Today on This Week in Startups, news panelists Brian Kennish of Disconnect.me and Jay Levy of Zelkova VC shared their thoughts on the new iPhone, Twitter’s apps update, Zynga’s executive departures and more.
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Jason: Hey, everybody. Hey, everybody. It’s ThisWeekIn Startups. It’s our News Roundtable. We’ve got an amazing program, for you. The iPhone 5 is out. I have it, right here. We’re going to discuss it. Also, Twitter, is locking down their service like, it’s Fort Knox, and kicking out all the API developers. iOS 6 Maps, from Apple, is a complete, utter embarrassment. Yahoo, has their money, from Ali Baba, but, it’s going to shareholders. Marissa, has very little to spend. Zynga executives are departing, like crazy. We’re going to talk about all these issues and more, right now. On, ThisWeekIn Startups. Stick with us.
TWiST title sequence.
Jason: Hey, everybody. Hey, everybody. Welcome, to ThisWeekIn Startups. The program, where, we talk about startup companies, technology, entrepreneurship, all that great stuff. It’s going to be a very exciting program. We’ve got some great folks, with us. Brian Kennish, of Disconnect. Really, a security and internet expert. Jay Levy, fro Zelkova, the venture capital firm. A great entrepreneur and a great venture capitalist, is going to be on the program. Kirin Kalia, of course, from the Launch Ticker. Which, is surging. People tell me, it’s the most brilliant product, I’ve ever, conceived of. It’s pretty amazing. People are responding to this Launch Ticker.
Kirin: They love it. They love it.
Jason: Why is it?
Kirin: It’s, just, so efficient.
Jason: Ah. That’s what it is. The efficiency.
Kirin: It’s so efficient and they like your comments.
Jason: They like the comments. That’s true. We worked together at Silicon Alley Reporter.
Jason: We’ve worked, together, across two of my four companies. In your estimation, is it the most brilliant product, I’ve ever created?
Kirin: Considering, the time and the place, of where we are, with the way journalism is, I think so.
Jason: It’s like a pretty interesting thing. It’s like, this is what entrepreneurship is about. You keep trying. You keep figuring things out.
Kirin: Oh yeah. We tried a lot of things in the last year, with the Launch editorial product.
Jason: Blog and stuff, like that, using SquareSpace, of course. A great product. It really is that people… It was very interesting how we came to it. Which is, Gabe Rivera, wouldn’t link… from Techmeme. He was sort of a friend of mine. We’re friendly, I guess. Maybe not now, cause I dissed him publicly. He wouldn’t list all these great profiles of companies we were doing.
Kirin: I know. I was writing those profiles.
Jason: It’s very frustrating.
Jason: I called him out, on it. I tried to talk to him, about it. He told me, “Profiles are not interesting, for Techmeme. You need to have a salacious headline.” He, literally, told me, “It has to be, more, salacious, more buzzy. In order to be on Techmeme.” I said, “You know what? Techmeme, is turning into this house of mirrors. It’s not efficient, for me.” That’s when we sort of had this discussion: What would be more efficient, than Techmeme? We said, “If you look at all the stories, as they’re being tipped to Techmeme, what Techmeme’s covering, what’s on HackerNews, and all these other places. You just summarize it, as quick as possible. Would that be an interesting product?
Kirin: It is.
Jason: It is. What is the monthly donation up to, now?
Kirin: It’s getting close to $1,200.
Jason: Wow. It broke $1,000. In what, 30, 45 days, of asking for donations?
Kirin: Yeah. We started end of July, asking for money.
Jason: Great. Very interesting. Now, we have about 3,000 people, on the…
Kirin: About 3,700.
Jason: Wow. Right now, it’s just, LaunchTicker.com. If, you go to slash live, it dumps you into a Google doc. Where, you can see, myself, Kevin, and one of our researchers, just talking about all the stuff that’s going on, on the internet. It’s become, a very efficient product. If, you want to go check it out and give me feedback, give Kirin feedback, go to LaunchTicker.com/live or LaunchTicker.com. You’ll see all the information there. Go, check it out. It’s worth checking out. If, you have tips, firstname.lastname@example.org?
