And so with news that Google as acquired Slide I’m guessing that question has been answered: Max Levchin.

Max obviously has experience with social (from Slide) and also payments (from PayPal), the latter of which will be crucial to any financially successful social network/social games play going forward. Assuming I’m right (and Max must be getting some kind of top-job at Google), I’m actually glad it’s not an existing Googler – they’re are some great people working there at all levels but I can’t identify any executive-level folks who really get social.

I’m also guessing Max Levchin as GM is more palatable to Google than Mark Pincus, which further suggests that an acquisition of Zynga by Google is off the table now.

Liquidation preference?

In other thoughts, I’m wondering whether common shareholders will see any return? With Slide raising $78m at a $500m valuation and then a sale for $128m, will there be much left after costs + liquidation preferences, etc?

I’ve been involved with the WordPress community for several years (all the way back to B2 in fact, which was the precursor project that WordPress was forked from). However as interest in WordPress has steadily grown into the mainstream, one of the pain points I’ve seen people experience time-and-time again is hosting.

WordPress.com is great, but once you want to run a custom theme, plugins or embeds from sites that Automattic don’t have a BD relationship with, you’ve kinda reached a glass ceiling with the service. Self-install solves those problems but how many bloggers are really in a position to be installing, maintaining and updating a WordPress install on a hosting account? From my own anecdotal evidence most just don’t have the technical interest and/or time and I’ve spent many hours helping friends install, update and migrate WP blogs over the years.

Reports that WordPress is insecure almost always arise from people not keeping their WordPress self-install instances patched and up-to-date.

When I sat down and talked to the WPEngine founders about how they intended to solve this problem I was very excited. I love working with companies who are addressing real-life problems I can directly relate with. I’ve been working with WPEngine since SxSW to help them build the platform and bring it to market.

WPEngine is serving platform, not a hosting account

We’ve taken all the greatness of WordPress self-install and bundled it together into a blog serving platform that is designed solely just to serve WordPress.

You come to us and either create a new blog or migrate your existing WordPress blog over using some one-click export tools we’ve built.

From there we look after the installation, management, security, upgrades, backup and day-to-day running of WordPress. Everything looks and works the same as far as what the blogger uses – the same old familiar admin tools. But behind the scenes we make sure the WPEngine WordPress Platform is kept up to date and optimized for performance.

Behind the scenes everything is kept in compatible formats to WordPress self-install so you could migrate out and walk away if you ever wanted to. No lock in here.

The service is ideal for pro-bloggers, fledgling blog/news sites (like TechCrunch, Mashable, etc) and small-to-medium businesses that use WordPress as a CMS for their sites. Many doctors surgeries, law offices and other businesses use WordPress to power their site and WPEngine is ideal for those who don’t have any in-house technical capabilities to keep their sites running in optimally and securely.

Invites!

We’ve been successfully hosting in stealth-beta some pretty high profile blogs – including Balsamiq’s Blog, OtherInBox (their entire site) and Jason Cohen’s highly trafficked A Smar Bear blog (who is also a co-founder).

Tonight we’re announcing we will be opening our platform via invite. You can follow coverage on Read/WriteWeb, Mashable and others.

If you would like an invite, just visit this sign-up form to request one. We’ll be getting back to people in the next day or so.

Advisory Capital

As mentioned, WPEngine is the latest company I’ve added to my portfolio. They are actually my pick of SxSW 2010 as I now make a habit of meeting as many Texas based startups as possible each year I visit Austin, with the view to working with one as an advisor when I return to SF. Last year’s startup was NutShell Mail, which of course just had a successful exit to Constant Contact.

I intend to write more about my growing portfolio as I am enjoying that this is now taking up a more significant proportion of my time these days. Watch this space!

Don’t get me wrong, it’s great that you can call them up and order a pizza and every employee gets to decorate their cubes.

But I’ve never been convinced it really converts into increased profits in a mainstream, volume-orientated, retail vertical selling commodity products like shoes.

As much as I want to believe in it all, we’ve never seen the hard numbers on sales because Zappos has always remained a private company. Yes, they revealed they did $1bn in sales in 2008 but that doesn’t mean anything – that could be against $1.2bn in costs at which point they’d be operating at a loss. And I don’t see the point of cheerleading an established company that has never turned a profit.

