Google Sees YouTube Striding Toward Profits

July 17, 2009

Google’s says its second-quarter financial results show the online advertising market is slowly stabilizing from the swoons of the global downturn.

But the online search giant fell over itself to highlight the fast growing strength in YouTube, the come-one, come-all video site it bought for $1.65 billion two years ago.

The YouTube home page is selling out, says Googles Nikesh Arora

The YouTube home page is selling out, says Google's Nikesh Arora

YouTube has been something of a laggard in its ability to carry and sell advertising. But Google says this is changing and that profits may not be far away.

“YouTube is on a trajectory we are very please with,” said CEO Eric Schmidt.

Ad showings more than tripled in the past year to the point where billions of ad views are recorded each month, the company said.

And the success is not only apparent on YouTube’s home page, where “we are seeing significant sell through in major markets,” according to global sales President Nikesh Arora, but on search pages and with “pre-roll” ads that appear at the start of videos.

YouTube is starting to show a lot of pre-roll advertising tied to clips of partners, such as Disney, says Arora. “I think the next phase of YouTube is going to be (with) pre-roll views on short clips and long-form video.” Over time, brand advertising also will expand.

So far, there has been little customer drop off from the pre-rolls.

Google wouldn’t be specific on its expectations for profits. But in the “not too long distant future we actually see a very profitable and good business for us,” says CFO Patrick Pichette.

Watch out Hulu. Google may have figured this business out.

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Posted by Mark Boslet

As Mobile Web Startups Proliferate Making Money Is Still Elusive

July 16, 2009

A new wave of mobile startup is creatively reshaping the way people will think of and use their mobile phones in coming years.

Before long today’s pocket-sized communicator will become a credit card, a photo store, as well as a user’s primary source of information from the Web.

Micro transactions are promising, says Tapulous Andrew Lacy

Micro transactions are promising, says Tapulous' Andrew Lacy

But this vibrant incubation of new applications is missing one key ingredient: a straightforward way of turning turn technical innovation and site development into revenue.

The proliferation of smart phones, such as Apple’s iPhone, the latest Blackberries and the Palm Pre, is enabling this transformation – opening the door to more complex applications and pushing data in steady streams to mobile users.

The dramatic shift is still several years away. But several early innovators were on display at the MobileBeat 2009 conference Thursday in San Francisco.

One startup, AppStore HQ, wants to create an easier way to locate useful iPhone apps. With tens of thousands of applications available, “it’s easier to get your applications found than get a camel through the eye of a needle,” says exec Chris De Bore.

The company is starting with the iPhone and hope to expand to apps for Google’s Android and the Blackberry.

Boku has already begun turning the phone into a payment device and now boasts operations in 50 countries. Urban Airship plans an alternative way to push data to cell phones and is even working on push alerts for RSS feeds – a potentially huge market. (Apple and other phone developers have begun offering their own push technology for phone data.)

Another promising startup – Touchnote – is rooted in the real world. It wants to make money by turning cell phone photos into postcards it mails to recipients.

But making money is no guarantee. Opentable has been able to use its iPhone application to deliver dinners to local restaurants, for which it gets a fee.

But Flixster’s hope of selling movie ads into its movie location app is a work in progress. The evolution of the phone payment system is also creating confusion.

Payment restrictions make it hard to know whether to charge for a game application and make money with virtual products or to charge for the game itself, says Andrew Lacy of Tapulous.

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Posted by Mark Boslet

Entrepreneurs More Likely To Be Middle Age Than Young

July 15, 2009

The perception that entrepreneurs are most likely ambitious twenty-somethings is just that – perception, not reality.

Instead most startups are founded by middle-aged people who have families and are motivated by a desire to be rich.

The average age of an entrepreneur is 40

The average age of an entrepreneur is 40

A study conducted by the Ewing Marion Kauffman Foundation surveyed 549 founders of businesses in the technology, health-care, aerospace and defense industries.

More than 90 percent came from middle class or lower-class backgrounds and are well educated. More than 95 percent have bachelor’s degrees and nearly 50 percent have earned advanced degrees.

They also tend to be middle age – 40 years old on average – when they started their first company. Nearly 79 percent are married.

They study opens an interesting window into the composition of this somewhat mysterious class of company builders. Common wisdom holds that many entrepreneurs toil in their dorm rooms or struggle in a garage.

The study also found that building wealth is a primary motivation. Other motives for starting a company include: capitalizing on a business idea; the appeal of a startup culture; a desire to own a company; and the desire not to work for someone else.

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Posted by Mark Boslet

Good News From The PC Market

July 15, 2009

The personal computer market topped expectations in the second quarter as resilient consumers shopped for portables, and shipments to China and other Southeast Asian economies reversed course and grew.

The overall market continued to shrink during the three months. But the decline was smaller than anticipated and it gave some analysts hope the market would once again expand by the fourth quarter.

Research firms Gartner and IDC released quarterly numbers on Wednesday afternoon that offered similar market assessments. IDC said the global market fell 3.1 percent, or less than the 6.3 percent decline it expected. Gartner said the market slipped 5 percent, a better performance than the 9.8 percent drop it projected.

