Cogblog

Was DMX a tool for non-premium advertisers?  I didn’t think so.  Someone help me out here.

I thought DMX was a tool for non-brand name inventory.  Specifically, I thought DMX was a daisy chain management system that competed with Pubmatic and Rubicon and was getting beat badly.  Positioning this as enabling premium advertising in the exchange seems like an exaggeration and a way to put a positive marketing spin on the orderly shutdown of a niche product without hope at Yahoo.

Someone tell me I am wrong?

Report from Alley Insider that AOL is planning to pull ad inventory from Ad.com.

Not being on the inside for more than a month now, I thought several things when I read this:

1. Everyone has seen how Tim is working to cut ad volume on AOL, focusing on ads with positive yield (e.g. get rid of worthless photo galleries and tons of ads below the fold).  This is super smart and if the point is simply that, with less ads, less are flowing downstream to Ad.com for remnant monetization, then yay, Tim.
2. Will this decrease Ad.com’s reach?  It would be a bitter pill if Ad.com was no longer the biggest ad network.
3. The talk of improved eCPM and yield in the comments is interesting.  Has decreasing volume to Ad.com really increased the sell-through rates of AOL inventory?  If so, is this simply a sales management problem and that is how they are addressing it?  Seems a little counter-intuitive, but it is possible.  Now, this makes a lot more sense if #1 is true and there are simply less worthless ad space on AOL.  (LIKELY)
4. As Yahoo has refocused on putting their Class 2 inventory into places like Right Media, it is interesting to see AOL consider going the other way.  Furthermore, it is ironic to note that the original investment thesis behind AOLs acquisition of Ad.com those many years ago was that if they owned their own remnant monetization engine, it would be smart because they could keep their margin.  Deciding that AOL inventory should not be remnant monetized now is funny.  Particularly when many people acknowledge that AOLs acquisition of Ad.com was the best acquistion ever by AOL.
5. AOL inventory was great differentiation for the Ad.com network.  Although maybe that was what devalued AOL inventory.

Net-net, I like what Tim is doing, although I am sure if Alley Insider is correct (UNLIKELY), then it sucks for my buddies at Ad.com.

Ad.com’ers that lurk here, comment away!

(As always, I want to note that this is not disparaging AOL, I love this.  Simply making industry observations.)

Silicon Alley Insider did a post that was filled with lots of comments about whether offering a voluntary package is a good idea or not.  Do the best people leave?  Do the worst people go?

I thought I would throw out two cents on this:

Economically speaking, any AOL employee that did not spend the last 2 weeks job hunting is not optimizing their income.  If you are able to get a job somewhere else very quickly, then you can bank a fair amount of income by taking the package, knowing that you have a job lined up.

So if you assume every employee has spent the last few weeks furiously job-hunting, that is probably not good for AOL.

That argues that it is smart of AOL to minimize the window.  Given that people only had three weeks, could people really have lined up interviews, conducted interviews and gotten offers?  I suspect it is hard.  So lots of people now have to decide what to do but they haven’t yet gotten positions.  That will probably encourage even the superstars to stay if they have an iota of risk aversity to them.  The good news for superstars is they were probably more likely to line up offers quickly because they have a network of people that want to keep them.

Poor performers have to make tough decisions.  This is not about whether you are in the bottom third because some departments will cut deeper than others and few people know in advance whether that is their department.  If you are in a team of 5, the bottom three might go!    So if you are not the top couple of people in your department, you seriously have to consider prophalactically taking the package.  Yet, your average person considers themselves above average, so in all likelihood, few people will.

Should more people take the package than the number that will?  It seems likely to work out that way.  Unfortunate because it would be better if everyone volunteered.

I wanted to go on the record with my love of Tim’s decisions to go for big, big cuts.  As a start-up, bootstrappy guy, I am a believer that people need to run profitable businesses and the only areas where things shouldn’t be profitable are where the business is growing so fast that investing ahead of demand is critical or where a company is entering a new business.

I think the objective of a decision to make cuts is to cut the business to profitability.  Excluding AOL Access’ profits, there are clearly lots of areas losing money, so making these cuts is a great decision.

Despite this, I thought it was really eye-opening when Clickety Clack noted that bringing costs in line with revenue does not drive top-line growth.  Without a growth strategy, they are simply IAC.  Great point by one of my favorite blogs.  I actually think they have ideas for how to invest the access profits.  Will it work?  Don’t know.

