Web X.0

Speaking at two events

2009-07-10T16:37:26-04:00

I'll be speaking at two events in the next couple of weeks:

The Israeli Business Forum of New York (IBF) is an apolitical, nonprofit organization facilitating quality business discussions among Israeli professionals in New York. I'll be speaking there on Tuesday, July 28th at 6:30pm. Details and registration here.

On Wednesday, July 22nd, I'll be speaking on a panel at an event benefiting Rabin Medical Center in Israel. Registration is here.

With me on the panel will be Joel Naroff – Chief Economist of TD Bank and Dr. Lindsay Rosenwald – Founder of Paramount BioCapital. Cost is $75, and it all goes to benefit the new emergency and trauma center at Rabin Medical Center.

Evaluating the real risk of swine flu

2009-05-01T12:33:16-04:00

I am sick and tired of all this swine flu craziness. Does anyone remember the last pandemics which were going to wipe out humanity? - avian flu, SARS, ebola, anthrax, etc... Where did they all go?! And hey - weren't we all supposed to have been mad cows by now?!?

I want to suggest a new formula for evaluating the real risk of pandemics like the swine flu:

# of infected people / $$'s made by the media

Anyone out there have the numbers re swine flu? Regular flu? Bee stings? Fire ant attacks?

Based on my proposed formula, I bet swine flu is probably one of the safest and mildest diseases in the world.

Now world - get back to work...

"Journalism"

2009-04-26T01:26:03-04:00

Globes published today an obnoxious article (Hebrew) about Better Place - Shai Agassi's electric car venture. From the first word through the last, it was clearly setup as a hit-job by a clueless nobody "journalist" who has obviously never tried to accomplish anything meaningful in her life.

Disclosures: I'm not an expert on the subject matter. I'm not very familiar with the company. I've never met or spoken with Shai Agassi, and have no other connections I'm aware of with his company.

The "article" attacks Better Place for failing to deliver on a variety of milestones that the "journalist" had apparently expected them to. For example, they did not yet start manufacturing cars or employing 50,000 people in Israel after less than two years since the company was founded. The writer of course has started multiple successful companies, and has extensive experience in building factories within months....

This seems to have been going on for a while now - On the one hand Better Place has gotten some incredible press, and on the other hand "journalists" ripping apart Shai and the company, as if they owed them or the public anything (they don't...). It's sad to see this kind of hit-job journalism which is designed to do nothing more than sell a few more copies of the newspapers. The cost of hit-jobs by mediocre writers is much cheaper than actual journalistic work by journalists. And unfortunately, tabloid crap like this sells newspapers...

So as an FYI to Ms. Shlomit Lan - startups in general, and specifically one as ambitious as Better Place, take years or decades to build. During those years, as long as it's a law-abiding, private company, it owes *nothing* to the public as it relates to timelines, milestones, business models, pricing, etc, etc. Building a great company is never as simple or quick as it seems, and if they figure out half of the challenges they currently face in say 5 years, that will be an incredible achievement. Passing this kind of judgment on the company so early in the game proves you're either clueless, or jealous, or you've intentionally setup a hit-job.

A couple of years ago I attended a conference where Yossi Vardi was part of a panel judging startups. After passing criticism to a couple of the entrepreneurs, Yossi stopped the conference, took the microphone, and said he has something critically important to remind all the judges, journalists and investors dealing with entrepreneurs. He quoted Theodore Roosevelt's 1910 speech (also covered by TechCrunch here):

"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat."

Shai Aggasi is the man in the arena. He might fail miserably, but he will do so while daring to make great things happen.

I know too little to determine whether Better Place is good for the environment or bad (I suspect it's a pretty good alternative to buying oil to fund the bad guys and burn it to destroy the world...). I simply dread the day that "journalists" kill innovation and innovators by abusing their power to run hit jobs like this on the men in the arena. Therefore I had to respond.

Finally - to anyone who is genuinely interested in this project, I highly recommend this hugely inspiring talk that Shai Agassi recently gave at TED:

Free ad space

2009-02-13T15:28:12-05:00

For an experiment I'm doing, I'd like to offer a month's worth of *free* ad space on several blogs for one of the following products:

If you run marketing (or manage the ad budgets) for any of these product/companies, drop me a note: yaron[at]galai[dot]com

The first company/agency to respond will get the free ad space, no strings attached.

