Newspaper industry: RIP

Can it get any worse for the newspaper industry? Once the titans of information discovery, is now an industry that has been brought to its knees. It’s the classic case of an industry that was in denial of an impending wave that was going to make them irrelevant and it’s amazing just how long they had to prepare an alternate strategy to mitigate any collateral damage, yet still made all of the wrong moves.

In a report today, newspaper circulation has fallen an additional 3.5% over the past 6 months, triggering the lowest newspaper circulation since 1946, over 60 years ago. There is no foreseeable end in sight. With the emergence of blogs, and other information sources that can provide us real time breaking information for free, why pay 50 cents a day to get outdated information that is meant for a 5th grader to understand? The reason I read the Techcrunches, Mashables, and the ReadWriteWebs is because I can get so much more relevant content for early adopters, that actually increases my knowledge of the space. The power tail, or long tail of information discovery is endless, and the newspaper space as a whole has done nothing to capitalize on the longstanding power, they once had. Instead they focused on putting ads on the front page of their publication to drive revenues.

The newspaper industry has frequently cited the Craigslists of the Internet space for their downfall, but I fault the Sam Zell’s of America who continue to get it wrong each and every day, using outdated CEO strategies for squeezing out profit.

Even in this day in age, Sam Zell, owner of the Chicago Tribune thinks that he can raise prices for his daily publication, and for articles on their online site that are over 30 days old, he has the nerve to think that he can charge people for getting access to those articles. Are you kidding me? That’s old school, and is exactly why they are getting their rear ends handed to them.

Henry Blodget over at the Alley Insider believes that we are witnessing the beginning of the $42 billion land grab over the newspaper ad revenue that will now shift over to the Internet, after the impending death of the newspaper. Is this the beginning of hyper-local content, finally having a revenue stream to support its operations? I don’t know if it will be a 1 for 1 trade, but I do know that Google will be the recipient of most of that additional revenue as the main gateway for information discovery.

With web applications such as SavvyDoc and new start-ups such as TeachStreet, we are finally ready for hyper-local content and services, and I think the second half of 2008, reaching into the first half of 2009 will emerge as the tipping point.

Controversy over Medical Giveaways

republished from the SavvyDoc blog

The Association of American Medical Colleges (AAMC) recently released a report on Industry Funding of Medical Education which was reported on by the New York Times this weekend. Unexpectedly, this was a very strong report seeking to ban all medical giveaways to medical school faculty, staff and students. Though this report is not a mandate, it is very likely that most if not all of the 129 U.S. medical schools will adopt the task force’s recommendations on how to proceed with medical school and private industry interactions. The report does a good job of realizing the role private industry plays in medical education and they are obviously not looking to prevent pharmaceutical or medical device companies from presenting to the medical school community (though its hard to believe these recommendations would not stifle these interactions). Rather the AAMC is concerned with the perceived conflict of interest when private industry presentations involve paying faculty to present information or presentations are attached to gifts such as free food and/or pens.

It is not a secret that the pharmaceutical and medical device companies spend billions of dollars marketing to doctors. However, unlike traditional marketing (TV and print adds for example) doctors receive free meals, pens (and other office products) as well as some more extravagant gifts. Considering there are slightly less than a million U.S. physicians but billions spent on marketing to them it’s not hard to imagine that some of these giveaways have been, lets just say, a little over-the-top. However, my initial reaction to the AAMC task force report is that it took the easy route by attempting to deal solely with the conflict of interest issues and missed an opportunity to create guidelines that would impact the real crux of the issue which is how private industry should market their products. We have all noted the influx of direct to consumer advertising by drug companies and my concern is that the position of the AAMC will only lead to more drug advertising through mainstream media. I point to the controversy surrounding this common Lipitor commercial featuring Dr. Robert Jarvik:

