Henrik Torstensson's Weblog

3 data points on online distribution of media

noreply@blogger.com (Henrik Torstensson) — Mon, 30 Aug 2010 17:54:00 +0000

Some additional data points on my post on the shift to online distribution of media. Activision Blizzard, the world's second largest games publisher, reported that more than 50 % of it sales during Q2 2010 came from online channels. Amazon executive Steve Kassel thinks that the company will sell more Kindle books than paperbacks in 2011. Netflix's cost for streaming content rights went from $31 million (first six months of 2009) to $116 million (first six months of 2010).

The Internet is not Western and White

noreply@blogger.com (Henrik Torstensson) — Sat, 21 Aug 2010 12:20:00 +0000

Royal Pingdom has collected data on the top 20 countries in terms of Internet users, including how much potential growth each country (looking at the percentage of population using the Internet) has. The country that surprised me the most was Nigeria, which has 44 million Internet users (slightly less than France, but more than South Korea).

In addition to the raw number of Internet users, it is helpful to look at the number of broadband users, users with mobile Internet access and purchasing power to rank the commercial opportunities in different countries. The list also shine some light on why the investments done by Naspers into China, Brazil and Russia among other countries has been so canny.

Skype prepares for IPO

noreply@blogger.com (Henrik Torstensson) — Wed, 11 Aug 2010 21:19:00 +0000

Skype, like Demand Media, is preparing for an IPO by filing an S1 with the SEC. Unlike Demand Media, Skype is not highly dependent on Google.

Booming ad sales for Facebook from massive user growth and time in market

noreply@blogger.com (Henrik Torstensson) — Mon, 09 Aug 2010 23:56:00 +0000

Facebook's massive user growth in combination with the fact that its advertising sales teams have been in the market for another year or two, has led to a massive increase in spend by advertisers, according to Facebook's COO Sheryl Sandberg.

This is a central aspect when trying to understand the growth of an advertising-driven startup: it takes time to build an advertising sales businesses.

First the company needs to have a site with a fair number of visitors. The absolute number required depends on country, vertical and other factors.

Then the company needs to hire good salespeople, have them meet with advertisers (at the right time in the advertisers' planning/buying cycles), get some initial test orders, prove that the specific online media performs and get the first repeat orders. At the same time, the company needs to hire more salespeople to increase the number of agencies and clients it meets to get more test orders and start more customer relationships.

While the sales team is really getting up to speed, the site is hopefully growing and is still being considered hot among media buyers. When everything fall into place, massive growth a'la Facebook is possible.

Google acquires Slide, invests in Zynga, building game-oriented (?) Facebook challenger

noreply@blogger.com (Henrik Torstensson) — Sun, 08 Aug 2010 14:25:00 +0000

Google has acquired Slide, maker of entertainment apps for Facebook and other social networks, for $182 million. TechCrunch breaks down how the money was split between founders and investors. It is worth to remember that Slide raised $50 million on a $500 million valuation in early 2008. Google's acquisition of Slide becomes a good example of how liquidation preferences make sure later stage investors get their money back when a company sells for less than the valuation at the time of a Series C or D investment.

The acquisition is said to be a part of a larger push by Google into social networking, likely with social games as a primary driver. Using games as the the killer app for a social network is smart, as games can have a single/few player mode that don't require millions of users to be fun. According to reports, Google has also invested more than $100 million in Zynga, maker of Farmville and many other of the most popular games on Facebook.

Demand Media takes first step towards an IPO

noreply@blogger.com (Henrik Torstensson) — Sat, 07 Aug 2010 15:53:00 +0000

Demand Media, the search-driven publisher of eHow and other sites
and domain registrar, has filed a S1 to do an initial public offering. The company has revenues of about $250 million per year and is looking to raise up to $125 million on a $1-1.5 billion valuation.

Search Engine Land goes into some of Demand Media's Google-related risks (the article even mentions the Geosign debacle). The industry often talk about the Facebook platform, but for most online companies, including Demand Media, the Google ecosystem is still much more important as it provides both traffic and monetization.

Why Microsoft didn't get it right until version 3

noreply@blogger.com (Henrik Torstensson) — Sun, 25 Jul 2010 23:26:00 +0000

People used to say that Microsoft didn't get it right until version 3.0 (or 3.11 for that matter). I've had a line of thought that goes something like this on the subject (not entirely polished, so please give feedback).

When a new type of hardware and software combination arrives, a firm that offers vertically integrated solutions (i.e. develops both hardware and software) can initially offer smoother integration and a better user experience than firms in a horizontal ecosystem (i.e. different makers of hardware and software) can. In the 90's and early 00's, that advantage seemed to hold until the horizontal ecosystem came up with a version 3.0 of its software.

In our ever more online world, firms have also been able to connect online services to hardware and software combinations. The best example is probably how Apple combines hardware (Mac, iPhone, iPad), software (iTunes, Quicktime, Safari) and services (iTunes Music Store, App Store) to create a better overall experience.

Another example is how Research In Motion has combined the Blackberry phones with the BBM chat service to create something special that competitors don't offer. One of Nokia's issues seem to be the inability to create a hardware, software and services combination that can compete with the iPhone.

It might be even harder for a horizontal ecosystem to replicate the ease-of-use of a vertically integrated system when it also needs to get the online services right (see Android Market). Especially as major players in the different layers don't fully trust each other, as they've seen how the majority of profits often flow to a few firms (an example being Microsoft and Intel in the PC ecosystem) and few firms want to "take on for the team" to make sure the ecosystem grows strong.

Facebook has passed 500 million active members

noreply@blogger.com (Henrik Torstensson) — Sun, 25 Jul 2010 10:09:00 +0000

This Wedensday Facebook announced that it has passed 500 million active members. That's massive, especially considering that about 50 % is said to log in every day. A nice infographic on Facebook members in different countries can be found at Mashable.

U.S. tech companies Q2 report card

noreply@blogger.com (Henrik Torstensson) — Sat, 24 Jul 2010 10:23:00 +0000

All numbers are in billions of U.S. dollars.

Jobs at Spotify

noreply@blogger.com (Henrik Torstensson) — Thu, 22 Jul 2010 11:55:00 +0000

We're looking for some great people to join Spotify's Premium Sales Team in London. If you know great people or are interested yourself, please have a look the following openings:

* Premium Manager - Campaigns
* Premium Manager - Retention
* Web Designer

I'm also always interested in meeting great and interesting people, regardless of if they're currently planning to change jobs.

The digital media future is (almost) here

noreply@blogger.com (Henrik Torstensson) — Wed, 21 Jul 2010 22:56:00 +0000

In the late 1990's, almost everyone in the media industry went gaga over the promise of digital distribution of media products and services. As consumer behavior change slower than most visionaries want, it's taken almost 15 years to (almost) reach the promised future. Some very interesting data points reflecting the shift to digital distribution of media products:

* Amazon is selling more Kindle e-books than hardcover books. Obviously this doesn't take into account paperbacks, which in my opinion is probably the best reading experience, but it shows a massive shift. In the last four weeks Amazon has sold 1.8 e-books for every hardcover book. With the Kindle going down in price and the iPad and smartphones driving e-books sales, this is a market that should have a lot of room to grow.

* Digital make up 35.5 % of U.S. music sales, with iTunes being the by far largest retailer with 26.7 % of the total market. Wal-Mart had 12.5 % (mostly physical) and Amazon had 7.1 % (5.8 % being physical and 1.3 % being digital).

* Digital downloads were 48 % of U.S. PC games unit volume and 36 % of revenue. The major retailers for traditional PC games were Steam, Direct2Drive, Blizzard.com, EA.com and WorldofWarcraft.com. Major casual game retailers were Bigfishgames, Pogo, Gamehouse, iWin and Realarcade. That is obviously not taking Facebook games like Farmville into account.

With a combination of digital growing (driven by changed consumer behavior, products that take advantage of the medium and better online retailing) and physical having slower growth or even declines, expcting more than 50 % of media to be delivered digitally in 5-10 years seems like a quite reasonable assumption.

Removing friction to increase sales (Amazon Prime example)

noreply@blogger.com (Henrik Torstensson) — Mon, 12 Jul 2010 22:25:00 +0000

Making any part of the buying process easier, i.e. removing friction from the process, will drive sales.

The first version of an e-commerce web site or a media site with a paywall in-front will always have a lot of friction. But with active work a site often double its sales by communicating unique selling points better, making sign-up and payment pages easier to understand and adding additional payment options.

Often most of the work to remove friction is done on the web site, but just having moved to the U.K., I've been able to try Amazon Prime, a way to remove friction from the final stages of the buying process by doing away with delivery costs for individual orders.

By paying Amazon an annual fee of £49, a customer gets next day delivery of the things she buys from Amazon.co.uk without a per item delivery charge. It combines quick delivery and no variable cost.

While Prime is only useful for customers making about 10 purchases or more a year, to those customers Prime takes away the need to even consider delivery costs. The price you see is the price you pay. No extra attention required. Less friction in the buying process after you've found a product you like. For a repeat customer, the process becomes as simple as buying an iPhone app and that must be a good thing for sales.

Usage drives sales, if you make it easy to buy (iBooks edition)

noreply@blogger.com (Henrik Torstensson) — Sun, 11 Jul 2010 10:59:00 +0000

In the last few days I've started to play around a little with Apple's iBooks. As I'm reading on my iPhone4, at first I wasn't sure if I'd enjoy reading a book on a small screen. But after having read 2-3 previews of books, I realized it is a nice experience that that I think it can be a nice substitution to playing a game, checking Facebook or sending a text when I have 5-10 minutes in transit or am waiting for someone.

To try if I will enjoy reading a longer book on the small screen, I've bought Andrew Ross Sorkin's Too Big To Fail. I guess I'll know if the user experience holds for a long read in a week or two.

However, the actual book buying experience had a few interesting points.

* iBooks is a different application from the iTunes and App Store on the iPhone. It likely decreases initial adoption and usage, but I guess the tailor-made UI could be more effective in driving sales per user.
* iBooks has extensive previews of books (and a chunk of free public domain books), which is a good thing. The same way free applications in the App Store make it easy to spend time in that store, previews and public domain make it easy to spend time in iBooks.
* The combination of iTunes accounts with credit card information and people spending time exploring books will drive impulse buying. (I'd suggest that as good a technical platform the iPhone is, a big part of the general magic for music, apps and potentially books is the retail environment Apple has created with iTunes.)
* A big negative is that once I bought Too Big To Fail, I was told that the book was over 20 megabytes and could only be downloaded over WiFi. Not what I wanted to hear on the bus just having spent around £10. A nice solution would be partial downloads of chapters over 3G if Apple and the mobile operators don't want to push to much data over the 3G network.
* An observation is that while most apps cost one to a few pounds, books seem to hoover around £10. It will be interesting to see if book formats that allow for £1-5 price point develop.

Agile Advertising

noreply@blogger.com (Henrik Torstensson) — Thu, 08 Jul 2010 17:55:00 +0000

Read the blog post and the slides from Gustav von Sydow's speech on Agile Advertising and the four feedback loops at Cannes Lions. Very good stuff.

Facebook Credits and smart mobile payment biz dev

noreply@blogger.com (Henrik Torstensson) — Tue, 22 Jun 2010 22:52:00 +0000

Facebook founder and CEO Mark Zuckerberg did an interview with InsideFacebook talking about the Facebook ecosystem. One thing touched upon was Facebook Credits and it not being a major profit driver for Facebook despite a 30 % fee for developers.

One reason is that Facebook Credits can be bought with premium text messages, which cost far more to process than credit cards or Paypal.

Facebook is using Zong for mobile payments, and it's worth noticing that Zong has done some really, really nice business development with their Zong+ product.

Basically, after a purchase of credits or virtual goods a user is asked if she wants to connect her credit card to her mobile phone number (in return for additional credits/virtual goods). The result is mobile-initiated credit card payments and the combination of easy to purchase (mobile) and a low-cost funding source (credit cards). Probably the smartest thing I've seen in online payments in the last year.

Facebook 2009 revenue was 700-800 million dollars

noreply@blogger.com (Henrik Torstensson) — Mon, 21 Jun 2010 22:33:00 +0000

Facebook had revenues of up to $800 million in 2009, according to Reuters. Some quite obvious drivers of revenue growth last year:

* User and traffic growth
* A targeting system (age, geography, interest) that makes sense and allows smaller and larger advertisers to get started and find advertising that works on a CPA and optimize advertising campaigns. Combined with cost-per-click payment it is low risk to start advertising
* Zynga and other makers of Facebook games marketing their new games

With about 500 million users, a growing ad sales operation and a new micropayment system, Facebook will likely grow very quickly in 2010 too.

Consumer payments were driven by games and virtual goods

noreply@blogger.com (Henrik Torstensson) — Sun, 20 Jun 2010 12:55:00 +0000

Ex Post Facto: Why paid consumer services are in a golden age. Ex Post Facto is becoming one of my, if not the, favorite curating/news commentary blogs. I'd argue that paid-for, even if freemium was quite widely discussed, was not a core Web 2.0 trait as many entrepreneurs and venture capitalists caught a bad case of the advertising bug when Web 2.0 was getting popular in 2005-2006.

Consumer payments have been fundamentally driven by increased consumer acceptance/usage of e-commerce, but went mass-market with the games/virtual goods, Facebook and premium text massage/mobile payments combination. That in combination with a greater number of experienced data-driven marketing and sales operators will make the next few years very interesting.

New York Times: One on One: Fred Wilson, Union Square Ventures. Good interview, but nothing spectacular if you've been following Fred's A VC blog for a long time.

Business Week: Zynga Receives $147 Million Investment From Japan’s Softbank. Apparently Zynga has attracted additional funding from the Japanese media/telecom/Internet investor.

New job

noreply@blogger.com (Henrik Torstensson) — Wed, 02 Jun 2010 19:13:00 +0000

After 4.5 very, very good years with Stardoll I joined Spotify as Head of Premium Sales yesterday. From mid-June I will be based in London.

On startup CEOs

noreply@blogger.com (Henrik Torstensson) — Mon, 10 May 2010 19:15:00 +0000

Ben Horowitz, partner at venture capital firm Andreessen Horowitz, has been writing a couple of very interesting blog posts on company-building in the last couple of months. An interesting post is Why We Prefer Founding CEOs. It's a post that should be read in its entirety, but he points to three key ingredients required for innovative organizations/CEOs: a) Comprehensive knowledge, b) Moral authority and c) Total commitment to the long-term.

Related reading (in Swedish) by Sebastian Siemiatkowski, CEO and founder of Klarna.

Temporary address

noreply@blogger.com (Henrik Torstensson) — Sun, 09 May 2010 12:25:00 +0000

As Blogger has removed the possibility to publish to a domain via FTP, I've temporarily moved my blog and blogging to torstenssonsweblog.blogspot.com. My plan is to have the latest updates back on torstensson.com in the not too distant future. If you subscribe via RSS nothing should change.

Sequoia invests in Klarna

noreply@blogger.com (Henrik Torstensson) — Sat, 08 May 2010 14:26:00 +0000

Sequoia has invested in Swedish payment firm Klarna. To my understanding it was a combination of a new share issue of 70 MSEK and Sequoia acquiring shares from earlier investors (but not the founders). If Sequoia didn't acquire secondary shares as part of the investment, the implied valuation doesn't make sense.

Scaling, returning, learning - mix of articles

noreply@blogger.com (Henrik Torstensson) — Mon, 12 Apr 2010 20:49:00 +0000

Mike on Ads: The Challenge of Scaling an Adserver and Scalability Follow-Up — The challenge customers impose on innovation. When a site/service gets big fast, it is as much about operating it as developing new features. Doing both, like Facebook for example, at the same time is always impressive.

Internet Retailer: Get Back - Return policies can win over customers, and there’s more than one way to do it. Zappo uses returns to drive average spend and thus revenue (as long as additional contribution dollars are less than cost of returns it works well).

Lessons Learned: Learning is better than optimization (the local maximum problem). It's important to keep the big picture in mind and not start to micro-optimize too early.

Venture Beat: China’s top four social networks: RenRen, Kaixin001, Qzone, and 51.com. The Chinese Internet is not like the Western Internet. Interesting data on four of the large social networks in China.

Reaction Wheel: Everybody's an ad exchange (The Thin Exchange, 1) and Open Source the Ad Exchange. Using the stock exchange and a 'perfect market' as the metaphor for an ad exchange doesn't seem like a perfect fit. The, not always perfect, electricity market is likely a better metaphor as an ad impression is not an asset but a flow.

Sticky Slides: CVs are coming to PowerPoint and Axiom One presentation. The way you say it always matters.The way to describe work history in the presentation gave me food for thought.

Google and China

noreply@blogger.com (Henrik Torstensson) — Mon, 12 Apr 2010 18:40:00 +0000

Google's A new approach to China: an update. I didn't post about Google's March 22nd decision to stop offering a censored version of its search engine for mainland China, but it is one of the most interesting decisions ever made by a technology or media company.

It shows that a corporation doesn't exist solely for (short-term) profit maximization if the owners have other principles or objectives. It also shows that a media/tech company can come to the conclusion that sometimes it is not possible to do business if the price is that one has to accept censorship.

Tencent invests 300 MUSD in DST, form strategic partnership

noreply@blogger.com (Henrik Torstensson) — Mon, 12 Apr 2010 18:34:00 +0000

Chinese Tencent has invested $300 million in Russian Internet investment firm Digital Sky Technologies for 10.26 % ownership (economic interest mainly, as share of votes is 0.51 %). Obviously DST owns a few percentages of Facebook and Tencent operates QQ, one of the largest Chinese Internet services.

Videoplaza raises 3.5 million euros from Creandum and Northzone

noreply@blogger.com (Henrik Torstensson) — Thu, 18 Mar 2010 09:00:00 +0000

A little over two years ago Swedish Kanal 5 started using Videoplaza to manage its video advertising. After having spent time with the company's founders Sorosh, Alfred and Dante that spring, I was so impressed with them and their combination of business/sales focus, software development skills and vision that I asked to and was allowed to participate in Videoplaza's angel financing round and joined the company's board of directors.

After almost two years of seeing the business grow, with clients like TV4 Group (Sweden), Ekstrabladet (Denmark), La Vanguardia (Spain), myvideorights.com (UK) and Incisive Media (UK), it feels good that Videoplaza can announce that VC firms Creandum and Northzone have invested 3.5 million euros in a Series A financing round. Read Sorosh's blog post Why we raise 3,5M EUR and what it means for our clients and the press release (pdf) for more information.

It's going to be great to see Sorosh, Alfred, Dante and the amazing team they've assembled continue to build a great service for publishers and a great company to work with and for. As Videoplaza is growing and looking for more employees, the company has move into a new Stockholm office (see video).