The Lighthouse

2009-02-02T12:50:32-05:00

A key to a successful startup journey is to always know where you're headed. The company has to always have a single lighthouse that it is pursuing. More importantly - everyone on your team has to know exactly what that lighthouse is. This might sound easy, but in reality most startups fail miserably on choosing a lighthouse, communicating it clearly to the team, and sticking to it obsessively.

A healthy lighthouse can usually be reduced to a chart. Curiously, the most trivial chart - the revenue chart - is hardly ever a good lighthouse to choose... I'll explain why below. The lighthouse, if properly communicated to every single person in the company, should determine pretty much everything that gets done by by each team member. In a company with a clearly communicated lighthouse, everyone - junior or senior, engineer or biz dev, in NY HQ or in the Israel R&D - should prioritize tasks nearly identically. If your company is struggling often with priorities, your problem is extremely simple to diagnose - you are most likely missing a clear lighthouse.

For a web company, the trivial lighthouses are - page views, unique users, etc. Choosing trivial metrics as the company's lighthouse is acceptable, but the problem is that it will likely be the same lighthouse used by many other companies. That means that that the faster/bigger boat, not necessarily the smarter one, will likely win. If you are the biggest baddest boat around (aka "Google") - you should be fine. If you're among the 99.9% other startups, you might want to dig deeper and find your unique lighthouse.

A good lighthouse is also clearly actionable. A lighthouse that implies action will help everyone focus on the biggest opportunities. For example - when all search engines were focused on ranking sites based on keyword counts, Google's lighthouse was to perfect the ranking of results based on the site's authority. Later when Google was a late entrant to the PPC search advertising market, their lighthouse was maximizing the yield of each ad shown while their main competition was focused on maximizing the bids.

Which brings me to another attribute of a good lighthouse. And this one isn't always achievable, but it's beautiful when it is -

A great lighthouse is fairly invisible outside the company. In Google's example, it isn't immediately clear to an outsider how search results are ranked, and is therefore very difficult to play the same game. A good lighthouse let's you compete in a crowded market while playing a game that's completely different from your competition.

Revenue is therefore almost never a good lighthouse. It is not actionable and it does inherently not let you play a different game in the same ball field. But unless you're doing not-for-profit work, revenues is probably a primary goal for you and your shareholders. The right way to reconcile this gap is to ensure that your chosen lighthouse has a reasonable eventual linkage to revenues. For example, if your lighthouse is to maximize unique users, that can later (if successful!) be translated to advertising revenues.

The lighthouse cascade

Most importantly for startups - a lighthouse is *not* permanent. It should change as the company grows and develops its product. The important thing is to know when to transition lighthouses, how to do it, and most critically - how to communicate to everyone what the current lighthouse is.

Each lighthouse should have a logical connection to the next one. For example, your 1st lighthouse might be to focus on building a big user base, while your 2nd lighthouse might be to maximize the page-views (so the actionable parts are to grow both the user base, as well as page-views-per-user). Each metric should eventually be a supporter of those future metrics.

The lighthouse metrics should not only cascade logically from one to the next, but also eventually have a strong connection to revenues. Choosing a good lighthouse and planning how your metrics will eventually cascade into revenues does not ensure your company's success, but it is nearly impossible to succeed if you (and your whole team) don't know what your lighthouse is at all times.

{image CC - mischiru. thanks!}

Best reality TV show format

2009-01-09T11:45:43-05:00

So here is proof that something good can emerge from a war situation. Israeli TV has pretty much become 100% reality shows this year, importing all the American/European junk TV formats (Survivor, Big Brother, etc). Ugh...

It took a war in Gaza for Israel's Channel 2 to come up with an original, and incredibly good, reality show format. The kids in southern Israel have not been going to school for over two weeks now, and are at homes and shelters with not much to do. The idea for the TV show (named "Learning Together") is super-simple - Put cameras inside a classroom and bring the most interesting people in the country to give a lesson on a subject of their choice. There are several "classes" each morning, passed by people like: Presidents of Israel, book authors, etc. For example - as a kid (and even an adult) - could you hope for anything more interesting than getting a class in citizenship by Nobel Prize winner, President Shimon Peres?... Wow.

I'm not sure what the ratings are for this show, but I love how for a near zero production cost a new format emerged which is intelligent, educational and original.

Moneyball - highly recommended

2009-01-08T01:14:48-05:00

Last week I participated in a roundtable organized by Carmel Ventures, with probably 20-30 entrepreneurs in the room. I recommended they all read Moneyball by Michael Lewis - a book I read a couple of years ago. I think most of the people in the room didn't have a chance to take note of the recommendation, so I'm repeating it here.