So it was interesting to read a somewhat bitter-sounding Tony Hsieh reveal some insight to Inc. Magainze on the operations of his company and why he sold to Amazon.

The two juicy nuggets I found interesting:

1) Even with $1bn in sales, Zappos was trading on a $100m line of credit

By 2008 we were doing more than $1 billion in gross merchandise sales annually
…
At the time, Zappos relied on a revolving line of credit of $100 million to buy inventory. But our lending agreements required us to hit projected revenue and profitability targets each month. If we missed our numbers even by a small amount, the banks had the right to walk away from the loans, creating a possible cash-flow crisis that might theoretically bankrupt us. In early 2009, there weren’t a lot of banks eager to give out $100 million to a business in our situation.

In other words it doesn’t appear Zappos was even making $100m/year profit on that $1bn/year in sales (a rather poor 10%) – if it was, presumably it would pay off the debt that was leaving it in such a precarious position. Given that Zappos has never competed with other retailers on price, and thus been able to maintain healthy margins, one has to wonder whether all that amazing customer service and employee benefits have been proven overly expensive?

2) Zappos’ Board had no confidence in his corporate culture methodology and just wanted to exit

Although I’d [Tony Hsieh] financed much of Zappos myself during its early days, we’d eventually raised tens of millions of dollars from outside investors, including $48 million from Sequoia Capital, a Silicon Valley venture capital firm. As with all VCs, Sequoia expected a substantial return on its investment — most likely through an IPO. It might have been happy to wait a few more years if the economy had been thriving, but the recession and the credit crisis had put Zappos — and our investors — in a very precarious position.
…
Some board members had always viewed our company culture as a pet project — “Tony’s social experiments,” they called it. I disagreed. I believe that getting the culture right is the most important thing a company can do. But the board took the conventional view — namely, that a business should focus on profitability first and then use the profits to do nice things for its employees. The board’s attitude was that my “social experiments” might make for good PR but that they didn’t move the overall business forward. The board wanted me, or whoever was CEO, to spend less time on worrying about employee happiness and more time selling shoes.

Despite controlling the common stock, Tony was at risk of being ousted as CEO at any time and replaced with someone more traditional. In other words it appears he sold out to Amazon not because it was a match made in heaven but really just to eject the board and keep his position safe. And Jeff Bezos had the check waiting.

Conclusions

I don’t have any firm conclusions right now as I’m still digesting the rest of the article (an excerpt from his book) but it’s pretty frank and telling. I’m actually very surprised Tony has given such a revealing account given he is still the CEO.

But I do think this indicates a friction between the much lauded Zappos corporate culture and the realities of establishing a profitable business – specifically that Zappos failed to prove it.

While everyone working at Zappos was able to pick up a solid pay check while working in nice conditions and customers could call up the helpline and talk about whatever they wanted, it appears that Zappos hasn’t become the business success many have drunk the kool-aid over.

…after a couple of years of trying, we did not see the broad adoption that we had hoped for

But while the main tech blogs are assuming that means that the site didn’t get traction, they’re missing the real story here.

What was hailed as a great innovation in lead-gen actually fell flat on its face. The idea was that users would move to searching for products on Bing Shopping knowing that many advertising retailers would then offer a 5-20% cashback on the purchases, generating leads that might not of otherwise occurred. Don’t forget, these advertisers were paying Microsoft for the placement and then having to foot the bill for the cashback too.

Instead many people, including myself, would simply get to know which online retailers offered Bing Cashback. When they went to buy something from such a retailer we’d hop over to Bing and click through via the Bing Cashback link to get the extra discount. No lead generated at all, but still with a financial cost to both the retailer and Microsoft.

I’ve probably ‘earned’ (well, saved) over $2,000 in the last few years by doing this, sometimes by saving up to 40% off during special promotions. Thanks Microsoft!

For example, every time I’ve found something to buy on eBay I’ve noted the auction details, cleared my cookie, searched for eBay on Bing and clicked through. Performing that slightly but not terribly inconvenient task has netted me up to 30% refund on my eBay purchases. Ditto for B&H, Dell and others.