“The results can be interpreted as a small sign of a PC market recovery in terms of shipment volumes in some regions,” said Gartner principal analyst Mikako Kitagawa. Asia/Pacific and the U.S. came in better than forecast while weakness continued in Europe, Africa and the Middle East.

Hewlett-Packard widened its lead as the world’s largest PC vendor with almost 20 percent of the market. Dell saw shipments drop sharply, but held the number two spot with an almost 14 percent share.

Acer continued to rival Dell in size with its strategy of selling low-cost portables and netbooks. Toshiba also gained ground.

The two research firms offered differing views on Apple’s place in the U.S. market. Gartner said Apple advanced modestly to 8.7 percent of the market while IDC said Apple lost ground and held 7.6 percent of the U.S. market. Apple generally prices its machines above comparable Windows models.

Top worldwide PC vendors according to IDC

Top worldwide PC vendors according to IDC

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Posted by Mark Boslet

GlobalFoundries Enters Consolidating Market

July 14, 2009

New chip foundry GlobalFoundries will break ground on its massive New York State chip plant in ten days (July 24).

Let’s hope the joint venture isn’t buried by the $6 billion it hopes to spend ($4.2 billion of which will go into the foundry itself).

We have to fill our fabs to make money, says GlobalFoundries Thomas Sonderman

"We have to fill our fabs to make money," says GlobalFoundries' Thomas Sonderman

The company is the latest entrant in a crowded market, one that many think will consolidate in the next few years as the global slowdown trims demand and generates more excess capacity.

GlobalFoundries hopes to transform the foundry business by offering only the most advanced manufacturing techniques to customers. It will start producing at 28 nanometers in 2012 and ramp to volume at 22 nanometers. (Intel’s most advanced lines make chips today with 45 nanometer features).

“We see a huge opportunity to bring leading edge technologies to the foundry space,” said Vice President Thomas Sonderman at the Semicon West trade show on Tuesday in San Francisco.

But the strategy is no guarantee. There are already more fabs than business to fill them. By some estimates 35 outmoded fabs will close this year and another 12 next year.

“The trend I would expect is consolidation,” said IBM Vice President Dan Armbrust.

So far, excess capacity is less of a problem among the most technically sophisticated fabs that produce using 12-inch silicon wafers and produce small electronic ciruits. But it is not clear how long that will last.

“I think we have to hope the economy recovers,” says Sonderman. “We have to fill our fabs to make money.”

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Posted by Mark Boslet

Act II For Google-Backed Wireless Startup FON

July 14, 2009
FON CEO Martin Varsavsky wants to eliminate waiting on the Web

FON CEO Martin Varsavsky wants to eliminate waiting on the Web

Remember the wireless company FON?

The Spanish company attracted money from Google, Skype and Sequoia Capital three years back to fund its Wi-Fi sharing scheme, where FON members let other members access the Internet over their home connections.

The story hasn’t had a fairy tale ending. FON has had some success in the United Kingdom and Europe, where it has about 400,000 members. Japan also has been a relative hot spot.

But the network didn’t catch on in the United States. Only 5,000 people signed up.

Now the company is ready for Act II. FON said Monday that it is launching a wireless router for the U.S. market that includes its network sharing technology and which allows people to remotely download data off the Web without using their PCs.

According to FON CEO Martin Varsavsky, the Fonera 2 is like a “Tivo for the Internet” and will do away with waiting for photos, movies and other files to download (or upload). Just set it and walk away.

A FON press release goes a step further, suggesting users can access peer-to-peer download sites such as BitTorrent, RapidShare and Megaupload as well as upload sites such as YouTube, Picasa and Flickr.

Varsavsky said the Fonera 2 will be priced to compete with other wireless routers – at about $90 – and be available in the states come October, after a September launch in Europe. Data storage is not included.

Unfortunately, it is hard to imagine the FON selling point of “no wait” will catch on big. When the Internet was young and people downloaded over dial-up modems, the world wide wait was part of the process. Now, with broadband speeds (as slow as they are) the wait for most people has gone away.

Instead of no-wait, convenience would have made a better ticket. The idea of Tivo-like storage for the Internet is a good one. But FON should have pitched its router as a device for getting content into the home and onto the TV without a struggle. That might have made ACT II worth seeing.

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Water Technologies Offer A New Frontier For Startups

July 14, 2009

When it comes to clean-tech investing, water conservation startups haven’t produced a flood of success.

Mohr Davidows Will Coleman sees promise in filtration and membrane technologies

Mohr Davidow's Will Coleman sees promise in filtration and membrane technologies

One company, Energy Recovery, went public in a 2008 IPO and several others have found M&A exits. But the list of liquidity events isn’t long.

Still, there may be more promise in the sector than venture capitalists commonly think.

That’s because of the law of large numbers. In California, for instance, 19 percent of the state’s energy is used to transport water from the north to thirsty southern cities and farm fields. Finding ways to move the water more efficiently could bring big benefits and substantial cost savings.

And while water is cheap, a lot of it is used in Central Valley agriculture and for the cooling of commercial buildings and data centers. So even modest steps at conservation can bring large rewards.

A small cadre of VCs play in the space, such as Will Coleman of Mohr Davidow Ventures and Victor Hwang of T2 Venture Capital.  There is room for more.

Obviously “there are bigger fish to fry in the clean-tech area,” said Rick DeGolia, CEO of irrigation technology developer Green Wireless Systems, Tuesday at the SDForum sponsored “World Water Crisis: Technology Based Solutions.” “It doesn’t mean there aren’t opportunities.”

According to Coleman, some of those opportunities include filtration and membrane technologies for power generation and consumption. Smart metering is another area worth exploring, especially as water companies begin to implement tiered pricing with higher prices for larger volumes.

Improving the efficiency of data-center cooling is another spot were the demand for new technology could be high.

Water investing isn’t necessarily a perfect fit for venture investing, says Hwang. Companies can take decades to germinate and aren’t always fast growing.

What’s more, the lack of a national water policy means that conditions and markets can vary state to state.

But with VCs looking for new places to make financial bets, water technologies are a thoughtful option. With global warming threatening to disrupt natural water cycles across the globe, the size of the potential payback may be something no one can accurately predict today.

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Posted by Mark Boslet

Venture Funds Appear To Be Writing Off 2009

July 13, 2009

Many venture firms appear ready to write off 2009 as a lost year.

It is no surprise. Exit markets are tough (though a few IPOs have launched), product markets are soft and investors have little money to pony up for new funds.

The fundraising diet may lead to a smaller industry as firms disappear

The fundraising diet may lead to a smaller industry as firms disappear

General partners may indeed have little choice than to retrench and plan for a time when the economy looks better. And hording money may be the best alternative with the industry likely to shrink in coming years.

This pent-up desire to sit still was evident in venture-capital fundraising statistics released Monday by the National Venture Capital Association and Thomson Reuters.

According to the researchers, only 25 venture firms raised funds in the second quarter – the smallest number since 1996. The money they raised ($1.7 billion) was the lowest amount collected in a quarter since 2003.

Welcome to the 21st Century paradox, where the past is becoming the future.

So far this year, VCs have raised just $6.3 billion for their funds. If that pace continues, the year will come in at less than half the $28.4 billion of 2008 and about a third of the $36 billion of 2007.

Clearly the industry is preparing for a future that might hark back to the pre dot-com bubble days. Already some pundits are projecting that half of all venture firms need to disappear to open up enough opportunities for the rest.

The “shrink to survive” message is now being echoed by industry luminaries. “We believe that many venture firms are waiting until 2010 and beyond to go out to their limited partners, who, in an improved market, will look more favorably upon the assets class, vis-à-vis other alternatives,” says Mark Heesen, president of the NVCA. “That said, there will be firms that will not be able to raise a follow-on fund, and our industry is positioned to contract over the next five years through this type of attrition.”

Yet the belief in contraction is not unanimous. Interesting to note is that while fund raising fell to a 13-year low in the second quarter, new funds drew strong interest. There were eight of them, or roughly a 2-to-1 ratio to existing funds.

That ratio was 15 to 1 in the first quarter. It reminds me of the old Dickensian description: they were the best and the worst of times.

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Posted by Mark Boslet

Employment Picture Improves In Technology But Job Still Disappear

July 13, 2009

The loss of almost 34,000 technology jobs in the second quarter isn’t exactly good news. But it represents a big improvement from the first three months of the year and offers a sign of greater stability in the technology business.

Challenger Gray & Christmas reported Monday that the 33,891 U.S. technology jobs lost during the second quarter represented a 60 percent improvement from the first quarter, when 84,217 positions were cut.

They were about equal to the cuts made during the second quarter of 2008.

While the better performance suggests the sharp slide in the technology market has moderated, it continues to show a market place in decline and leaves open the possibility of a second dip in technology sales.

The computer sector saw the greatest decline in the period while telecom and electronics saw the strongest rebound. The telecom industry saw just 1,876 job cuts compared with 18,972 in the first quarter.

Telecom and electronics appear to be benefiting from business strength in wireless markets as Americans continue buying cellular phones and competition to outdo the iPhone heats up.

First quarter (top row) and second quarter technology job cuts from Christmas Gray & Challenger

First quarter (top row) and second quarter technology job cuts from Christmas Gray & Challenger

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Posted by Mark Boslet

Facebook Homepage Redesign Continues

July 10, 2009

In March, Facebook rolled out a major redesign of its homepage incorporating real-time data streams and more easily accessible feed filters.

It turns out the redesign continues. The social network company is still seeking the right balance between real-time information and delayed updates that can be days or more old.

Facebook trying to balance real-time and aggregate data, says Christopher Cox

Facebook trying to balance real-time and aggregate data, says Christopher Cox

The question is how to mix them in the main news feed, says Director of Product Christopher Cox.

Cox, in an appearance at the CrunchUp conference on Friday in Redwood City, said that the company is using e-mail feedback from users and usage data it gets from the site to guide its work.

Facebook is testing several versions of the homepage, he added. The idea is to balance a “real-time and aggregated view” of the feed, Cox says.

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Posted by Mark Boslet

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