Moneyball is a must-read for any entrepreneur. It has nothing to do with entrepreneurship (it's about baseball), and it's not a very good book (in the literal sense, I mean).

But if you read it with an entrepreneur state of mind, there are great lessons to be learned... 2 have been particularly useful for me:

Look at the same game differently - Most startups compete with many other companies for the same market share. In the online world in particular you are likely to be competing with hugely successful companies like Google, Yahoo, Amazon, etc. You can't win by playing their game. But you can absolutely win by playing a different game in the same space. An example that comes to mind is Yelp - while all other yellow pages and review sites are focused on getting readers and selling to advertisers, Yelp seems to be playing a completely different game. It looks like they are focused obsessively on their reviewers - giving them tools, recognition, community etc. Yelp is looking at the exact same market as all other yellow page companies are, but playing a totally different game.
Understand what metrics really matter for your business - the metrics that *seem* to matter for your business might not be the ones that really determine your eventual success. Moneyball shows how the Oakland A's found that most of the metrics that baseball teams have been using for decades (batting average, # of steals, etc) had little or nothing to do with how successful the teams were. Another example is a post I wrote recently about how PV's and ad revenues might not be the best success metrics for publishers.

Bottom line - highly recommended. Get it here at Amazon or here at Audible.

Pricing Display / Demand Creation Ads

2008-12-16T18:10:01-05:00

Following Fred Wilson's post about display advertising, and my post about demand-creation vs. demand-fulfillment advertising, I had another thought I'll share here regarding the pricing of "display" advertising (or in my terminology - Demand Creation Advertising)Fred Wilson says:

"...However, this study does not determine what the right price for display advertising is. Search is measurable by virtue of the cost per click and display is not. And if click thru isn't the right measure, then display has an issue..."

And I agree with Fred 100% on that... While auction-based CPC (cost-per-click) is a great way to price the value of demand-fulfillment-ads^[1], it is certainly *not* the right way to price advertising which is introducing a brand and creating demand. That's because the users are *not* in immediate shopping mode, and the effect of the advertising on them is not necessarily embodied in an immediate click.

So following my thread, I had an idea which is slightly theoretical at this point, but could serve as a way to price Demand Creation Ads in the future:
Search ad inventory is inherently limited. That is why CPC bids on search terms are bidded up over time. In other words, the bids advertisers place reflect the balance between the value they get from each click, and the amount of clicks available on their keywords.

If this is true, then a mechanism that creates a lot more search queries and clicks should increase supply, thus reducing the cost of each keyword. One such mechanism are Demand Creation Ads (or, if you prefer - display ads). These ads don't necessarily create any immediate clicks, but they should create more searches for the brand down the road.

Assuming all this could be aggregated and tracked efficiently (a big IF), you could then price display ads based on one metric - the increase they create in future searches.
Then the next step in pricing would be to identify a common denominator between the pricing of search ads and the pricing of display ads. So for example, as an advertiser I would know that I could pay $1 per search click, or I could pay 50c for display ads that created enough future searches to reduce my search CPC to 40c per-click.

Again - I'm not sure how doable all this is, but if it were - I think this would bring on the golden age of display/demand-creation ads on the web, making them suddenly as efficient as search ads are perceived today.

UPDATE: John Battelle just posted some interesting data from eMarketer on the effect of demand-creation-ads on the # of search queries ----------------------------->

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[1] It can be argued that CPA is a more perfect pricing model than CPC is, because it ties directly to the only real conversion metric that matters - the purchasing of a product. That is technically true, but I think that CPA has a few inherit deficiencies which make it a pretty bad solution for pricing ad inventory:

It moves all the risk from the advertiser to the publisher. CPC perfectly balances the risks on both sides.
CPC is a wonderful common denominator that allows all advertisers to participate in a single, easy-to-understand, marketplace. There is no comparable denominator in CPA.
CPA requires a LOT of data points in order to establish the value of each ad and its probability of generating revenue. That makes it completely ineffective for a centralized and efficient marketplace.

The two types of ads

2008-12-15T02:14:24-05:00

Fred Wilson has a great post about display advertising discussing a recent comScore white paper about the subject. Fred's bottom line:

"The basic insight from the report is that display advertising does not normally result in an immediate click. That makes sense because the ad is not being presented in a moment of purchase intent, like a search ad is. But the ad does create interest in the product or service which is realized at some later date in the form of a site visit, a search query, and possibly on online or offline purchase."

I think that the common distinction between "display ads" and "search ads" is not the right distinction... The distinction should be between:

Demand Creation Ads - these are ads that notify the consumer about a brand, it's values and reasons to purchase it (whether factual or emotional). Display ads would typically fall into this category.
Demand Fullflilling Ads - these are ads that offer the consumer an effective shortcut to fullfiling a purchase that s/he has pretty much decided to execute. Search ads would typically fall into this category.

Demand Fullfilling Ads (DFA's?) is a fairly mature business on the web. Demand is best expressed through a search box, and search ads are an extremely effective way of fullfilling that demand. As comScore noted - the immediacy of conversion on these ads is very high, however in terms of raw volume - there aren't many of these ads.

However, for Demand Creation Ads (DCA's?) there is no such Google yet. DCA's have to be interesting, not necessarily relevant. That's because the consumer has not yet expressed their intent, and therefore 'relevancy' is no more than an educated guess.

To date, the DCA's on the web can be categorized into 2 categories:

Interruption ads - banners, etc are intended to capture an audience consuming content and interrupt them with ads.
Contextual ads - text ads that algorithmically emulate search advertising on non-search pages.

Contextual ads may be relevant but, they certainly are not interesting. And therefore they mostly fail at being effective demand *creation* ads. They are also not effective as being demand *fullfilment* ads because they are presented to users who have not expressed their commercial intent.

We're only scratching the surface with Demand Creation Ads. The future lies in the word "interesting", not necessarily in "relevant" and I think there are exciting opportunities to displace and significantly improve on both interruption ads and contextual ads.

On gentelmen and cowards

2008-12-09T17:42:04-05:00

Anonymous comments (or - "talkbacks") on newspapers are one of the ugliest things in the online publishing world. In Israel the situation is even worse than the US, as it seems that the newspapers have zero concerns of liabilities over crap being published on their pages. The comments have been taken over by trolls to such an extent that it's nearly impossible to find a single intelligent comment by a person with a real name...

I've been reading some of the coverage lately of Gmul - a company acquired by Leon Recanati about a year ago. As with most stories, 99% of the comments are posted by anonymous cowards who haven't the slightest clue about what they're talking about. It infuriates me to see that crap being published, and reputations ruined, so easily by people who can't be held accountable. So as someone who actually knows Leon Recanati and has worked with him, I thought I'd provide my comment, under my real name.

Leon is an investor (via GlenRock) in the two companies that I have founded - Outbrain and Quigo. We've been working together for the past ~7 years, and have gone through some great times (like selling Quigo to AOL), and some awful times (like running out of money in the early days of Quigo).

Leon made the first investment in Quigo when we were at some of our toughest and riskiest times. During 3+ years we pitched over 50 VC's (including nearly all VC firms in Israel) and were rejected by all of them. During those years (2000 - 2004), funds were too afraid to invest in un-proven entrepreneurs with a risky business model.

We were lucky enough to meet Leon Recanati (and the wonderful team at GlenRock), at the riskiest stage of our business. After having been rejected by 50+ funds, GlenRock was the first institutional investor to provide us with financing, literally saving the company^[1]. From what I could tell, Leon decided to make the investment in Quigo both because he understood the potential of Quigo's business (unlike all other funds who looked at us), and because he sees it as his mission to help young Israeli entrepreneurs.

Throughout the past ~7 years, GlenRock in general, and Leon in particular, have been a wonderful partner at both companies. They are there to support (financially and mentally) every time we hit a rough patch, and let us do our work quietly when things are well. For an entrepreneur, GlenRock is as good as an investor as you can hope for - supportive, honest and never ever stabs you in the back as many early-stage investors do.

In addition, Leon has been one of the biggest philanthropists in Israel, donating much of his family fortune back for charitable and educational causes in Israel (such as the National Science Museum in Haifa, for example). There are few people who have done for Israel - both for the business community and for charitable causes - so much.

It infuriates me to see anonymous cowards try to ruin a person's lifetime reputation. I am not familiar with the details of the specific situation at Gmul, but as someone who actually knows the people involved - I'm confident that this situation was fully inherited when the company was acquired. I'm confident that Leon & Co are doing whatever is reasonably in their power to fix the inherited problems. And I'm sure that -- *whatever* the outcome in Gmul -- the debt holders would be in a far worse situation had they had to deal with with the previous owners and not Leon.

It's a pity that anonymous ignorant idiots get so much exposure on mainstream newspaper sites these days... I hope this post provides a little balance on the subject matter.

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[1] I should also mention Jack Lahav and some of our other angel investors who supported us during the first 3 years and made it possible for us to survive through 2003 to begin with!...