The various deal sites such as SlickDeals are rife with this activity – every time a deal is mentioned that is sold by a Bing Cashback retailer you can expect a reminder to perform the above trick to get the extra discount. Here’s a super-thread on all the Bing Cashback retailers and how to get the deals. (And here’s the thread where the free-loaders are up in arms about the closure!)

Aside from SlickDeals & co, there are many other people I know who have also been doing this. And let’s be clear with these examples:

• These purchases were going to be made anyway – thus no lead generated
• None of these people have switched over to Bing search engine (known as the halo effect)
• None of these people have switched to Bing Shopping for non-Cashback purchases
• Microsoft and the retailers have been paying handsomely for our hacks

It’s my bet that the above situation accounted for a large amount of Bing Cashback purchases, especially repeat/return vistors. Microsoft has finally got wise to the game (or the cost/benefit has leveled out) and cut the gravy train.

This caught the attention of a number of folk, including GigaOm’s Mathew Ingram who wrote about my comment this evening. (a post which ended up being syndicated to Salon.com and NYTimes – congrats Om, Mathew and co on those distribution deals btw)

Indeed I was referring to the likes of David Recordan (now at Facebook), Joseph Smarr (now at Google), Eran Hammer-Lahav (now at Yahoo!, albeit for sometime now) Will Noris (now at Google) Chris Messina (now at Google) – and now Tantek Çelik (now hired by Mozilla)

All of these folks have made significant contributions to the Open Web and Open Standards movements while either being independent, working at a startup or working at a company which itself had little active involvement in open standards (SixApart in the case of David R and Plaxo/Comcast in the case of Joseph S). That’s significant because their motivation behind their labour and efforts was (I believe) altruistic and not to forward the interests of a specific vendor, employer or other sponsor.

Since making their many significant contributions independently to the Open Web, all of them have been hired by larger and/or more significant entities. All of these companies are clearly are interested in benefiting not only from the influence these individuals have in the community but also their board seats/key positions on projects such as OpenID, oAuth, Portable Contacts, Open Web Foundation, etc.

Clearly this must create a conflict with each of their previous independent endeavors. In response to my tweet, Google engineer Adewale Oshineye commented on my Google Buzz “[Y]ou could say that the ‘open web usuals’ have all found ways to make an even bigger impact.”

I disagree and here’s a stark example of why, involving Adewale’s own employer Google.

Last week I attended a panel session at Google IO 2010 on social network standards and APIs, which included Chris Messina representing Google and specifically the Google Buzz team. Having reflected on Facebook’s current woes due to a perceived lack of respect for user privacy, panel moderator Kara Swisher asked Chris to elaborate on the virtues of Google Buzz and the way that Google have strived to protect user’s privacy. What seemed to be an intentionally ‘softball question’ towards her conference host, actually had a deeper, almost perverse, dimension to it given Chris’s staunch personal perspective that there is no such thing as online privacy.

As Chris wrote back in 2006:

“personal privacy is an oxymoron. you know less about yourself than the mass of services and companies out there that collect, individually or collectively, information about you and your activities, for their own selective proprietary uses
…
you think you have privacy left to protect?
…
privacy today in general is a fallacy: it’s an impossible dream that we should’ve woken up from some time ago.
…
repeat after me: “PRIVACY … IS … A … DREAM.”

not for you. not for me. only for the government, big corporations, disappearing persons.”

Do read the rest of it this in his post “Pry, To”, along with “Privacy? What privacy?”, “The Krypton of Privacy”.

It was pretty uncomfortable to listen to Chris wax lyrical about how Google understands why user privacy is important and the various steps it was taking to ensure users were aware of the privacy options Google offered.

Now before you think I’m performing a character assassination on Chris, please be clear: I agree with him. I think the concept of expected privacy in any social media setting is an illusion.

But the problem is that you have radical individuals, ones who were compelled to spend their own time ripping up and recreating the way we handle stuff like authentication and contact exchange, being forced to remain ‘on message’ with their new corporate masters.

Why is this?

Aside from the tensions alluded to above, the issue no one is talking about is that there are slim returns for being independent proponents of the Open Web. While you spend your evenings and weekends working on specifications and evangelizing these brave new ideas, there are plenty of companies who are looking to profit from the good work achieved.

