, but its focus on India's domestic market as well as international markets is key. Expect strong rapid growth, technology really isn't the issue, sounds fine overall, it's the VOIP that allows personal interaction that can make the difference. Solid, relatively quiet investment which is good for the investors as it's growing strong.

FeeDisclosure: About 1/3 of fees for closing mortgages are junk fees, fees for Adobe's free Acrobat software, etc. Identified fifteen categories that make up a real estate transaction, brokers give data for reporting and can become featured members, similar to LendingTree. Data includes service provider ratings, professionals provide trust by providing full disclosure. Forcing market to become more transparent. Consumer can compare their closing costs to national averages, whether fees are common. Patent pending. Can break down data to zip codes, price, location closes to home.
QUICK TAKE: Good basic argument, huge market, may become a trusted leader, in a tough lareal estate market this may be appealing for consumers, new legislation may force disclosure, pubic sentiment behind this. Could flip quickly, management seems professional, know their. market.

Presentations Round Two

:A platform for young companies to be discovered. started with 250 companies, now 800-plus. Wants to be the place where startups grow up. Wants to provide services and features that helps them to do it. Distributes news from companies via Blinkx, AlwaysOn, YouTube, VentureBeat, Mashable, profile updates get picked up as blogs. Hoover's company profiles are static, Vator.tv profiles are dynamic, cover hiring needs, creating announcement in video, RSS feeds, constituents, can help audiences to find related companies. A resource for other sites writing about these companies. Looking to make 70 percent of content from community, 30 percent editorial [COMMENT: This is probably going to be close to the de facto industry standard]. 1.5 million total views, seeking $30 CPMs, potential value in archives, subscriptions to data cuts. Thinking about value-add from directories of angel investors, etc.
QUICK TAKE: Sounds like an idea bigger than its initial packaging, still too early to tell where this is going. With Bambi's reputation it's likely that she'll have the entrees to make this fly to some degree in the long run, and "build it and they will come" can work when you have a highly focused and monetizable community such as high tech/content startups. Watch this as a potential model for evolving trade media in new directions - long run looks lot betster than the short run.

: Monetizing links. Harder to interlink in large sites, can be expensive proposition. Automatic, dynamic document interlinking - zero effort from pubishers, natural language processing provides links to relevant information. Can embed related videos, Amazon content. Sees 12 billion addressable market. More time spent on pages, Monthly licensing fee, revenue share on advertising sometimes, for example on video pre-rolls. Launched in July 2007. Looking for 3-4 million.
QUICK TAKE: Sphere-like but no big deals, more contextual analysis of keywords, like Sphere it can help people find more content in their own site more effectively. has potential but there's so much technology chasing these problems I worry about whether they'll be able to get significant deal flow and buzz to differentiate.

ArchieMD: Rich graphics for online service with deep content that can educate people on the body, diseases and injuries. High school students, military surgeons, internet health portals, general public, jury education - have 300 law firms as clients - with both generic animation and customized animation. Reed Elsevier partnershipfor health professions and higher education, looking for wider scope of distributio n for legal. A.D.A.M. is primary competitor but is more text oriented.
QUICK TAKE: This is a strong play, a good variety of audiences, monetization models, high-end value and mass audience value, Nobody really owns this, I think that main challenge is to make this a model that can interoperate with as many environments as possible. I can see markup with social media APIs something that could be quite appealing . A Google Health exit, perhaps?

Keibi: Control and measure user-generated content, adjacency is an issue for many publishers, moderation suite is key product. MySpace has tiers of moderators, small publishers have maybe one or two people, it doesn't scale either way. Content is ranked, scored, looks at other signals, prioritizes most likely offenders, keeps moderators productive. Hosted SaaS model, mostly subscription model with some CPM-based ad models. Has Bebo as client. Certification model, Keibi will provide a rating for a page of content (G/PG/R/X is general concept), ability to manage scores to be appropriate to specific advertisers has a filed patent.

QUICK TAKE: A highly useful service, SaaS model is fine, can be expanded, helps to decrease costs while growing UGC as rapidly as possible. This is a market that will grow significantly, has potential to become an industry standard, the need is clear, will only grow, competitive environment unclear, could wind up with too many solutions following a specific opportunity, but it seems to be a pretty clear field right now.

Courtroom Connect: Discovered more value in getting content out of courthouse than content into courthouse. Video will change practice of law, they capture the dramatic moments. Demo of Bill Gates testimony in antitrust suit, video side by side with exhibits of stamps, squirming as his testimony doesn't match exhibits. Cost MSFT 100 million on that case alone. Networks installed in 50 courtrooms in major markets, developing data bank, makes money on big hits but long tail is strong, 15-plus years of reuse. All major legal firms, legal outlets, can help lawyers be much more efficient. Universities want content in curricula. Review videotapes of opposition, helps them to prepare against lawyers and expert witnesses. Interactive focus groups, exhibit & document sharing, YouTube professional commentary. Revenues growing 50-100 percent per year.
Existing television networks look only at sensational stuff, these are money-oriented trials.