(P.S. None of this is based on insider knowledge or is intended to disparage my former employer, it is simply an observation.  I no longer have any insider knowledge and frankly, I don’t think I have had any insider knowledge since Jeff took over!)

Love the fish, incidentally.  Everyone has heard my “naming and branding is over-rated”, but why not, I say.

http://denitza.files.wordpress.com/2009/08/twitter_facebook.jpg

I have talked before about the difference between Twitter and Facebook.  Recently, I said that Twitter was momentarily slumping, but it was just momentary.  I got some push back on that.  Is Twitter suffering more seriously?  Don’t know, but you heard my take.  Let me add this caveat: Twitter, assuming there are no huge changes, will never be as big as Facebook.  Because Twitter is for sharing information with the world and Facebook is for interacting with friends, Facebook has an inherent virality that Twitter does not have in their current model.  Facebook has your friends nagging you to join.  Twitter is where you are missing out on what Ashton Kutcher is doing.  Facebook is where you are missing out on what your friends are doing.  Ashton will never nag you.

While Twitter is a new and different kind of communication from Facebook, the mechanism that they use is not as viral as Facebook because it is about looser linkages of interest than linkages of a specific “knowing each other” relationship.  That is ok.  It just means that it will be a little smaller.  The kind of meaningful data for targeting that they are gathering is great.  Not Facebook great (every aspect of your life), but great just the same.

How many people need to talk to complete strangers?

I read recently that Millenial Media and Admob both see around 6-7b impressions per month.

Pretty good.  Obviously, a reasonable next question is what does that business look like?

First, we need to speculate on what kind of CPMs they achieve.  We have absolutely no idea, so let’s make up a number.  A reasonable starting point might be “regular ad network CPMs”.  So here is Pubmatics numbers:

OK, so $0.27 is a real network value.  But that is the publisher payout.  So if we inflate that 40%, to get the network revenue:  ~$0.50.  In the interests of being conservative, let’s make the mobile network CPMs $0.25.  That also makes our math easy.

So a 6.0b impression/month network yields a $1.5m/month business with ~$600k gross margins.  That means they could probably support 30 employees with that business.  From this, one could imply that Admob, with ~150 employees was losing a lot of money and Millenial Media, with ~50 employees (and ~1b more impressions, yielding an extra ~$100k in gross margins), actually close to breakeven.

Are these margins realistic?  I have no idea.  Maybe they have to rev share with the carriers.  Maybe a lot of these are international impressions and hence worthless.  (Although the Millenial team, at the least, is smart enough not to buy those impressions.)

Seems like a great business.  Obviously, Millenial is sending a message with their raise, as did Google with their acquisition, that the market is a lot bigger than these two companies current implied run rate implies (implications imply!), but these numbers actually seem to make a lot of random anecdotal sense to me.  I had heard that Admob was doing around $10m in revenue annually , so this kind of lines up, given their ramp.

The obvious question is “was my imaginary CPM correct?”  Anecdotal information is that CPM prices are high and CPC prices are low in the industry.  When I try to unwind all of the math from the blog post, it sounds like $0.25 is about right.

I would be shocked if this back of the envelope calculation was too far off.

Security breaches are an act of terrorism in many ways.  And much like terrorism, security never gets credit for breaches prevented, but people lose their jobs ever time someone gets away with one.  The result is that there is little incentive other than sheer cost to limit security efforts in a corporate context.

And better security works!  I found this chart of password lengths that told me that allowing a special character could force a hacker to take 8x longer to break a password.  Making a password 7 characters instead of 6 makes it 12x harder to break.  This is very good.  Passwords should be hard to break.  So what security organizations take away from this is that users should be required to put in a special character.  Required to mix case.  Required to use numbers.  Let’s make the password 8 characters minimum!

Does this sound preposterous?  This was an employer’s corporate password philosophy.  According to our handy-dandy chart, it will take a hacker 1.45 centuries to break my password.

But you never know, a hacker could have started on my password already!  Fortunately, my employer made me change my password every 45 days.  Also, they would need my RSA Securid, a 6-digit passcode that changes every 60 seconds and is more or less random.