Pfizer was forced to pull these adds over controversy that they imply that Dr. Robert Jarvik treats patients, where he is actually an inventor and entrepreneur who has developed an artificial heart. This is an example of blurring reality to create effective direct to consumer advertising, and this is not the only example. Viagra adds were pulled in 2004 for implying that Viagra increased libido. When the AAMC limits the marketing of drug products or medical devices to physicians the alternative is to market these products to patients. The Viagra and Lipitor examples may be extreme and in all fairness both are Pfizer drugs. But the impact of 30 and 60 second drug adds that have potentially devastating side effects that are rattled off and barely audible in these commercials seems like something that should be factored into any discussion of how physicians involve themselves in the marketing process. Taking positions that will lead to big pharma diverting marketing budgets from educating physicians about new drugs to creating slick commercials created by Madison Avenue firms will not help the ultimate goal of doctors, helping patients. A more useful report would have laid out guidelines for how private industry and medical schools interact and placed reasonable limits on giveaways to medical faculty, staff and students. I am just concerned that the tone of the report and it’s strong stance makes any and all private industry-physician interactions seem tawdry when in fact they are necessary. Physicians need easy access to new information on drugs and medical devices and private industry need an opportunity to create name recognition for their products. The drug and medical device companies can develop revolutionary products but if no one knows about them they are useless. Private industry understands this and will market their products regardless of reports by the AAMC. As a document to prevent all perceived conflicts of interest the AAMC report hits the mark. But it’s necessary to view these issues with a global focus and the ultimate goal of creating a better health care system, which I’m not convinced this report will do.

What does a Chicago sandwich shop have in common with SavvyDoc?

Republished from the SavvyDoc blog

For those of you in downtown Chicago or have spent time there, there are many Potbelly Sandwich Works located every couple of blocks. For those of you not familiar with this restaurant, it’s a combination of Subway meets Starbucks. For many people, it’s a daily routine for their lunch hour. You can get a toasted sandwich and a pretty good vibe, all for about $5. Amateur musicians play in the background, and the cafe/restaurant is always filled with upbeat, high energy people.

While offering such a unique environment for a reasonable price, they have to have quite a bit of volume to stay in business. Sales per square foot are the name of the game, and Potbelly wins just about every day. Lines can be seen being formed outside of the restaurant, seemingly a huge bottleneck. Potbelly’s has done quite a bit to ensure that the throughput of the restaurant is reasonable, so that everyone keeps coming back during that vital lunch hour, which can make or break a downtown fast-food restaurant in Chicago.

Lately, I have noticed that they have really been promoting their website, where you can place orders, and pick up your food without the wait. Your sandwich will be prepared, so you can eat and run, or take your food back to your office. In promoting this website, they have inserted postcards with orders and have made it highly visible through every step of the order process when you’re in the store, that there is a viable alternative, not aimed at replacing the current way most people grab lunch. They are aiming to target those individuals that value convenience and speed, over long lines. From a business perspective, they improve their throughput and can better anticipate demand through a transparent system.

With SavvyDoc, we aim to do the exact same thing. We don’t aim to replace using the telephone to make doctors appointments, we want to make it easier for those individuals that highly value efficiency and transparency. For us to be successful as a company, we do not need to have 98% of the doctor’s patients utilizing the online tool, it’s a system that can alleviate the bottlenecks so the physician can better anticipate demand. As an industry, by most studies, far less than 10% of the carryout orders are done online, yet it translates into a multi-billion dollar space. For tech savvy individuals, ordering online is a huge plus, which GrubHub capitalizes on.

Their are inherent bottlenecks in making appointments, which is why in our market research, 20-30% of the office staff’s time is spent on patient scheduling. Imagine the impact if 40% of the the appointments were done online. Imagine this power, coupled with decreasing the no-show rate, filling last minute cancellations, and the ability to recruit additional patients to the practice. That’s the goal of SavvyDoc. Some patients will enjoy utilizing SavvyDoc because of the real-time scheduling, but there are still others that may not see the value, but as with online banking, over time, I believe that it will be just as common, at least we at SavvyDoc think so.

Insurance shopping site raises $6.5MM

Republished from SavvyDoc.wordpress.com

With the SavvyDoc blog, we not only want to highlight what we’re doing as a company, we also want to highlight other business, mainly start-ups that have disruptive business models aiming to make the health space better for ordinary people. Today, it was announced that Health Plan One raised $6.5 million Series A funding to build out their health insurance comparison site, led by Pequot Ventures.

Health Plan One is aiming to be the Orbitz or Travelocity of health insurance, that aims to bring transparency to the entire process, as well as ease of use. I think this idea has a great deal of merit because instead of pricing out the three companies that come to your mind when you think of health insurance, their service can streamline that search and compare sites side by side with one search. These comparison sites have really transformed the airline industry, and I expect a couple of sites similar to Health Plan One to pop up furthering innovation and disruption in this space.

How does this relate to SavvyDoc? What we aim to do is provide transparency within the health space, by enabling the consumer to have more choice and make more informed health care decisions. Although I cannot vouch for the accuracy of Health Plan One, from a mission statement and from a thirty thousand foot view, I like the idea.

The Coral Reef of Future Internet Innovation and Disruption

This post was actually inspired by Kristen Nicole’s post entitled Twitter Economy: The Coral Reef of Social Networking. For those of you who believe or understand the theory of The Long Tail or the power law, those that study the Internet, or are in the space have heard the theory that in order to succeed in today’s Internet economy, you have to take a platform approach to providing web services and applications. The marginal cost of an extra unit of software or code approaches $0 and to attain success and ultimately profitability, it requires critical mass. You must cross the chasm as early as soon as possible, and that can only be done through a platform approach.

The latest platform to jump into the fray is Google’s app engine, which enables developers to easily build applications using Google’s infrastructure. To all of the non-hackers out there, one of the major challenges of building web application is dealing with scaling and infrastructure. Eliminating those two issues are an extreme value add, enabling developers and entrepreneurs to solve problems by pushing the limits of innovation.

Amazon Web Services, for the past 18 months has been the developer backbone of choice, because of the ability to provide scalable solutions at optimal prices, which has saved tons of money for start-ups. They use economies of scale to provide storage and cloud services at price points that are far cheaper than server companies. Amazon is preparing themselves to become a web services platform, diversifying itself away from a longtail book, music, and movies Internet retailer.

Amazon doesn’t offer the brevity of services as Google’s app engine, in terms of ease of use for developers from a thirty thousand foot view. But Google’s entrant into this landscape, probably followed by Microsoft’s entrance will make it more beneficial for developers, so they can solve problems and be disrupters.

The challenge that it does present, as O’Reilly questions is the developer platform lock-in. It would probably take an inordinate amount of time to port over code from the Google app engine over to an Amazon Web Service. It’s absolutely about creating switching costs, and since developers drive the next Internet, any of the major bigcos (Google, Yahoo, Amazon, MSN) would be silly to allow one of the other bigcos to waltz in and easily become the market leader. Despite all of the early adopters believing GMail is the best thing every created, Yahoo Mail is far and away the market leader, all because of first mover advantage and switching costs. Amazon had to know that Google and Microsoft won’t sit idle and allow this to happen in front of their faces.

I’m thrilled to see the competiton and see how this evolves, but as Kristen Nicole states that the Twitter economy is the coral reef of social networking, the Google App Engine and Amazon Web Services will take us away from the digestion phase, and into the next phase of the Internet. Although many believe that Facebook’s applications will be the social media platform of the future, I think the bigcos will be the one to deliver on that promise.

Internet Start-ups Do Need A New Path to Liquidity

Fred Wilson recently wrote a highly popular blog post, highlighting the need for an alternative market for venture backed start-ups, as an opportunity to opt for a liquidity event, benefiting the early stage investors and the founding team. In the late 90s, the liquidity event of choice was an IPO, or get acquired by strategic investors. Nowadays, Fred argues, if you don’t get acquired by Google, Microsoft, or Yahoo, there are very limited venues to maximize the value created by these Internet start-ups, and those that were acquired never materialize to the disruptive force that they were initially acquired for. He cited examples of start-ups that were left for dead after being acquired such as Delicious, Dodgeball, Jaiku, and Feedburner. In a video on Yahoo Tech Ticker, Fred argues that creating a private market for pre-public companies would better utilize the mid to later-staged VC firms, that are flush with cash, and have minimal opportunities to invest their capital. By exiting those companies from the early staged VC firms, the founding teams would have an opportunity to cash out some of their shares and diversify, yet stay on with the companies they founded and create additional value from their ventures.

I agree with Fred on many levels, but with the creation of new markets, it increases the opportunity for regulatory involvement, and with the current credit crisis the financial markets are undertaking, it would take quite a bit of time for this idea to gain any traction. I think it would send off a great deal of red flags.

Some of the pros and cons to Fred’s theory from my perspective are:

Pros

A new path to liquidity means that it will increase innovation and investment in early stage/seed start-ups. VCs will be encouraged to invest in ideas, which would bode well for entrepreneurs, especially those without the connections and money. A young start-up in Chicago wouldn’t have to waste valuable time hunting down a few dollars to get the business off the ground, instead, they would focus on solving problems, creating value, and expanding their business. Additionally, the founders would have confidence that their companies could have liquidity options, that are founder friendly, similar to some VC firms such as the Founders Fund, which have “FF shares” that enable the entrepreneurs to cash out some of the money, so they can diversify and maybe buy a house, rather than living in the basement of their mother’s apartment (jokingly).

Cons

The major con that I can see from this new market is that as with the late 90s, you’ll see a flurry of venture capital thrown into powerpoint presentations, and will encourage everyone and their grandmother to start an Internet company, thus facilitating vaporware, and is not sustainable long-term. And based on our US financial system hanging in the balance, government may have something to say about this, despite the fact that the PE/VC market is highly unregulated in many ways because they are considered sophisticated, accredited investors.

Finally

All in all, I think this is a net positive, because, although I am highly biased, these small companies are tackling major problems, and we need forces to encourage innovation, enable entrepreneurs to focus on solving problems, and give them opportunities to cash out some of the shares so they can feed their families. All too often, these start-ups are gobbled up by the big guys and are unable to create value, because they are not integrated into the framework of the acquiring company. This is Pareto sub-optimal and the creation of the market that Fred speaks about, is necessary to prevent the influx of me-too start-ups that are not aiming to be disruptive because it’s much easier getting funding for another video sharing site.

Internet Review Sites Are Broken

Today, in Techcrunch, the over hyped widget maker Slide has been caught doing the ultimate no-no, their employees were making overly positive remarks in the application reviews section of Facebook applications. There was no disclosure, they made fake accounts to hide their identity, and they have compromised the integrity of one of the major tenants of Web 2.0. But do you blame them? The old cliche, don’t believe everything you read in the newspaper should be upgraded to don’t believe anything you read on the Web, even from so-called experts. I don’t, because we have a broken system, that is way too idealistic, with too much at stake. If I had to name the number of review sites on the web, ranging from Viewpoints, Yelp, Menuism (my personal favorite), the now defunct Judys Book, Insider Pages, product blogs, and the list goes on and on, you’ll see that product recommendations can be huge business for the site that gets it right by providing unbiased reviews so that when we do our Google searches, we can make more informed decisions.

The problem lies in the inherent transparency of review sites. Anyone can post a review, at any time, and in all honesty, it’s too hard to figure out how credible the reviewer is. With Viewpoints and Menuism, their differentiating factor is that they want their reviewers to post information about who they are as people, so that I can see that a soccer mom from the suburbs of Chicago and I have far different tastes and I shouldn’t expect for her review to be as valuable to me. Other sites such as Disqus and SezWho aim to filter the noise on blogs, by enabling the commenting history within the comments thread of blogs to be transparent and visible, so that you hope to tell the difference between a commentator who signed up anonymously to promote their product that has just been reviewed on Mashable, ReadWriteWeb, Techcrunch, or Venturebeat from having their ten marketing and PR teams state how much they love their web application in the comments thread.

The problem with review sites are that they:

Epitomizes the chicken and the egg problem

Unless you have at least 10 reviews, are you going to trust a product review site with two reviews? To me, review sites only become important once you have significant content. But, on the other hand, too many reviews, and I get lost.

Minimal incentive for people to contribute

I have viewed comments on review sites thousands of times, but I have yet to contribute. Why? Because I’m a free-rider who doesn’t get anything out of signing up, distributing my e-mail address, and having another password to remember.

You rarely get a balanced view, either the commentators love or hate the product. I’d prefer the middle-ground

To me, human nature implies that we will articulate our opinions when we feel strongly one way or another. I don’t tell my mom about how cool my phone is unless I really like it, or if it drives me insane. With minimal incentive to just offer this information up, I feel even less inclined to offer this information on the Web without wanting to slam or feverishly promote the company or product.

I wish I could only read comments from my friends

In all honesty, the only people that I’d actually trust in reading or hearing about new products or services are from my friends and family. At least I know of their conflicts of interest and they’ll be honest with me. With the social graph, shouldn’t Facebook, distributed social networks and widgets already accomplish this? It would except that promoting products and services really isn’t that cool, and for the above reasons, most folks aren’t going to offer it up unless they feel strongly about it or have some incentive. An interesting but pointless study was released stating that people trust their friends more than bloggers for product reviews, so why don’t we have a distributed review system that leverages my social graph? Data portability would be one major step, but as much as it is discussed in the echo chamber, I don’t see it coming to fruition anytime soon.

Disclosure: The guys at Menuism are super cool and are good friends of mine, but if I hadn’t mentioned that, would anyone be able to tell? Highly doubtful, and that’s exactly my point on why the review system is broken.

Techcrunch vs. DemoFall: Round 2, Fight! Is it bad for entrepreneurs though?

I, like many future entrepreneurs out there cherish any and all opportunities that can come about to showcase your product in front of anyone that’s willing to listen. That’s why when annual conferences such as Demo, Web 2.0 expo, and now the Techrunch40(or 50) come along, you always contemplate whether your company will be or should be ready to present in front of thousands of people present at the event, and with the advent of livestreaming with tools such as Stickam, Mogulus, and uStream, there can feasibly be tens of thousands of people watching live streaming of your presentation. Seems like an entrepreneur’s dream come true. VCs? Check. Journalists? Check. Tech bloggers? Check. What more can you want?

This fall’s event is quite different with another layer that many people will pick up very soon. DemoFall and the Techcrunch 50 overlap. DemoFall is September 7-9th and the Techcrunch 50 event is September 8-10th. Big conflict, major conflict…..tech battle. Here’s the tale of the tape: for DemoFall, it can cost up to 18k to present if you are an interested start-up who wants significant exposure. You bet the NPV on that can be substantially positive if you have a cool product. On the Techcrunch side, it’s FREE for entrepreneurs to present, a destabilizing business model for the former Kings of start-up launch conferences. Michael Arrington has expressed his disdain for the Demo conference, and I am not going to take sides on which conference is better for an entrepreneur, but I do know there are some interesting take aways for entrepreneurs.

Your business model needs to be flexible, with secondary business models ready to deploy at any sign of competition

Techcrunch is free for entrepreneurs to present, Demo costs 16-18k. Techcrunch has chosen to price tickets for regular admission at less than $2k until July 15th ($2,995 thereafter), whereas Demo costs $2,999 for regular admission. It will be interesting to see how Demo’s business model changes, or if it will change at all. My guess that it will change very soon, at least for the next conference.

Although it is obvious, building a brand is so essential for fending off competitors

Techcrunch has one of the most recognizable brand equity in Web 2.0 technology start-up space and they have done a tremendous job staying on top, in midst of great competitors in their space with Mashable, ReadWriteWeb, and Venturebeat. Techcrunch is no stranger to controversy, which helps it stay at the top of the echo chamber, tech discourse, and the mainstream press. Arrington is also no stranger to stating that he wouldn’t mind kicking Demo off their pedastal as the start-up launch conference. He has the networks to launch a conference with A-list attendees, that will wow the people not in the in-crowd. They can announce that they have some of the top VC firms including Sequoia as their main sponsors. Although the Demo conference is twice a year, it confines them to the Web conference space, which may be a competitive disadvantage to a media company, who interacts with their community 10-15 times a day through the Techcrunch blog. It will be interesting to see how in the near future, what things Demo could do to ensure they are talked about many times a year, rather than the two isolated conferences.

Free seems like the only business model these days

Chris Anderson, the author of the often quoted book, The Long Tail, has a new book coming out called Free, and although I have not read it, in some of the interviews he’s done, he states that the future of business is offering a great deal for free, and earning marginal revenue for other items associated with the free one. One example that I can think of is that musical artists should offer their music for free, and concentrate on generating economic rents through concerts, t-shirts, autographs, etc. I’m not saying that I all the way agree with that MO, but it seems like the basis of his argument. When you’re the King, you can charge monopolistic rents to an extent, but in Econ 101, the more people that enter your space directly competing against you, your total revenue will decrease, unless you find another way to earn more money.

Finally

Although there are a hundred other take aways that I could point out, there’s one question that I have. Actually, I have several questions. Is this bad for entrepreneurs? The point of these conferences are supposed to be focused on the start-ups and celebrating innovation. Are we to expect half of the innovation to opt for the Demo Conference and the other half for the Techcrunch50? Are the reporters, VCs, and bloggers going to split their allegiance? With the Demo conference having up to 70 presenters and the Techcrunch 50 having 50, are we going to see a dilution of what makes us excited about Web 2 dot 0? If we see poorly executed digg clones, is it going to seem like Web 2.0 has peaked? Is the conversation going to shift from celebrating the new trends to a battle of words for Techcrunch versus Demo? Or on the other hand, is this going to force the CEOs of these events to provide more value to all participants involved? Who knows! We’ll have to see in early September.

Like I said earlier, I think both conferences are great events, and they both have their merits because the attention that it brings to the space, but I must say that it’ll be a sad day if the competition doesn’t bring out the great things that Web 2.0 has to offer, and encourages continued investment in the space.

By the way, this is my first blog post, and plenty of nasal gazing to continue from here on out.