QUICK TAKE: Wow. What a great application of public informaiton to a high-end and media product, well-placed, building up huge expertise, winning bids against telcos who see only the infrastructure opportunity, text transcripts are pricey, they have video and multimedia, more efficient. Oftentimes network installations are exclusive deals, like Wayport in hotels, so you have an exclusive service channel with deep content. Strong, strong, strong.

Closing Keynote: Kevin Ryan, Co-Chairman and Co-Founder, Alley Corp

Growth of Doubleclick was like 40 years in 9 years, dot-com crunch as "less fun," 70 percent of clients went bankrupt. Panther Express doing well, other key deals, ShopWiki, User-Generated Nation, SampleSales Online - needless to say a deep and successful portfolio.

Traditional media companies - it's going badly, but it will get much worse, "It's a disaster." Time-Warner has lost 80 percent of value in 18 months. Market Cap of TimeWarner now smaller than Google. Yahoo wouldn't budge off of one billion to buy Google [oops]. Google is even more powerful than people realize, sucking all the air out of the room. Numbers staggering. New York community is incredibly well positioned for startups, compared to ten years ago it's night and day. In 1950s, TV didn't wipe out movies, but movie consumption went down 90 percent, fundamental trends can change industry dynamics. Internet not as bad as that because human nature hasn't changed that much. But same people may not make the same amount of money. Profit margins were related to distribution monopolies. CapCities/ABC deal, how could ESPN be worth more than ABC, saw the 10x growth of value of ESPN. Structural problems, distribution, cost structures "just ridiculous." Doubleclick now worth 3 billion, Warner Music 3 billion, 10 people at WM with more than a million in compensation. Is that inherent in the model? $120/sq/ft offices is a choice. EMI was buying expensive "flowers" hand over fist, turned out to be hookers and drugs. [Sheesh]

"Traditional media companies have not been able to create new value in the online media space." They said "Wait 'till the big boys get in there," now not a single one of the top companies online was created by a traditional media company. People from startups have created more market capitalization than existing media companies from their infrastructure plays. Media companies are making better acquisitions, About.com, MarketWatch, MySpace, but cannot create internal DNA to be more competitive. On fundamental issues it will get worse, if I had a Kindle-like device to read my New York Times I would, not far away, about three years.

On Google side, "Google will be the first trillion-dollar company," takes percentages of other markets' ad shares consistently. Take out the Google numbers from internet spend, growth is in teens, not 30 percent. Will probably dissipate, number ten-priority products will suffer, but leading products have 80 percent-plus margins.

New York companies - why still in NYC was a question in old days, couldn't get a lawyer in 1996 that had worked on an Internet IPO. Changed completely - ten to twelve ex-Doubleclickers have developed their own companies. Two thirds of people in a recent Meetup for online people were already on their second startup. Infrastructure is here, will benefit from recession, relative value of VCs versus private equity will increase. Investment banks have no deals to talk about. Fundamental trends are not going away. 5 billion of acquisitions of New York-based media, more than Silicon Valley, don't hear about it, tech community "has a chip on its shoulder." Ladders is huge, don't hear about it. Digital media is a big growth area, New York is logical space, fashion is here, advertisers are here. Look at how much you spend per person in real estate, just use less per person. 6,000 per person on real estate, 3-4,000 in Pittsburgh, not as compelling as getting the right people. Oursourcing makes some functions more cost-effective for NYC work. Need better VC infrastructure, Boston firms are all working in NYC every week. Biotech still in Boston, but more pure technology companies like Doubleclick appearing in NYC. Lots of people being "freed up" from Wall Street this year, will learn that the Street is not as secure as they thought.

All of this creates opportunities. Social media is hot, but risk-reward is not always there. Look at taking areas worth billions and seeing if there are all the products that you need in the space. TheLadders was targeted at 100K+ jobs, those people don't use Monster, return will be huge. Re-segment markets - five windsurfing magazines in France, always opportunities. "If you spend more than five minutes online trying to find something, there's an opportunity." Hotel niches, retail niches. Video serving costs dropping rapidly, down to levels where advertising can support access. Magaines, radio are ugly, TV is not as bad, harder for a startup to do from scratch. Music labels are worth almost nothing, devastated.

QUICK TAKE: Not all new news, but a very compelling present on the online content markets that I've seen in a while. I'd agree that some of the Silicon Valley narcissism may have reached some sort of threshold, and I agree that NYC offers strong opportunities for startups picking off the bones of larger media companies and the ready pool of advertisers, but I'd suggest that the footprint is broader, more of a Bos-Wash Corridor community. That's where the West Coast iations a little more advantageous in some ways - a more concentrated community. The key factor is that there is not that much happening that's fundamentally new in consumer media technology lately. Apple's iPhone's advantages are based mostly on their largely failed exclusive deal with AT&T, for example. So we'll see whether there's any shift to the East Coast this year, I'll have to think about it but I'm still betting on a lot of trips to SFO this year.

Hope that you enjoyed this, more tomorrow on the Information Industry Summit
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