But if you are on the security side of our organization, I can’t figure out why they haven’t made passwords 12 characters, or 45 characters?  If it was 12 characters it would take 4 millenia to hack.  Maybe they could relax other rules, like letting me change my password every 60 days.  I am sure they would encourage me to voluntarily make my password that long.  But here is the rub:

When you have to change your password every 45 days, and the password is that preposterously complex, you have a system.  Everyone I work with has a system.  Incrementing numbers in the same password.  Date-based password schemes.  When you have to come up with 9 passwords a year and you are not allowed to reuse a password you have used in the last 24 tries (true!), you have to have a system to remember.  Does this mean changing passwords is less secure than not changing passwords?

So changing passwords is a bad idea.

These same requirements are true if you wanted to read my email via my phone, where every corporate phone is locked with an 8 digit password combining letters, numbers, and special characters.

Do you have any idea how much of a pain in the butt it is for me to put in an 8 digit password with letters, numbers, and special characters every time I want to make a phone call?

How much business value is lost by making people enter passwords every time they use their phone?  I just calculated that it takes 12 seconds for me to type in my password on my phone.  So let’s say that I do that 10x/day: 2 minutes.  That means 14 minutes/week (still typing on weekends).  12 hours/year typing your password (52 weeks because you still have to type the password on vacation.  That is .5% of my work week.  Let’s say that an employee makes $104,000/year (to keep the math simple).  That means $2k/week.  So that password lock on the phone is essentially paying $11.66/week to keep things secure.  But none of that cost gets passed back to the IT department, so it is a slam dunk decision.

Is anyone trying to brute force hack my password on my phone?  Really?  That would be foolish because if they fail six straight times, my phone deletes its entire contents.  So why the password complexity?

Let’s not even get into what it is like when I am trying to type my password into my phone while driving.  If my wife knew…

Password-protecting phones with complex passwords is a bad idea.

Let’s talk about RSA Securid.  RSA touts it as the best protection in the world because the Securid’s are mobile: They go where your workers go.  But let me tell you, they don’t really.  I put mine on my keychain.  Now my keychain is huge.  Sometimes it bothers me so I leave it lying around the house or office.  I don’t take it on vacation.  I don’t have it lots of times.  In fact, I don’t have it right now.

(Let’s be clear, this is not a ding on any one company, this is a ding on complex security at companies.  Many companies have them, all of them are FAIL.  I don’t like them.  Of course, I don’t work on the IT side of companies any more because I am the kind of guy that annoys the rest of the organization.)

Talk about your problems with your company’s security policies.

http://www.flickr.com/photos/marciookabe/3102556540/

So what does David at Expensify do after I give him a little blog love last week?

He shoots me an email asking if I could tweak the post to be a little more SEO friendly towards him.  Now “track expenses” is a link to expensify!

This is another smart idea:

• Obviously the SEO wars are important and that little bit of link juice helps.  (Little does he know that no one reads this blog!  That is other posts!)
• He is hitting me at a moment when we have a great relationship!
• Asking favors continues to build the relationship and dialogue.  That means asking favors is a good thing.  I will be posting on that more soon.

http://www.flickr.com/photos/jam343/1703693/

I have talked before about how it is far cheaper to build stuff today than it was previously: languages like Ruby, dev environments like AWS, and tools such as Github and Basecamp allow small teams to develop great products for thousands of dollars instead of millions of dollars.

Also, we have talked about how marketing has gotten a lot less expensive for many companies also.  The tools of social media and the ease by which a meme can be spread have never been better.

All of this is great for early stage venture capital.  It used to be that they had to write huge checks to fund product development and marketing expenses.  Now they can write smaller checks.

But I am here to tell you that there is even better news.  The growing science of customer development and lean start-ups has led to start-ups that are out-and-out better.  The odds of start-up success are simply higher than they used to be.  Start-ups have a better idea of how to build a product that customers want.  Plus approaches like scrum and agile have increased the velocity at which great products can be built.

Of course, competitive risk continues to be an issue, but as entrepreneurs systemically work to decrease risk in businesses, investors reap the benefits!

Holy ComScore, Batman!

TechCrunch freaks out in an attempt to break news by noting that Twitter growth has declined for the first time month over month!

Are they doomed?  Nah, Facebook had the same problem:

OMG!  Facebook was doomed!

Furthermore, Facebook was doomed when they changed their newsfeed, driving down views per user:

At least Twitter is figuring out how to get engagement into a Facebook-ish range with the introduction of features such as lists: