Monday, April 4, 2011

The Latest from TechCrunch

The Latest from TechCrunch

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BrightRoll Snags Former Yahoo Treasurer And VP Of Finance As Its New CFO

Posted: 04 Apr 2011 09:15 AM PDT

Yahoo has apparently lost yet another executive with the departure of Ron Will, former treasurer and vice president of finance at the Internet company. The man has decided to join video advertising startup BrightRoll.

Will was an executive at Yahoo for quite a while, from 2004 until the end of March, 2011, to be exact. As CFO, Will will oversee BrightRoll’s finance, corporate development and HR operations and report directly to CEO Tod Sacerdoti.

Before becoming Yahoo’s treasurer, Will served as a senior member of the company’s corporate finance group, where he was the finance lead for a number of acquisitions, investments and joint ventures including Flickr, Rivals, Whereonearth, Yahoo!7 and Musicmatch.

On an interesting sidenote: BrightRoll co-founder and CTO Dru Nelson was once an executive at eGroups, and before that a software engineer at Four11. Both companies were sold to Yahoo.

Prior to joining Yahoo, Ron Will spent 12 years in investment banking working at Merrill Lynch, Lehman Brothers and Bank of America.

BrightRoll is a privately held video advertising services company and headquartered in San Francisco, California. The company has raised $15 million from investors like Scale Venture Partners, True Ventures, Adams Street Partners and KPG Ventures.



A Royal Waste Of Resources? Yahoo Launches British Royal Wedding Site

Posted: 04 Apr 2011 08:28 AM PDT

I’m not sure about you, but I’m already tired of the Royal Wedding coverage, and the wedding is nearly a month away. Media companies are clamoring to publicize their coverage of the marriage between England’s Prince William and Kate Middleton and Yahoo is the latest to throw its hat in the ring.

Yahoo, who says that searches worldwide on is search portal for the royal wedding have increased 8 million percent since the announcement of the royal engagement and 1,523 percent just in the last month, is launching a dedicated portal for all things related to the wedding.

At Royalwedding.yahoo.com, visitors can now access articles, photo galleries, videos, and more coverage related to the wedding. Yahoo’s portal, which is an extension of its womens-focused news site Shine, also features a digital guestbook, a livestream of the wedding on April 29, original video content from a joint ABC News/Yahoo News Web show called "Wedding Royale," a mobile site and more. Yahoo is also launching an Official British Monarchy Flickr stream here.

Of course, in all fairness, it’s not just Yahoo who is hoping to cash in on the royal wedding media circus. A host of media and news companies are ramping up coverage as the wedding date draws near.



Google Makes $900 Million Stalking-Horse Bid For Nortel Patents As It Looks To Fend Off Trolls

Posted: 04 Apr 2011 08:03 AM PDT

The patent system is busted. Tech rivals are throwing lawsuits at each other to shoot down competitors instead of trying to win with innovative products. And Google’s had enough of being pushed around.

Today in a blog post, Google has announced that it’s going to help fend off attacks on both itself and ecosystems of projects like Android and Chrome by bidding on the Nortel patent portfolio — a trove of 6,000 valuable patents that relate to a variety of technologies including wireless, 4G, data networking, and more. Which, should Google win them, would be a strong deterrent for any other companies thinking of suing Google or one of its partners.

Google hasn’t won anything yet — there’s still going to be an auction planned for June when other companies will be able to bid above the $900 million stalking-horse bid. Nortel is selling the patents as part of a bankruptcy auction and says that the Google bid “follows a confidential, multi-round bidding process involving several interest companies” — which reportedly included Apple, who could presumably follow up with their own bid in the main auction.

In its blog post, Google explains that it’s a relatively young company, and that it simply hasn’t been around long enough to build out a patent portfolio as broad as some of its competitors. It says that while it’s still fighting for major patent reform, for now, building out a portfolio is the best defense against such litigation. Google has not used any of its patents offensively before.

Google has been involved in quite a bit of patent litigation lately, and Android has been a big target in particular. In March 2010 Apple sued HTC, alleging over 20 patent infringements. Microsoft has gone after Motorola (a big manufacturer of Android phones) and even Barnes & Noble for its Android-based Nook eReader. And there’s also the huge Oracle suit, which alleges that Google is infringing on seven Java patents with Android.

From the post:

Today, Nortel selected our bid as the "stalking-horse bid,” which is the starting point against which others will bid prior to the auction. If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate. In the absence of meaningful reform, we believe it’s the best long-term solution for Google, our users and our partners.



Former ValueClick Exec Who Joined Gigya As CEO Jumps To … ValueClick

Posted: 04 Apr 2011 08:01 AM PDT

Eyal Magen, founder of social sharing software maker Gigya, a couple of weeks ago announced that Dave Yovanno, who joined the company as chief executive officer in October 2008 after serving as COO of ValueClick for almost a decade, was stepping down.

Turns out Yovanno will be returning to ValueClick as the new general manager of Mediaplex, the company’s technology division.

Yovanno will report to ValueClick CEO Jim Zarley and will assist with the company's corporate development program in addition to running Mediaplex.

Before joining Gigya as CEO, Yovanno was a key member of the ValueClick management team from 2000 to 2008, serving as chief operating officer of U.S. media and the general manager of ValueClick Media.

He has also served on the board of directors of the Interactive Advertising Bureau and holds both bachelors and masters degrees from The George Washington University, Washington, DC.



AOL Has Already Replaced The Engadget Exodus (To Tech Gadget Nation)

Posted: 04 Apr 2011 07:42 AM PDT

Ever since AOL bought the Huffington Post, one group of high-profile bloggers at our sister site Engadget (AOL also owns TechCrunch) decided they did not like the direction the company was going and left quite vocally. It seemed that every week one of them quit in a huff.

Now we know where they went. Eight of those bloggers, led by former editor in chief Joshua Topolsky, are preparing to launch a competing tech blog at SB Nation, which is currently a sports blog network whose CEO, Jim Bankoff, is a former AOL executive. As David Carr at the New York Times writes:

At first blush, SB Nation would seem to be an odd home for a gadget blog — the Venn diagram intersection between geeks and jocks usually is defined by the Madden NFL games.

The new site doesn’t have a name yet—call it Tech Gadget Nation for now—and won’t launch until the fall. Besides Topolsky, the other bloggers Bankoff poached from AOL are Nilay Patel, Paul Miller, Joanna Stern, Ross Miller, Chris Ziegler, Justin Glow and Dan Chilton. Bankoff picked them off one by one as they departed, he says.

Where does that leave AOL and Engadget? It survived the departure of its first two rockstar editors, Peter Rojas and Ryan Block, who went on to start GDGT, and it will survive this talent turnover as well. In fact, editorial director Joshua Fruhlinger, who has been at Engadget since 2004 and was Topolsky’s boss, tells me that he’s hired seven new editorial staffers in the past month alone (Richard Lai, Myriam Joire, Christopher Trout, Dana Wollman, Brian Heater, Brett Terpstra, and Paul Heuts), and is about to announce two more additions, including new editor in chief Tim Stevens (formerly the automotive editor). “Engadget is nonstop,” he says. More than 20 people are currently writing and editing the gadget site full time, and they are not taking a break until next fall.



HomeAway Broadens Presence In Australia With Acquisition Of Vacation Rental Site RealHolidays

Posted: 04 Apr 2011 07:26 AM PDT

As it prepares for a public offering, vacation rental giant HomeAway is continuing its aggressive acquisition strategy with the purchase of realholidays.com.au, the Australian vacation rental brand of REA Group Limited. Terms of the deal were not disclosed.

The acquisition broadens HomeAway’s presence in the Australian market, and into the Asia-Pacific region.Currently HomeAway has presences in North America, Europe and South America. Realholidays.com.au, which currently features which features 21,000 listings, will be integrated with HomeAway.com.au and will be managed by James Cassidy, formerly of realholidays.com.au and vacation rental site, stayz.com.au. HomeAway.com.au already features 105,900 vacation rental listings in 99 countries.

International expansion is a key growth strategy for the vacation rentals giant and I think we can expect HomeAway to continue to make similar acquisitions in the coming year. In 2010, 37.9% of the company’s revenue of $167.9 million came from outside the United States, including 36.6% from Europe and 1.3% from Latin America.

A few weeks ago, HomeAway filed for an IPO valued at $230 million (though this could be a placeholder amount). HomeAway has raised close to a half a billion dollars in venture funding, and in its most recent investment round was valued at $1.4 billion.



SmartBear Buys Website Performance Monitoring Company AlertSite

Posted: 04 Apr 2011 07:22 AM PDT

SmartBear Software this morning announced its acquisition of web and mobile performance management software maker AlertSite.

Through the acquisition of AlertSite, SmartBear says it aims to expand its cloud and mobile offering.

Founded in 2003, Austin, Texas-based SmartBear offers code review, testing, and development management tools to a community of over 100,000 users.

Terms of the deal were not disclosed, although SmartBear Software CEO Joe Krivickas in a statement said “all AlertSite customers and employees” will make the switch to SmartBear.

Founded in 1998, AlertSite serves more than 2,300 customers worldwide.



Livebookings Processes 1 Million Reservations In A Month, Raises $10 Million

Posted: 04 Apr 2011 07:01 AM PDT

London-based online restaurant reservations and marketing services company Livebookings says it has processed 1 million bookings for restaurants in a single month, marking the largest ever for the OpenTable rival. In the same month the record was achieved (that would be March, 2011), Livebookings secured £6 million - or nearly $10 million - in a round of funding from existing shareholders, including VC firms Balderton Capital and Wellington Partners.


EMC Buys Network Security Monitoring And Analysis Company NetWitness

Posted: 04 Apr 2011 06:28 AM PDT

Following its $2.25 billion acquisition of Isilon, infrastructure giant EMC is making another purchase today— network security software company NetWitness. EMC's acquisition of NetWitness closed on April 1, 2011 (clearly neither company wanted to make the announcement on April Fool's Day) and NetWitness will operate as a part of RSA, the security division of EMC. Financial terms of the deal were not disclosed. NetWitness provides network security monitoring and analysis software products for commercial and government organizations internationally. The company's software offers network content analysis methods, risk verification and determination methods, incident response, data leakage and content monitoring, and compliance services.


Season 7

Posted: 04 Apr 2011 06:20 AM PDT

One of the deep pleasures of writing on the weekend is taking a break from the drumbeat of incremental news and marketing disguised as insight. We forgive the marketers for at least having some product or service to promote, but give less leeway to the drip drip drip of factoids served up as revelation. There are no scoops on the weekends; they’re being saved for the early Monday tip off of the new week.

As Hollywood has undergone the fragmentation of the television audience and the resulting collapse of the sweeps cycle, there is a similar flight from the kind of fare that traditionally pays the bills. The holiday season from Thanksgiving on still commands the big releases, but once the networks broke away from the sweeps months there’s been little difference between opening on big holidays and littler ones. All you need is a few two-day weekends, and the market is ready for something to stretch out with.

You can see the same dynamic in the tech world. At South By (SW) we got a whole lot of nothing breaking through: no Groupon, no Foursquare, no Google social gasp. Instead, the slots just after were filled by the new usual suspects like Color, the Google +1, the New York Times pay wall, the Time Warner iPad gambit. Some were tuned to their less than spectacular innovation, others to a desire to slip into the market ahead but not too exposed. That may have worked for the Times, not so far for Time Warner.

It’s not as though there’s nothing going on here, just the wholesale overhaul of show business. But the drama is only apparent if you stretch out and relax into the rhythm of weekend politics and its seemingly sedate warfare. Take the palace coup at Twitter for example. Just when we are finally told that Jack was fired (the kick in the stomach heard ’round the social world) out goes Ev and heeeere’s Jack again. Astute readers and attendees of the realtime Crunchups may remember that Jack has always been partial to Twitter’s holy grail, Track. Are we at the doorway to a Golden Age? See Dick run and Emily Play.

Let’s try another one: Mad Men. The deal is finally almost done for the realignment of the television business. Creator Matthew Weiner gets $30 million for the final three years of the series, with no cuts of talent and only a partial concession to AMC’s insistence on cutting 2 minutes of the show for more ads. This “concession” is to keep the first and last shows at 47 minutes and then go to 45 for the rest of the 13 shows in the middle. But wait: those shows will be 45 on broadcast and 47 or even 48 on digital with an eight day window.

In other words, the broadcast show becomes a giant commercial for the iPad market and iTunes version, setting up AirPlay viewings on the big home theater screen that will become the dominant mechanism for high value audience metrics. Twitter and Facebook posts will market the extra two minutes relentlessly to the addicted fan base, as more and more people time shift the show to the “real” version. By the end of the three years the iPad version may well be in sync with broadcast, since Weiner has only made a deal with the studio for Season 7 so far.

By then Jack and Dick may have integrated Square into DickBar 2.0 and offered Weiner thirty million for just the last season. A combined Twitter/Apple (read Disney/ABC) deal with social metrics replacing broadcast ratings? Such a new network powerhouse, with the already implicit Netflix association, can fund a whole new set of iPad blockbusters promoed in Season 7.

In the meantime, we could use a live streaming news network on the iPad. So far YouTube hasn’t jumped, but if Netflix can do it how far behind is, oh, the Season 7 network from doing it? Apple TV uses its hard drive for caching only, so it’s already up and running for such a stream. ABC already makes their broadcast shows available next day on the iPad, while NBC/Comcast is queued up behind TimeWarner waiting to get permission from everyone else to TV Anywhere it in subscriber homes over WiFi.

This looks very much like Apple and AT&T squeezing the other carriers until Verizon blinked. Now that we can run FaceTime over the iPad via iPhone 4 tethering, how long will it be before either carrier drops the no 3G blocking of FaceTime? Just think how Apple servers are going to look at that data in a big Twitter switch, mixed with shared news channels, live events, and Season 7 Glee Direct. Can you say MobileMe One. If Facebook is worth 65 billion, what is Season 7?



Twitter, Chegg Investor Insight Venture Partners Closes $2 Billion Funds

Posted: 04 Apr 2011 05:56 AM PDT

Insight Venture Partners, the NYC-based investment firm that has backed companies like Twitter, Chegg, Flipboard and HauteLook, this morning announced the closing of two new funds with a combined $2 billion in commitments.

One fund, Insight Venture Partners VII, has received approximately $1.5 billion of institutional commitments and roughly $70 million of additional affiliate and friend commitments. Insight Venture Partners Coinvestment Fund II, which the firm explains was established for co-investments in larger deals, received $450 million in commitments.

The significant majority of Insight's existing investors committed capital to the new funds, which will enable the firm to invest up to $150 million per transaction.

Since its inception in 1995, Insight says it has received total commitments of more than $5 billion. Its most recent investment was announced last week, when we reported that the firm joined a $40 million round of financing for Israeli startup Wix.



Apax Partners Acquires Software Giants Epicor, Activant For Close To $2 Billion

Posted: 04 Apr 2011 05:22 AM PDT

Business software maker Epicor this morning announced that it has agreed to be acquired by private equity firm Apax Partners. The transaction is valued at approximately $976 million. In a separate announcement, Apax said it will also acquire Activant Solutions, a provider of business management software solutions that was controlled by investment funds affiliated with Hellman & Friedman, Thoma Bravo and JMI Equity. The combined transaction is valued at approximately $2 billion.


Visible Measures Launches Video Ad Network, Hires Industry Vet To Run It

Posted: 04 Apr 2011 04:28 AM PDT

Visible Measures, the third-party media measurement firm for online video advertisers and publishers, today debuted a new video ad network dubbed Viewable Media, and separately announced that it has hired video advertising industry veteran Steven T.A. Carter to become general manager of the new business unit.

Viewable Media enables advertisers to purchase user-initiated views in social video, which Visible Measures says makes it the only video ad network with the capability to both drive and measure such views and ‘Earned Media’. The idea is to let advertisers target audiences that actually choose to watch and share their video ads, as opposed to delivering pre-roll advertising units and whatnot.

Viewable Media is powered by the company’s tracking platform and Viral Reach Database, the analytics video system that fuels the Ad Age Viral Video Chart and the Variety Top 10 Online Film Trailers Chart, among others.

Visible Measures has recruited Steven T.A. Carter, formerly of rival Tremor Media, ScanScout, and Specific Media, to serve as General Manager of Viewable Media.

Viewable Media’s day-to-day ad operations will be led by Eddie Murphy, formerly General Manager of the Eons BOOM Media Ad Network, who previously managed ad operations for Lycos and Wired.com.

Visible Measures also recently announced that Chris Harris, formerly Director of Engineering, Video Platform Team at Yahoo had joined the company as VP of Engineering.

The company has raised close to $30 million in venture capital to date.



Obama’s Re-election Campaign Puts Facebook Front And Center … Literally

Posted: 04 Apr 2011 03:09 AM PDT

U.S. President’s Barack Obama’s re-election campaign just been kicked off, and it – again – makes clever use of Facebook as a tool for spreading the word and amass supporters.

When you connect to your Facebook account on the campaign website, an interactive banner will appear on the top of the website that shows you which of your friends aren’t “in” yet, profile pictures included. You’re invited to put post a message to your friends’ walls to prompt them to join the ‘Are You In?’ application.

You can easily scroll to your friend list by skipping from one to the next, and you can add an optional message when you opt to post to a friend’s wall.

This is how the message appears (just for illustration, I’m not even a U.S. resident):

Obama’s Facebook page has been ‘liked’ by close to 19 million people.

According to a message posted on the campaign website, they’re starting off ‘small’ both online and offline and plan to boost efforts at a later stage:

One thing that may strike you is that there’s just not as much here as there used to be. As this campaign gets off the ground, we want to start small—online and off—and develop something new in the coming weeks and months.

The idea is to improve upon what’s worked for the past four years, scrap what hasn’t, and build a campaign that reflects the thoughts and experiences of the supporters who’ve powered this movement.

And later:

This is just the beginning. We’ll be adding to this site, opening new field offices, training organizers, and developing plans every single day, and we hope you’ll play an active role.

The first step of all this is an unprecedented program to hold one-on-one conversations with millions of supporters about where they want this campaign to go—look for lots of news about that over the next several weeks as the process unfolds.

YouTube is also one of the things that have apparently worked over the past few years. In emails and text messages sent to supporters earlier today, in which Obama announced that he would be filing papers to launch the 2012 campaign, the video below was promoted.

Twitter, for whatever reason, seems to be not that big a deal for the campaign.



Online Pawn Broker Borro Raises £7.5m Led By Augmentum Capital

Posted: 04 Apr 2011 02:53 AM PDT

Online pawn broker Borro has raised £7.5m in a round led by Augmentum Capital, the growth capital fund launched by Tim Levene and Richard Mathews. Existing investors Eden Ventures and Rockridge Investments have also participated, while the new investment will be used by Borro to "aggressively drive new customer acquisition" and raise awareness of the company's offering. The company is also backed by The European Founders Fund.


How We All Missed Web 2.0′s “Netscape Moment”

Posted: 03 Apr 2011 08:20 PM PDT

(Editor’s note: This is the third installment in a series about the late stage, secondary investing craze sweeping the venture capital business. For the first two installments go here and here.)

On May 26, 2009 Mike sat down with Yuri Milner, Mark Zuckerberg and a Flipcam to talk about the then-scandalous $200 million investment DST made in Facebook, at a price that valued the company at about $10 billion. The camera-work is Blair-Witch-Project-like at best. You can barely hear the audio,  and Zuckerberg can’t for the life of him figure out whether to look at the camera or Mike. It doesn’t really matter because, just after he asks, Mike proceeds to cut off half his face anyway.

But shoddy production aside, this may have been one of the most pivotal moments TechCrunch has ever captured on camera.

We didn’t know it at the time, but this was something more than an unexpected investment by an unheard of investor in a seemingly overhyped social network. It was a moment we’d been waiting for for more than a decade. Something we’d been obsessing about. It was the moment when a Web startup fundamentally broke all the normal rules of gravity that govern all Web startups. It was the moment that would eventually spawn a new, unchartered frenzy of late stage dealmaking. In my opinion, it was nothing short of the Web 2.0 generation’s answer to “the Netscape moment.”

THE. NETSCAPE. MOMENT. Anyone who was in the Valley in the 1990s likely hears dramatic music when they read those words. It refers to Netscape’s 1995 IPO, when an 18-month-old company that wasn’t yet profitable electrified the public markets generating one of the biggest first day stock pops in history. It wasn’t just the dream team of the Svengali-like Jim Clark, king of the geeks Marc Andreessen and the operationally rigorous Jim Barksdale. It wasn’t just that Netscape stood at the forefront of a multi-billion wave of Internet creativity that would transform nearly every industry and the lives of the billion people online today. And it wasn’t just that Netscape was a better business then than people like to remember, doubling revenues quarter-over-quarter.

It was also Netscape’s timing: The IPO coincided with a greater democratization of stock market investing. It wasn’t the banks– it was the everyday retail investors flooding brokerages to buy a piece of a product they loved that caused the stock to pop so dramatically. And Andreessen was a symbol to every hacker or geek that you could move to Silicon Valley and build something huge (and get rich) in a matter of months– something that had never been possible in business before.

Put the two together and there was an irresistible new reality where a smart idea posting dramatic growth that a huge number of consumers loved could now operate by new company formation and liquidity rules. Was it any wonder a flood of new companies followed? Of course, everyone knows the inevitable happened next: Greed and latecomers pushed things too far, and we ended up with a dramatic crash that psychologically much of the Valley is still reeling from. (Don’t believe me? How many times this week have you read an alarmist report about whether or not the Dot Com Bubble is back?)

It didn’t take long for nostalgia over Netscape’s IPO to set in. One of the biggest stories when I first moved to the Valley was the hotly anticipated IPO of Loudcloud, Andreessen’s second company. It was the fall of 2000 and the IPO market had ground to a halt. But there were still plenty of people who believed it was only the frothiest companies that would die and that, after a pause, the new economy would keep surging. Quarterly venture capital investments were still increasing, launch parties were still held, and the Red Herring was still as thick as a phone book.

As times got worse, everyone needed something concrete to pin their hopes on, and for many that became the Loudcloud IPO. Afterall, Andreessen had changed the markets once, why couldn’t he do it again? The story that rang across CNBC, the Wall Street Journal and countless other media organizations: Could the Loudcloud IPO be the new Netscape moment?

It wasn’t. And yet, the press still yearns. Since then there have been no fewer than 10 million Google mentions of the phrase, as the press and analysts have predicted that each impending liquidity event by an outperforming company lead by a charismatic CEO would be the thing to get the broader public markets moving again.

Would Salesforce.com be the Netscape Moment?

Would Google be the Netscape Moment?

Would Tesla be CleanTech’s Netscape Moment?

Each IPO above has been newsworthy and an industry milestone in its own right, but each has fallen short of the Netscape yardstick. Here’s a spoiler alert: When LinkedIn becomes the first social network to file later this year, no doubt the same story will be written, and LinkedIn won’t produce a Netscape moment either.

As each IPO fails to be the next Netscape, more expectations pile onto the IPO everyone really wants to see: Facebook. Since 2007, stock “experts” have been reading tea leaves to predict its imminent arrival, and even today every move the company makes is pinned to speculation that the IPO is coming soon, nevermind executives take every opportunity to say there are no immediate plans for one. Facebook has a young wonder-geek CEO. Facebook is growing a fast rate. Facebook has 650 million users, who no doubt will produce a strong retail pop. Couldn’t Facebook be it? The obsession is palpable.

Of course none of these things will be the next Netscape moment, because Netscape has already happened. Crash-aside, the new rules created by the Netscape IPO are still pretty much the rules high-growth startups play by today. It’s no longer shocking that a 20-something kid could move to the Valley and build a billion-dollar world changing company. We’ve seen it dozens of times– in good economic times and bad. And it’s no longer shocking that an Internet company can grow very fast because of quick product cycles and a huge market of 1 billion people these companies can reach. These trends have developed and intensified, but today they are the norm.

In our obsessive zeal to witness the next Netscape Moment, I submit we missed it.

As a business reporter, the Netscape moment wasn’t so pivotal because it was an initial public offering; it was pivotal because of what it represented. It was pivotal because of the impact that it had on entrepreneurs– allowing them to build companies based on a set of new rules, not the old rules that had been defined for them. It was about a company not only disrupting an industry, but disrupting the laws of gravity associated with being a startup itself.

Just as Netscape proved you didn’t have to be profitable or fully-baked to go public, Facebook has proved the inverse: That you don’t have to go public to get liquidity for investors, a huge marketing event, and cash to acquire competitors and keep growing. That you don’t have to go public just because the playbook says so. One was about pushing a wave of companies to surge towards an IPO faster; the other has been about giving permission to a wave of companies to put off the IPO as long as possible– but the two have been equally dramatic changes that have impacted the broader economy. Netscape gave Wall Street and investors a new high growth industry to pour money into; Facebook– starting with that first DST deal– has deprived the market of it. But because we were so conditioned to view the next pivotal moment in startup economics as an IPO, we continually saw these secondary deals as something leading up to that pivotal moment– not as the pivotal moment that changed everything itself.

Facebook and DST won’t comment on the record about things like this– particularly since it involves IPO specualtion– so the natural people to talk to are the two guys who have been in the middle of it all: Marc Andreessen and Ben Horowitz. Andreessen was the co-founder of Netscape and the Mark Zuckerberg before Mark Zuckerberg. He was the reason Loudcloud had so much hype. And he’s not only on Facebook’s board, his and Horowitz’s firm has been one of the most aggressive investors in the Web 2.0 late-stage frenzy DST sparked. Horowitz gets fewer headlines, but he was a manager at Netscape, the co-founder and CEO of Loudcloud and the co-founder of Andreessen Horowitz too.

When I mentioned this story to Andreessen at a dinner party a few weeks ago, I could see the involuntary facial tick as his smile faded. He was polite, but his face said: “You’re not actually asking me about the Netscape moment? You must know me well enough to know how much I’ll hate that.” Indeed. I do. There’s a reason I quickly added: “HEAR ME OUT!” I sat down with Horowitz this week for his take and I saw the same look momentarily cross his face– the fleeting desire to throw me out of his offices for bringing up such a silly, overused press gimmick that they’ve been asked about thousands of times. It’s the only thing worse than asking if the current wave of frothy valuations are “ANOTHER TECH BUBBLE.” It’s the same look I give when someone asks me if China is the next Silicon Valley. Um… for starters, one of those is a huge country with a billion people surging out of poverty, and one is a 50-mile stretch in California full of millionaires…

Both Andreessen and Horowitz granted the dramatic change prompted by both the DST and Netscape deals – but to them, DST’s investment in Facebook was still just a precursor to a potential IPO. They argue what was so revolutionary from within Netscape was the retail pop– the sense of every rabid user owning a piece of the company and that reinforcing the marketing of the company itself. “It was one big feedback loop,” Horowitz says.

Granted, just like a comparison of 2011 to 1999 is inane, so too are there huge flaws with my comparison. As Andreessen likes to say, “There are no ‘nexts’.” To call Facebook the next Google misunderstands what each company has built. Predicting the next industry changing moment is like predicting the next industry changing technology– by definition it’s something we can’t envision before it happens. And that’s why we didn’t realize at the time just how transformative that DST-Facebook deal would be.

In the Milner-Zuckerberg video above, Mike asks a few times why the company would raise this much money when it didn’t need the cash and why Milner would invest so much without a board seat. Zuckerberg says, “We have no plans to use this money immediately and we may never use it. We may use it to make an acquisition or to open up data centers, if some strategic option makes itself available, and now we might be able to do it whereas otherwise we wouldn't have been able to, that's the option value that we gain through this investment.” Was he being cryptic? Maybe. More likely, even he didn’t realize the flood of follow-on secondary opportunities the deal with unleash allowing Facebook to put off an IPO for years without hurting the company’s growth.

Some more parallels jumped out at me, the more I thought about the two moments:

Both had key enablers from outside the establishment. In the late 1990s four San Francisco-based boutique investment banks were the first to spot the potential of small tech IPOs that could get huge. The incumbent Wall Street vets missed it completely, obsessed with playing the old-economy game. This time around it was DST that was the outsider to the establishment who spotted an opportunity that all the billions of dollars in Silicon Valley was ignoring: Facebook couldn’t go public, and it needed money and liquidity.

The deal was reviled at the time and DST was deemed to be paying an outrageous price for such a speculative company– the same thing that’s been said at every Facebook valuation, by the way. But pretty soon everyone around the company warmed to the idea: With Facebook’s earliest investors using these secondary deals to lock in returns, Facebook’s earliest employees using them as a pseudo-IPO, major firms like Kleiner Perkins, Elevation Partners and Andreessen Horowitz using them to manage to get a pre-IPO chunk of the company, and of course, Facebook using them to put off going public, but still get the benefits.

Just as the boutique investment banks spotted an inflection point in the market to break the traditional rules that the establishment initially mocked and then jumped all over, so too did DST spot an inflection point in the market, broke traditional rules, was mocked and then billions of dollars and many of the biggest names changed their strategies to follow.

The Macro-Economic and Cultural Backdrop. The impact of each of these moments was about so much more than the companies themselves, and that’s what makes them different from, say, Google’s IPO which was a huge moment in tech, but didn’t have much of a macro-economic impact beyond Google, Google investors and Google millionaires. Netscape’s IPO came at a point in time that it represented a catalyzing of the birth of the modern startup, the birth of the Internet and the impact of a truly democratized stock market. The latter was continually goosed by CNBC and only become more pronounced with the birth of subsequent companies like eTrade and Ameritrade. The role so many individuals played in the bubble was what made the crash so devastating.

Likewise, Facebook’s reluctance to go public is wrapped up in a lot of bigger macro trends that have been more than a decade in the making. It’s not so much the psychological impact of the Dot Com Bubble, Mark Zuckerberg has always been one of the few people in the Web 2.0 world immune to that. As he once told me, “I was in middle-school then.” It’s the transformation of what it means to be a public company. To many CEOs, the benefits– liquidity, marketing and a stock currency to purchase other companies– have been outstripped by mounting costs.

There are hard costs like Sarbanes Oxley compliance, but more problematic are things like Regulation Fair Disclosure, or ‘Reg FD’. It was created to make sure all shareholders got the same information at the same time, but in practice means a company can’t defend itself against rumors started by hedge funds without the dangerous precedent of issuing a press release to rebut every rumor. That’s augmented a new reality where gossip and perception drives a stock price, not the actual health of a company. Technology has also changed how quickly investors can trade in and out of stocks, giving the entire ecosystem an increasingly obsessive short-term mindset. And the separation between research and banking meant research had to tailor to brokerages, who mostly want reports about the large-cap companies. As a result, smaller companies that manage to go public wither and die with no one evangelizing them to investors.

These changes help explain why the concept of going public radically shifted from something companies couldn’t do fast enough in the Netscape era to something companies wanted to put off as long as possible in the Facebook era. Without these changes, we wouldn’t be seeing the explosion of late stage funding. DST’s investment in Facebook might have been singular secondary deal, because by the time the markets opened back up, companies like these would have just filed. The public markets are starving today– it’s these companies that are dragging their feet.

Coming into the Web 2.0 movement, the appeal of the IPO was gone. Founders had three choices they didn’t like if they were lucky enough to succeed: Suck it up and go public, hire a new CEO who wanted to deal with Wall Street, or sell the company before it got to that point. Mark Zuckerberg gave everyone a fourth option: Put off the IPO for years, until you have $1 billion in revenues and are so dominant you can operate by your own rules and continually do secondary rounds to give anyone who doesn’t like that strategy a way to get a return in the meantime.

While Google’s IPO didn’t have an immediate impact ala Netscape, there are roots in all of this that go back to Google. Google was the first company to dramatically stand up to the new unpleasant Wall Street reality, going public by dutch auction and announcing it would never give guidance among other non-traditional terms. Horowitz describes Googles IPO without words– by dramatically lifting his arms over his head, pulsing two middle fingers in the air and making a face like a headbanger. And Google paid the price: The stock didn’t have a dramatic Netscape-like pop. But over the next few years it soared from $85 a share to more than $700 a share.

That sent a powerful message to Greylock’s David Sze of how much growth you could still have in Internet companies after the IPO when you weren’t operating in the dot com bubble– especially now that more than a billion people are online. He says that insight was a big reason he invested in Facebook in 2006 at the then-outrageous $500 million valuation and why Greylock has increased its late stage appetite in general.

The Ripple Effect. Of course the biggest similarity is how both Netscape’s IPO and Facebook’s lack of an IPO have set a new model for others. In the case of Netscape, the floodgates opened wide. In the case of Facebook, it’s been far more measured in terms of the number of deals. Less than a dozen startups have raised these kinds of late-stage secondary mega deals, and the total activity on secondary markets is estimated to be less than $1 billion a year. But in the case of Facebook, the best companies have followed suit, and that matters because venture capital is a home run business where the top 5% of companies make 95% of returns. Anything they do, effects the entire industry and the absence of those companies from the public markets has a big opportunity-cost impact too.

Within Silicon Valley, the impact has been massive– dictating the investment strategies of some of the Valley’s biggest and best firms, and impacting lives of thousands of employees of Facebook, Zynga, Twitter and every other company doing these secondary deals. This much liquidity before an IPO was unheard of before that DST-Facebook deal, and we don’t yet understand the impact. I’ve argued before that it makes the rank-and-file Valley executives more short-term focused and more mercenary, which isn’t necessarily a good thing. Pre Facebook-DST, companies could hold onto the best and brightest employees up through the IPO and its trading lockups. Now, the churn out of companies happens before they even file to go public. And the appeal of getting pre-IPO shares in a company like Facebook is a lot more nuanced when a company is valued at double-digit billions and employees are given restricted stock units instead of options.

But you could argue the downside for a company’s ability to retain employees through an IPO is the Valley’s upside. In the case of Facebook, we’ve already seen a handful of promising companies developed from early employees who were able to cash in and leave. Usually “mafias” like these don’t start to bear fruit until a company is purchased in the case of PayPal or Netscape.

The big question with the ripple effect is whether things get pushed too far as they did post-Netscape moment. Netscape itself turned a profit quickly after it went public and had heathy revenue growth. While that IPO was speculative compared to what had come before it, it was boring and rational compared to what came next. So too are we already seeing the degradation of quality in late stage deals. There is only one Facebook, and while  Spotify was “only” valued at $1 billion in its recent DST deal, that’s ten times what Pandora– a company that has solved its legal issues with the RIAA– was valued at back in 2009. I don’t care how much smaller the price tag is, $1 billion for a company that can’t legally operate in the world’s largest Internet market despite two years of trying is a different risk profile than buying shares in Facebook at a $30 billion price. Facebook, after all, is already doing more than $1 billion in revenues, used by more than 650 million people and growing.

It’s not just macro-greed the Valley needs to worry about: It’s micro-greed. Last week, we reported a story about a Facebook employee named Michael Brown being fired for insider trading. We use those words, because we were told those were Facebook’s words to describe the internal rule he broke – and that fact wasn’t disputed by any of the sources we spoke with.

We didn’t take the allegation lightly. Contrary to suggestions from Brown’s friends and associates, before we wrote the story we talked to several people around the case including the employee’s attorney. Moments after the piece posted, we talked to the attorney again and later that night we spoke with Brown himself for more than an hour. We would have preferred to speak to Brown sooner, but his attorney denied our initial request. The content of those conversations was off the record and will remain off the record, but we updated the story with information gleaned during those conversations and remain comfortable that, on several points, we gave Brown the benefit of the doubt.

But the fact that so many people rushed to the employee’s defense without knowing the facts could be a worrying sign that others view what he did as rational and reasonable, and not equivalent to insider trading at a public company. Maybe it was an isolated incident and a naive mistake. Hopefully shining the light on it will show how serious such mistakes are. But one thing is clear: Even if companies act as swiftly as Facebook did in this case, if more employees view this behavior as acceptable, the Securities and Exchange Commission will come down on secondary markets like a hammer, effectively shutting down a new way to get liquidity as quickly as it started. Congress and the SEC already made IPOs an undesirable route, through well-meaning reforms that had unforeseen consequences.

It’s up to the Valley to show restraint and make sure this is one way history doesn’t repeat itself this time.



Yet Another Senior MySpace Exec Bails: SVP Tish Whitcraft Joins Tagged

Posted: 03 Apr 2011 08:01 PM PDT

“Tish Whitcraft recently joined MySpace as SVP of Customer Care responsible for delivering a world-class user experience to the 250 million + MySpace users,” the company said in mid 2008 when Whitcraft, a seasoned big company executive, joined the team. Now, three years later Whitcraft joins countless other MySpace execs, and about 190 million of those 250 million users, and leaves.

She’s joining Tagged, a social network that has somehow survived, and even thrived, in a Facebook world. Her first day at Tagged as Chief Customer Officer is on Monday morning.

Part of her job will be what CEO Greg Tseng is calling “onshoring” of a bunch of customer service jobs. Fifty customer service reps working with Tagged in India as contractors will be let go, and the company will be replacing them with new full time employee hires in San Francisco.

Tagged, with more than 100 million users, is on track to meet their $50 million revenue goal this calendar year, and are currently at a $40 million run rate, says Tseng. They have 65 full time employees, and will be at 100 by year end (not including the new customer service reps).



Amazon, Music, And A Sunny Forecast For The Cloud

Posted: 03 Apr 2011 12:30 PM PDT

Editor’s note: Guest author David Porter is the CEO and founder of 8tracks, the handcrafted internet radio network.

Last week, Amazon launched its Cloud Drive, with an emphasis on music storage.  While there have been a number of "jukebox" services these last 10 years (Napster 2.0, MusicNow, Virgin Digital, Yahoo Music Unlimited, MTV Urge, MOG, Spotify, Thumbplay, Rdio), relatively few "locker" offerings have emerged—although rumors of new locker services from Apple and Google sound promising.  Last week, Amazon leapt ahead of both rivals in launching Cloud Drive, a service that allows you to stream, for free, any songs purchased from Amazon.  

It also allows you to upload up to 5GB from your existing music collection for free storage and streaming; if you pay an additional $1 (or more) per year, you get an incremental 1GB (or more) of storage.  Amazon has not (yet, at least) negotiated direct licenses with content owners for Cloud Drive.

While it is creating quite a stir, remember that music in the cloud isn't new.  Jim Griffin envisioned the "heavenly" jukebox more than a decade ago, and Listen.com executed a subscription-based version of the concept in the form of Rhapsody in 2001. During the same period, myplay and My.MP3.com introduced the music locker, another vision for music in the cloud but populated with a user's existing music collection, without the subscription fee. Offering cloud-based access to your music collection obviously extends its value, making it available from another computer or a mobile device, and ensuring you don't lose it if your hard drive crashes.  

For Amazon, it makes sense to pursue a locker service: they've perfected cloud-based content storage and delivery for thousands of web-based startups with Amazon Web Services (AWS). Amazon Web Services (AWS) already provides hosting and data transfer.  What's interesting, however, is that the consumer-facing Cloud Drive is actually cheaper than its existing business-facing offering.  While Cloud Drive charges only $1 per GB per year (beyond the free allotment), AWS charges $1.08 per GB per year for storage alone.  If each song in a person's uploaded collection were streamed once per month, on average, AWS would require an additional $1.20 per GB per year for data transfer (or roughly $2.28 per GB in total).

Since Cloud Drive could well generate less than half the revenues as AWS for the same offering, it seems Amazon is offering the storage as a loss leader to gain digital music market share. Amazon undoubtedly hopes to wrestle away some market share from Apple's iTunes, particularly in view of the growing base of Android users not yet served by a Google download store.  Its bold "first move" without licensing deals from the music labels could complicate and delay negotiations at Apple and Google.  Early adopters of Cloud Drive—especially Android users—might then consider the switching costs and choose to stick around even once Google and Apple launch their own competing services.

In addition, while I'm personally bearish on the mainstream prospects for the subscription-based, on-demand model, it's also worth noting that a music locker may provide a more logical transition from the a la carte world of ripped CDs, iTunes, and Amazon’s MP3 store to the celestial jukebox of Rhapsody and Spotify.  At some point, it will make more sense for hardcore locker user to switch to unlimited music subscription services. For instance, a Rdio subscription costs $60 a year, which is the same as keeping 65 GB of music on Cloud Drive (5GB for free + 60GB at $1 per GB per year).

But will Amazon get away with offering Cloud Drive without a license?  I think there's a good chance it will.  While there's no doubt some grey areas are not yet adjudicated, it appears the labels can live with (i.e. won't sue) a service that allows people to upload music from their own collections, provided there's a unique copy of each track stored and no related features that make it easy to infringe.  My.MP3.com was sued and lost because it allowed users to "beam" CDs in their computer hard drive, providing access to the "bits" ripped from CDs purchased by MP3.com (rather than the user's CDs).  This feature also made it easy to replicate a friend's CD collection in the cloud.  In contrast, the plain-vanilla locker service of myplay was never sued.

Likewise, the current suit against MP3tunes, another music locker service founded by Michael Robertson, focuses on a user's ability to "sideload" music they don’t own from around the web, plus the use of a single copy for each track streamed. However, so far, mspot and Amazon—not to mention myriad other services like Google and Dropbox that have broader storage purposes but are often used for hosting music—haven't been sued.

Although, the industry has been experimenting with different models for online music services for a decade, I am hopeful that the entry of Amazon, and soon Apple and Google, will finally bring music to the cloud in a meaningful way.



Email Breach At Email Marketer Epsilon Affects TiVo, Citi, Marriott And More

Posted: 03 Apr 2011 11:53 AM PDT

BIG BROTHER WANTS TO READ YOUR EMAILphoto © 2006 Gene Tew | more info (via: Wylio)In case you haven’t already received the ominous sounding email, data held by email marketing firm Epsilon was compromised earlier this week  – the hack apparently executed by one person.

The breach, which keeps broadening in scope as more companies inform their customers, has thus far affected these top brands: TiVo, Walgreens, US Bank, Disney, JPMorgan Chase, Capital One, Citi, Home Shopping Network, McKinsey & Company, Ritz-Carlton Rewards, Marriott Rewards, New York & Company, Brookstone, and The College Board.

The notification emails each brand has been sending their customers is some version of the below.

We have been informed by Epsilon, the vendor that sends email to you on our behalf, that your e-mail address may have been exposed by unauthorized entry into their system.

Epsilon has assured us that the only information that may have been obtained was your first and last name and e-mail address. REST ASSURED THAT THIS VENDOR DID NOT HAVE ACCESS TO OTHER MORE SENSITIVE INFORMATION SUCH AS SOCIAL SECURITY NUMBER OR CREDIT CARD DATA.

Please note, it is possible you may receive spam e-mail messages as a result. We want to urge you to be cautious when opening links or attachments from unknown third parties.

In keeping with standard security practices, the College Board will never ask you to provide or confirm any information, including credit card numbers, unless you are on a secure College Board site.

Epsilon has reported this incident to, and is working with, the appropriate authorities.

We regret this has taken place and apologize for any inconvenience this may have caused you. We take your privacy very seriously, and we will continue to work diligently to protect your personal information.

Sincerely,

The College Board

Epsilon is assuring its customers that “only” email addresses and customer names were revealed in the breach but that’s actually not so reassuring. The ability to target spam emails to specific people leaves those affected by the attacks more vulnerable to phishing scams. People are more likely to trust something that looks like legitimate, direct communication. Again: Put on your thinking cap before you give anyone sensitive information like a password or social security number online.

The world’s largest email marketing service, Epsilon sends 40 billion emails a year and manages the customer email database for 2,500 clients according to Security Week. It is currently investigating the incident according to its own announcement.



AT&T Buying T-Mobile Won’t Matter. In Mobile Communications, Innovation Is Elsewhere.

Posted: 03 Apr 2011 11:30 AM PDT

Editor’s note: The following guest post is written by Joe Sipher, co-founder of Pinger, which makes the popular Textfree app.

So AT&T wants to buy T-Mobile and some are screaming it will reduce competition and hurt the consumer. Sprint is now going to court to try and stop the merger. I am in the mobile communications industry and, to be honest, I couldn't care less. This isn't going to affect the companies pushing the real growth and innovation and it's not going to affect the consumer. The consumer has plenty of options that have nothing to do with carriers and that list is growing daily.

For the legal fees it will take for these two giants to merge, ten new startups could be funded. The companies creating new business models for mobile communications are iterating out of sight of the big carriers, away from calling plans, contracts and traditional views of how people communicate. The Internet and the emergence of a robust mobile application layer have changed things forever.

Over-the-top services that provide calling, texting and other communication options over the wireless data channel are getting to carrier size in less than two years. For instance, my company, Pinger, now moves over a billion text messages every month and millions of minutes of voice calls. And we are only a fraction the size of Skype. There are many more companies like ours out there too. Increasingly, users pay nothing for calls because these new over-the-top services apply internet monetization methodologies to communication services. Advertising based communication services mean no contracts, no calling plans, no overage fees.

Before you say the newly extra gigantic evil carriers will shut down these over-the-top (OTT) services using their monopoly powers, let me say that the carriers are getting bigger, not dumber. Mobile operators make money with nearly every text, call, and tweet coming to their subscribers from OTT networks. These services are good for the operators because they help them sell phones and data plans. Allow me to use a couple examples from Pinger, because that is what I know. If you have a $19.99 unlimited text plan from Pinger and send 1000 texts per month, you pay $0.02 per text. Do the math: $0.02 x 1 billion is $20 million a month for the carriers on texting from our service alone. Not bad. The carrier appreciate that revenue.

In fact, new app-based communications services are helping carriers discover new revenue because most of the traffic coming to their networks from over-the-top services isn't even coming from phones. In fact, 80 percent of our voice traffic comes from connected devices like iPod touch, iPad, and even desktop computers.

But here’s the real truth: an entire generation isn't getting their first mobile number from services like ours. They aren't even making their first call from a phone! Because communication is simply an app, as kids grow, these apps will just work on their new device whether it's on the web, an iPad, an iPod touch, an iPhone or an Android device. Kids love Facebook, Twitter, Skype and all of these new communications apps because they offer better communication alternatives and the price is right. The thought of signing a contract just to communicate is going to be about as foreign to these kids as paying for cable TV!

The real story here is that the consumer has more options than ever, and the bigger the traditional operators get, the more their scale interferes with their ability to innovate.

Will there be sufficient competition in the marketplace if these two cell carriers connect? Plenty.



Gillmor Gang 4.03.11 (TCTV)

Posted: 03 Apr 2011 10:00 AM PDT

The Gillmor Gang — Robert Scoble, Kevin Marks, John Taschek, and Steve Gillmor — plus an active set of realtime commenters on Building 43′s realtime Friendfeed chat, added up to an interesting tour of the emerging AirPlay platform. The Apple TV-delivered streaming service hooks content from iTunes and iOS devices up to the big HDTV screen. According to @Scobleizer AirPlay support is growing from other similar services including Hulu et al via something called Sqrrl. With Google TV ineffectual in delivering content from major studios so far, Apple TV’s low price keeps getting lower as new services are integrated.

In cartel news, Time Warner continues to put pressure on the studios to treat the tablet as a first class citizen. The cable company did pull back from a few networks, most notably Comedy Central and DIscovery. Apparently the Viacom suit still has some teeth left in it with YouTube, as @kevinmarks mentions, encouraging transformers like the cable companies to be careful how they approach the home set. The studios have one more shot with those of us who’ve finally finished the MadMen season 4; creator Matthew Weiner has finally signed a deal to produce at least two and preferably 3 final seasons. Season 5 will return in March, 2012, leaving a whole year to get bored with and abandon network fare. There’s a new sheriff in town as the disruption known as the iPad continues to move through the media.



Facebook Comments Epitomizes Everything I Hate About Facebook

Posted: 03 Apr 2011 09:30 AM PDT

So it’s been a month now since we introduced Facebook Comments round these parts, time enough to have given it some serious consideration. And my conclusions are as follows:

…are you kidding me? This is the best a $75 billion company could come up with? Isn’t Facebook supposed to be the new home of software’s best and brightest? Is this some kind of elaborate practical joke?

The whole point of a comment is to make new information or a new opinion available. Good luck with that. As far as I can tell you cannot deep link to Facebook comments, and searching through them is at best a pain and can verge on outright impossible. A memorable comment on my last post included the phrase “I’ve been inside the sarcophagus at Chernobyl”: when I mentioned this on my Twitter feed, I was deluged by “couldn’t-find-it” replies, because it takes three clicks to reveal that sentence… and there is no way to make that comment more visible.

You can’t even sort comments by date – in case, say, you’ve gone back to a previously viewed post, and you want to see what’s new. Facebook’s Simon Cross patronizingly explains why (scroll down – I’d link directly to his comment, except, oh, that’s right, I can’t):

“The plugin automatically sorts the comments based on relevance to the viewing user based on friends, friends of friends and most active posts. We currently feel that a chronological view is not the best view for the viewing user to give them an immediate sense of relevance.”

…which kind of makes me want to burn down his workplace and then salt the charred earth so that nothing ever grows there again. God forbid that they even pay lip service to the notion that users might perhaps be given options—for then they might start to use them, and then where would we be? Sheer anarchy! Far better to reduce everything to a single dumbed-down inescapable standard, relentlessly mediocre and devoid of any color or possibility, like a tapioca straitjacket.

I’ll grudgingly grant that there has been one giant benefit: the army of trolls who used to plague TechCrunch have been reduced to a tiny grunting handful (most of whom log in with fake Yahoo accounts) thanks to Facebook’s insistence on real names. I actually even had mixed emotions about this -


Jon Evans
@ @ Objectively, yes, but I actually kind of miss the trolls. They added unintended hilarity.

- but I can’t deny that the overall level of conversation has gone up a notch as a direct result.

Balanced against that, though, is the single most infuriating and baffling thing about Facebook comments: they only allow a single level of replies. The notion of “a comment which is a reply to another comment” is built into the system—but you cannot reply to a reply. This cripples conversation, for no good reason, and it’s clearly a deliberate design decision: an ugly, clumsy, and completely inexplicable misstep. It’s like Facebook developers are literally incapable of thinking outside of the box that is their feed.

And the worst thing of all? Next time I build a site that requires some kind of commenting system, I might wind up using Facebook Comments.

Yes, despite my hate and loathing. Because as frustratingly mediocre as it is, it is easy to plug in, and it does solve the troll problem, and everyone’s already on Facebook, and it helps to spread links, and it’s just barely good enough and easy enough that it’s not worth wrestling with alternatives. Facebook Comments is basically Facebook writ small: while it’s maddeningly mediocre lowest-common-denominator crap, it’s not quite bad enough not to use.

But just take a moment, please, if you’d be so kind, to scroll down to the bottom of this page, consider the comments section, and reflect on the fact that what you are looking at is the very best product that a $75 billion software company, one famous for allegedly only hiring A-list talent, was able to build. If that doesn’t make you weep for the future just a little bit, then I don’t know what will.

Image credit: Zitona, Flickr.



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