I’m a member of the OpenSocial foundation, having worked on the project while I was contracting with MySpace (yes, not independently). While I have not been under contract with the former social network for several years, I still feel some affinity and sense of responsibility to maintain OpenSocial, having (in a small way) helped to create it in the early days.

However, I’m immediately bought back to reality when I remember that my unpaid time participating in work groups and/or potentially being on the board is going to help the likes of Zynga, Slide, RockYou, etc continue to innovate and generate further $Millions out of their use of OpenSocial to deliver their profitable social games and apps.

It’s not that I won’t work on Open Standards or Open Source projects for free. But simply that the returns others are making feels disproportionate to what the individuals doing the actual groundwork are getting back. While joining the likes of one of these companies could be one way of continuing this work while receiving some-what fair remuneration, it wouldn’t be the same as I would have to make decisions based on my given employer/client’s needs and not those that made the best sense for the ecosystem as a whole.

(And rather tellingly, to the best of my knowledge neither Zynga, Slide or RockYou contribute at all to Open Social or any other Open Standards project they rely on)

Ultimately I don’t know why Chris Messina ended up accepting the place at Google. The offer of a prestigious employer, intelligent peers and a guaranteed pay check may be enough – but to me that feels like selling out because you can no longer represent what you really believe in. When Chris began to answer Kara’s question on privacy in Buzz it seemed like he’d had to give up much of what he really believed in so that he could regurgitate Google’s talking points that his handlers in PR had fed him earlier.

Instead I wonder if there were more fundamental reasons why he joined Google – ones that you can begin to understand. Being an independent is hard and usually financially unrewarding. It’s a tough economy, maybe he wants to settle down with his girlfriend and set up home, I don’t know. There are all sorts of personally legitimate reasons.

But it shouldn’t have to be like this. The ecosystem as a whole (users, developers, vendors, startups, VCs, BigCo’s, etc) desperately needs independent participants like the Messina’s, Recordon’s and Smarr’s – and we can’t expect the best people to stick around looking out for our interests while others profit from the good work created.

How we resolve that, I don’t know. It’s kinda for the community to decide.

UPDATE: This post continues into the comments where Joseph Smarr responds to my post and I follow up with further thoughts.

CC flickr photo by Pat Hawks

If you’ve not yet checked out NutShell Mail, it is one of those really smart ideas you wish you’d had yourself, which is why I was so excited at giving the opportunity to contribute to it.

NutShellMail delivers to your email inbox a nicely crafted email of the activity streams from all of your social networks. You set this up to occur a couple of times a day, and what you are presented with is an email you can quickly digest during natural breaks in the day. It’s particularly good for people who are easily distracted by the updates from a desktop client and constant Facebook email notifications.

Back to the aquisition: I’m so pleased and overjoyed for founders David Lyman and Mark Scmulen along with David N, Nirav and Todd. They have all worked so hard for this.

I’ve worked with them for just over a year and in that time they have achieved so much. Highlights for me have to be them moving out here for fbFund and their pivot expansion into providing email digests for Facebook Fan Pages, which is probably one of the areas Constant Contact is particuarlly excited about.

Advisory capital

However, this also validates my decision to dedicate a proportion of my time on forming and working with a select portfolio of companies in an advisory capacity. A concept Stowe Boyd once described as “advisory capital” (the link to his blog post sadly seems to be broken).

I love working with startups and so anything I can do to help steer product strategy decisions, give platform advice or leverage my contact network is really fulfilling.

With this in mind, I’m going to be formalizing this part of my work over the coming weeks, and no doubt taking on a few more companies to mentor and advise. If you have thoughts or ideas on early-stage startups that I might be able to bring value to, please let me know.

However, some of the email conversations I’ve been on with members of delegation have included their surprise at the sites that they are unable to access due to the censorship of Internet connectivity there (aka the Great Firewall of China).

Apparently Twitter, Facebook, email posting to Posterous and even Louis Gray’s blog are blocked. But don’t worry, Scoble’s isn’t anymore.

Joking aside, many worthwhile and important sites, such as BBC News (disclosure: I am a former long-term employee) remain blocked and unavailable to the population of China.

It is for this reason that I personally would have been uncomfortable about visiting China in a business capacity, and certainly on a high-profile organized industry trip like GOAP (which I was invited to attend but turned down for other reasons).

As it happens, I’ve visited China, but simply for leisure to ‘see for myself’, especially to explore the nature of the censorship, regime and the way of life there.

This is not an attack on my friend Dave and I support the increase of industry ties with other countries.

However I hope that the GOAP trip of Internet entrepreneurs is not perceived to be a legitimization or acceptance of the regime’s censored internet access. Nor should we forget the still recent attacks on Google and other western-operated internet assets that appear to be state-sponsored. It is also worth remembering that China does not welcome foreign companies and startups to operate out of China without domestic co-ownership.

At a time when Google is clearing out its offices in China and refusing to cooperate with China’s censorship demands, the lack of any acknowledgment (and perhaps even condemnation) of these issues by GOAP is definitely disappointing.

As I said, this is not an attack on Dave or anyone else attending. And I also understand that while they are physically in China it may not be the best time to express these opinions.

But before the chapter is closed on the GOAP:China expedition, I certainly hope that some recognition of these issues are made – perhaps even some suggestions on what we can all do, as Internet entrepreneurs and professionals, to place pressure for change. For freedom from censorship, freedom from attack and freedom to operate a wholly-owned entity in the local market.

Reading the ‘about’ page of banksimple, the new online bank that Alex Payne has left Twitter to work on, I felt sad.

• A simpler bank that is easy to use.
• A bank that treats you with respect.
• No extraneous features.
• No hidden fees.

I already have that. I feel sorry for the people who don’t.

…

Seriously folks, if your bank is a bunch of dicks, look around for a local credit union.

Twitter API creator Al3x Payne is quitting Twitter to be a co-founder, which is why it is getting all the attention today – but I simply don’t get what they are trying to do.

Let’s look at this again:

• No extraneous features.
• No hidden fees.

Notice they didn’t say ‘no extraneous fees’, which is where I think some bloggers have got confused or caught up in the hyperbole.

My own bank, Citibank, doesn’t have any hidden fees that I have experienced. Ok, if I used my overdraft or bounced a check they probably would but I’m not in that position financially. Plus, surely BankSimple will have to have some kind of fees for overdrafts (or else not offer them at all) as they represent risk and will be abused if they are truely ‘free’. Why bother to keep any money in your account if you can run on the overdraft all the time?

Citibank makes things pretty clear: my personal account is free if I keep more than $1200 across the checking and saving accounts, and my business account is free if I keep more than $5000 in there. Which I do in both, so no big deal. And, well, simple

BankSimple has got to make money somewhere and so even if those fees ain’t ‘hidden’ no one is saying there aren’t going to be any fees at all. Perhaps it will be a $10/month charge or just a clearly advertised (ie not hidden) withdrawl fee.

The point is ‘No hidden fees’ doesn’t mean ‘no fees’.

And back to Citibank… well guess what? They do have lots of extraneous features! Like being able to convert an out-going international wire transfer into a check made out in the local currency that is delivered to the recipient in the local mail (great when I need to send money back home but don’t want my mum to have to deal with wire receiving fees). Or advanced bill pay features that give me a really fine control over my payments. Or deposit checks in any Citi ATM across the world. I kinda like those features and would be disappointed if I couldn’t do some of the really helpful, time saving and money saving things I can do with my account.

So I don’t really get what BankSimple is trying to do. A cut down, wishy-washy bank account that probably won’t have the features or convenience that most normal people want to see but will no doubt get caught up in bureaucracy both regulatory-wise from the SEC and also from it’s rivals who will no doubt make things difficult if they perceive BankSimple to be threat.

I notice the other founders are described as having experience performing technology consulting in the banking sector but it still seems like a bunch of startup people trying to create a 37 Signals-style bank rather than a serious banking contender that I would want to put my money in. Maybe I’ve not fully drunk the koolaid, but for some things I would rather go big/mainstream/known-quantity rather than small/startup/experimental. Cars, insurance and banking all come to mind.

Perhaps someone can tell me why BankSimple is a good idea – because from where I am sitting it doesn’t seem like a promising business, let alone one I would conclude vesting in early-stage Twitter stock for.

They are now announcing they have acquired Tweetie for iPhone.

What is crucial here is that Loren Brichter, developer of the Tweetie range of products, is also joining Twitter. Which aside from the additional discomfort of Twitter owning further mobile platforms now leaves the question as to what they will do with Tweetie for Mac . It is not clear if they have also acquired this product too. And if they havn’t, will Loren be able to continue to maintain Tweetie for Mac independently if he is a Twitter employee?

It would be strange to acquire one and not the other (especially as they share the same name and code DNA). And so I predict we might soon see the announcement of Tweetie for Mac becoming the official client for the Mac.

Further proof, perhaps, that Twitter is definitely now filling its own hole (slightly NSFW).

I therefore wonder if Twitter didn’t actively go out and look to make an official app, but instead RIM propositioned this to them as the way they build these apps and Twitter decided it was worth making the move.

However, what is significant is I wonder if this development will encourage them to now create ‘official apps’ in other areas, especially on niche or emerging devices and platforms. Fred Wilson’s blog post, while he is now playing down it’s significance, seems to suggest this.

Twitter needs create the platform exit strategy for developers

If you want to start ‘filling the gaps’ in your proposition yourself, you need to create a way for developers to remain loyal and focus their interests elsewhere in your ecosystem.

Let’s look at Facebook. They used their platform to add value to their proposition and fuel the rate of growth. When they met the inflection point where that was no longer necessary they regained control slowly restricting the app’s ability to communicate with the user and relegated the apps to a separate tab that no one would ever click on.

To pre-empt the frustration this might cause they very astutely created Facebook Connect – which enabled developers to continue to work on the opportunities of the Facebook platform but away from Facebook itself (which is what Facebook wanted). In many ways, this was an exit strategy for developers who had invested time and experience in the platform.

If Twitter begin to effectively close up the opportunities in the platform by creating ‘official apps’ across the board, or ‘plugging the holes’ themselves then they too need to create the exit strategy for developers else they will get pissed.

Fred Wilson suggests developers look at social gaming, enterprise, discovery, and analytics. Those are great ideas, but Twitter will need to do certain things and release certain APIs to create these ‘exit strategies’ to encourage developer focus away from clients and into those areas.

Here are some of my thoughts on what Twitter needs to do to make these ideas viable and valuable for developers:

Social gaming
Spymaster showed us that social gaming is too noisy on Twitter, at least as it exists is today

• Twitter need to create a filter or similar mechanism to allow social gaming to exist so users can participate without fearing they are creating noise for the followers. I actually think makes this the toughest one to solve.

Enterprise
Twitter is already building product in this area and that will concern developers.

• Twitter needs to be more transparent with what it is and isn’t doing in this space so developers can feel safe investing their time building apps Twitter isn’t going to compete with.
• An official solutions marketplace and preferred consultant network, while stodgy, would help startups connect with enterprise

Discovery
Rate limiting is still hurting this area, despite fire-hose/garden-hose being available. Discovery typically needs volumes of data.

• Remove rate limiting for certified discovery apps
• Increase who can get the true fire-hose as it doesn’t appear to be open to anyone
• Create a Twitter Query Language (TQL?) to allow new types of data interrogation to occur that doesn’t require the user to maintain a mirror of the twitter status database.

Analytics
Twitter is also working on projects in this space, which again will understandably concern developers. It also has the issue of (potentially) needing volumes of data like Discovery.

• Twitter should be transparent with their roadmap here too
• Release more API’s around user metadata, such as rankings and other computable values from the master DB
• Removing rate limits, creation of a TQL would help massively here too

What it comes down to is that developers have created mainly presentation-layer focused apps because the API set available to them has encouraged this. If eyeballs and page views are related to monetization, then I can understand why Twitter might be wanting to reign in what is going on this space.

However, before it can urge developers to go build in different spaces, in different parts of it’s value chain, Twitter needs to lay the foundations for this to occur. Creating these new APIs and being more transparent with its own roadmaps in the Enterprise, Discovery and Analytics spaces are all very necessary.

Friend and Seesmic founder Loic Le Meur has some wise perspectives on this.

(Disclosure: I am a shareholder in Seesmic and NutShellMail, both of which are primarily focused in this space)