Kirin: Yep. That works.
Jason: Or, any of those. Great. Hey. Let me tell you about, SquareSpace. SquareSpace, is the software we use, to publish on the web. It’s amazing. We’ve used it, for the Launch Festival and the Launch Blog. It’s, incredibly, to use software that works on mobile. It works with HTML5 and CSS. It’s just gorgeous. You hear, myself, and some other folks, who use the product, just rave about it. I’ve heard, Leo Laporte. I’ve heard, Kevin Rose. All people, I respect and know, in the industry, use this product. Why do they use it? Because, it makes gorgeous websites. Let’s take a look at these two. Here’s, the Van Brunt Stillhouse. An artisanal distillery, in Brooklyn. That’s a gorgeous website. Everybody, would say, “Wow. That’s a good-looking website.” They don’t have to hire tons of designers and spend tens of thousands of dollars, to do this. They can use the beautiful templates, that come with SquareSpace, and make a gorgeous-looking website, like this. You say, “Wow. That’s great. What about mobile? How do I get it on an iPad?” You go to a restaurant website, these days… or a brewery, or whatever, it is… and, you look at their mobile website, on your iPhone or your iPad, you’re like, “Oh, my God. These people don’t even have a mobile website.” Well, here you go. If, you make the website, gorgeous… here, it is, on my iPad. If, I flip it, of course, it flips beautifully. You can flip around. Look, at this gorgeous navigation. This is stuff that would be, previously, only available to the rich, affluent internet companies, that had a huge staff, to do these kind of fun things. But, you know what? Now, thanks, to SquareSpace, it’s available to everybody. Here’s another, good-looking one. This, is a photographer, named, George Karamanis. I don’t know him, but, it sounds like he’s greek. He’s, obviously, very talented. I’m looking at these gorgeous pictures. I flip my iPad, it worked, perfectly. Now, I can flip to the side. Gorgeous stuff. If, you look, here, on the web, absolutely gorgeous stuff. Just, zip around. Experience the gorgeousness of SquareSpace. Trust me. You’re going to love it. With SquareSpace 6, which, is what we’re showing, every site automatically has these resized mobile versions. That’s critical because internet traffic has quickly become 40-50% of the traffic, on the internet. That didn’t even exist just 4 or 5 years ago. You know, it’s interesting. People, in Europe, were laughing at us. Nokia and all these other companies, in Europe, were like, “The US is so far behind Europe, on mobile.” I used to go to Le Web or other places. Everybody would be ribbing americans. How far we’re behind. Oh. We’re behind? What? Hello. Oh, I’m sorry. Nokia what? iOS- crushing success. Android- crushing success. America, is back. USA. USA. Everybody start chanting it. We win, again. United States innovation took over the mobile market. You know what? We did it, right. Traffic is flowing to these mobile websites. We’re crushing it. iOS… I don’t mean to be all nationalistic or something like that. It does say something about the american entrepreneur system. That we can be a absolute bit player in the mobile space. Then take it over in 5 short years. Nokia, we crushed you guys. No offense. I know you lived in Europe for a long time.
Kirin: I have no loyalty to the Fins. It’s alright.
Jason: Ha, ha, Nokia, for failing. The United States wins again. Blah, blah, blah. Bottom line: mobile is where it’s at. You need SquareSpace to catch up. Go to SquareSpace.com/TWiST. Try it out, for free, for two weeks. No credit card required. That’s when you know you’ve got a confident company. free. when you do end your trial… trials do come to an end… hen you do decide to convert, use TWIST9. It’s very important. When you first start off the trial they don’t ask you for a code. They just want to make it easy. When, you then decide to check out and convert from the trial, it will ask you, “Do you have an offer code?”, below pricing. Enter the code: TWiST9. You’ll get 20% off a yearly or bi-yearly plan. That’s critical. These guys provide the best customer support, in the world, 24/7. These are beautiful, professional sites, as you know. Make sure, after the trials over, to use the code: TWiST9. Go, to SquareSpace.com/twist for your two-week, no credit card required trial. Really. Great team, over there. Great products. Today, on the program, Brian Kennish, is here. How are you doing, Brian?
Brian: I’m good. How are you, Jason?
Jason: I am well. How’s everything going, at Disconnect?
Brian: Stuff’s going great. We’re up to 800,000 active users, now. Which, is incredible.
Jason: Wow. Describe the product, for people, as it stands today.
Brian: We build tools to help users understand and control their personal data online.
Jason: Ah. In english. How does it manifest itself in a product?
Brian: We stop all the tracking, that, manifests itself from advertising and analytic services, across the web. There’s thousands of sites and services that otherwise track you as you browse and surf the web.
Jason: Yeah. You can get it, in the form of a Chrome extension. Correct?
Brian: Chrome, Firefox, and, Safari.
Jason: I have this. It’s pretty amazing. When you have this installed you see, exactly, how many… Facebook, Google, LinkedIn, Twitter, and, Yahoo cookies are tracking you. It’s unbelievable, huh?
Brian: Yeah. The state of the art of tracking has definitely blown up, in the last few years.
Jason: It doesn’t seem to be slowing down, does it? They’ve been collecting more and more information. You’ve been quoted widely in the Wall Street Journal amongst other publications. Finding out about all this secret tracking they’re doing. There’s been a lot of people sort of in the grey area, bending rules saying they’re not tracking but actually tracking. What’s the state of that today?
Brian: My background is in Ad tech. I worked at DoubleClick almost 10 years ago now. People used to click on ads but they don’t really anymore. We’ve evolved into doing all this behavioral tracking as a way to get users to actually click on these things. It’s become more and more desperate of a game to find out more information to get users to click. It’s not really a good state of affairs for users these days.
Jason: Really it’s the ‘Like’ button and the ‘Google+1′ button and the ‘retweet this’ button. Those are a front for collecting private information. Correct?
Brian: Well possibly. I think we talked about it on the show before. Facebook came out with this patent that they are using the ‘Like’ button to collect all of your browsing history and then going to spin that into behavioral targeted ads. So there’s definitely this idea out there that this data could be used for that stuff.
Jason: Yeah. It’s pretty clear. You are just a great entrepreneur working in that area at the edge. Full disclosure I think I’m an investor in your company and an advisor. Right?
Jason: It’s going well. I’m very proud of the work you guys are doing. You guys have more stuff coming out I know.
Brian: Yeah. We’ve got some cool stuff in the pipeline. That we’re really excited about.
Jason: But you can’t talk about yet.
Brian: Not yet.
Jason: Jay Levy is here from Zelkova Venture Capital. How are doing Jay?
Jay: I’m doing good. Thanks for having me.
Jason: How is the investment portfolio doing over there? You guys got a couple of big wins. I believe your biggest win would be…?
Jay: The one that’s getting the most attention right now in growth is Fab.com.
Jason: Oh yes.
Jay: We’re pretty excited about that overall.
Jason: I’m going to guess you guys invested in that probably in the $10M, $20M round valuation. It’s gone to $1B valuation. That’s probably 50X for you guys. You don’t have to confirm or not. But you could. What do you think Jay, 50X? I’ve shocked him. He’s frozen. He’s frozen there thinking, “God Jason why do you have to do that on the air?” I think we’ve got a little technical difficulty there. We’ll get that connection reset. Let’s go to the first story. What’s the first story?
Kirin: The first story. Twitter as you know updated its iPad app this week. Everybody of course rushes to go download it and they find out, “Wow. I can’t easily click from the timeline anymore. The really cool panels that they came out with, the Lauren Richter design, is all gone.” A lot of people started saying, “This is actually crap. Why did they do this?” The whole idea of course is to unify your experience. It looks a lot like the iPhone app now. I guess the question is, Do the negative reviews matter? How long before Twitter’s going to force third-party apps like Tweetbot to shut down?
Jason: It’s pretty interesting. Twitter is locking the system down. They also turned off access for a very loved and emerging product: If This Then That.
Kirin: IFTT. Yeah.
Jason: What’s it called, IFTTT?
Jason: It’s just referred to as IFTTT?
Jason: How would you find IFTTT on the web? Is it IF…
Jason: This was a really cool product. You basically would say on IFTTT, “If I get a tweet from this person then email me. If I get an email from this person then SMS me.” Whatever.
Jason: Why would… I don’t understand what Twitter is doing to themselves right now. They’re locking down their platform which was built off the backs of the innovation of all these developers. Now other people are desperately trying to get developers to build for their platform. Twitter is doing the opposite. It is a maddening strategy.
Kirin: Dick Costolo was on Charlie Rose and…
Jason: Saying that they are an API company.
Kirin: Well they want to have a true platform. He wants it to be how Amazon integrates its third-party vendors. You create value by being part of the network. You’re not supposed to actually make it feel different. I don’t know.
Jason: Yeah. A lot of this goes to look and feel. I think there’s a lot of Facebook envy. Where with Facebook you had to use the API, you had to use certain boxes. Now they’re sort of reining everything in. But I have to say this is incredibly poorly executed. It’s just a bit of a PR disaster. What they’re doing is driving people to App.net obviously. That’s a really interesting project. Those people are having… I just got invited to a developer meetup. All these developers who want to play with the social stream are now going to App.net. I think it’s going to create… a new class of is coming out that will be API guaranteed forever. You know it’s almost like a Bill of Rights. Twitter needs a user Bill of Rights. I’m a little peeved as a power user on Twitter that this is happening. I feel that I have invested a lot in Twitter over 6 or 7 years. I’ve got all these followers. Now innovation is going away. I feel like I don’t own my history, my timeline. Now they’re charging people to get access to the history.
Kirin: You have how many thousands of Tweets? Over 30,000 right?
Jason: Over 30,000 right. I don’t even have access to them. I have to buy access to them from another person. They can’t provide it to me but it’s available for pay. It feels like Twitter is jumping the shark now. I think they need to be careful. I think they need to do some things to rebuild trust. After they’ve locked down as much as they feel they need to then they need to rebuild bridges. I don’t know if that’s possible or not. I’m basically using this new app called Buffer. It’s kind of an interesting app. It let’s you tweet to all of your services. It lets you tweet to App.net. I said, “You know what? I’m going to have an abstraction layer. Twitter will be syndicating from Buffer. Buffer will go to all my social networks. It’s not like Twitter is going to be my default anymore. It’s really because of this reason. I don’t know if other power users feel this way. Brian what do you think this all means? You’re a developer and you’re watching what’s happening with Twitter. What are your thoughts?
Brian: It feels like Twitter has decided to take a very conservative approach to how they build out their monetization and go this very standard advertising-friendly route. I think it makes sense in terms of realizing their valuation. It makes them a lot less interesting of a company. I think what would have really been interesting is for them to be this great platform company. They have such interesting data that no one has. This very real-time information about what’s going on in the world. If you expose that to developers and let them build interesting things on top of that that’s pretty awesome. That’s pretty powerful.
Jason: Yeah. Explain to the audience, who might not understand, what does building an advertising-based business have to do with locking down your API? Why are those two things related? I know the answer but I want to have you explain it.
Brian: I think they want to control their streams so they can control how and when ads are shown. When you have developers tapping into that stream, cutting up and showing different visualizations of the data in ways that they want Twitter loses the ability to control the advertising experience.
Jason: So it’s a lot less interesting. The means the product now is going to… I think it means the product is going to stall in terms of innovation on the platform.
Kirin: Well they were never very fast at innovating either. Right?
Jason: They personally weren’t. Their developers were. It felt that all the cool stuff was happening with the stream of data from Twitter. Now you have both of these companies… For the last couple of years I’ve obviously not been so interested in engaging on Facebook. I just syndicate my stuff there. I don’t like logging into services with Facebook because of like they can post on my behalf. They can post my little behaviors.
Kirin: It’s horrible. I hate it.
Jason: If I’m reading the swimsuit bikini story on Huffington Post, I think they busted Marc Andreessen or something like that. He was looking at a model’s story and it got posted to his Facebook thing. Somebody took a screenshot of it. Like “Oh, look. Marc Andreessen’s Facebook account just looked at 10 best bikini bodies. It’s like, “Really. Do we need to share that much?” We Live In Public kind of levels. So I stopped using them for authentication services. I’d use Twitter. Now Twitter is pissing me off. Who do I use to authenticate? Do I have to I wish somebody would create an authentication service. Maybe App.net will be that. Just like an authentication service that is widely used. I guess we had this. What is the open thing called? OpenID.
Brian: Yeah. Actually Mozilla is working on something called BrowserID now. Which is sort of the follow-up to the OpenID stuff.
Jason: It’s a sad state of affairs across the board. Hey Jay Levy are you back?
Jay: I am. Sorry about that.
Jason: So when we left I was ribbing you, you probably made 50X your money on the Fab investment. If you’ve made more than 50 just keep smiling.
Jay: Ha, ha, ha.
Jason: The smile got bigger. I put that smile at 67X. I know my VCs. That’s a…
Jay: Let’s talk about the companies that need help.
Jason: Yeah. Exactly. That’s a 67X return smile. I can see that by the percentage of the curve of the lip. What do you take on this whole Twitter thing Jay? Is this a smart move for them? Is this the inevitability…
Jay: It happens every few years. It happened a few years ago when they decided to start building their own apps. I think they announced it at Chirp and there was a big rebellion and the same conversation happened. Then everything settled down again. That’ll happen. I think what it comes down to is Twitter is trying to figure out now all the great ways to monetize. Interestingly enough I’m starting a company myself. I’m now playing around with doing advertising on Twitter and Facebook. I’m finding that Facebook is a lot better. I think Twitter has a lot of opportunity but they need to figure out ways to appeal to the businesses. Like Facebook has been able to do and like Google. Part of this is reining things in so they can build tools that can make them a sustainable business going forward and not just pipes or plumbing.
Jason: Is part of coming up with your own monetization and your own system for making money and your own platform… Why does that require to shutting down experimentation on the fringes? Is that just for the confusion of market? Why does that have to occur?
Jay: Because they’ve probably identified areas that they want to own. Twitter started off, in some ways, with no plan and grew into this major force that has major economic and social impacts. Now they’re essentially going backwards in some ways as they figure out their plan. As they figure out their plan there are going to be people impacted and developers that are impacted. That is unfortunately the case. It’s a little of buyer beware for all of us out there. As we develop things, if the platform you’re developing on doesn’t have all their plans in store you might end up interfering with their plans down the road. So I don’t think this is a lesson just for Twitter. It’s for whatever the future platforms are.
Jason: Building on another platform can give you a big start but be careful. Because, like you said, buyer beware when they decide that your business is their business it’s over for you. You know TwitPic… we talked about people who are doing video hosting. Like, that’s a really bad business to be in. Sell that company as quick as possible. They didn’t. But my God, the day that Twitter decides they want to host the videos or the images it’s over for these other people.
Kirin: Has anybody ever built a sustainable business on Twitter?
Jason: I would say like the Radian6s of the world. People who do like the HootSuites of the world seemed to have a large sustainable business. Correct?
Jay: Yeah. We’re investors in Crimson Hexagon. Which is in the analytics side. They’ve been able to build a very substantial business around that side of it.
Jason: But they obviously have to pay the vig to Twitter to get that fire hose. So there’s some revenue sharing going on there.
Jay: Which we’re happy to. Right?
Jay: We need their content. We pay them for it. We’re able to monetize it.
Jason: So for those people it’s actually great that Twitter’s locking things down because it makes it less of an open playing field. It’s, OK you have to do a deal with Twitter. You have to be in the bizarre. You can’t just be out on the street making products.
Jay: We don’t look at it that way. We look at it as innovation’s great. The more innovation that can happen around a platform is great. But at the same time these platforms need to figure out a way to monetize and stick around. So ultimately there can be winners around them.
Jason: Yeah. It’s too noisy I guess. At a certain point they decide it’s too noisy. People can’t figure out how to use Twitter. I remember in the early days… I was talking to Evan Williams. It’s all public knowledge now. He said it publicly so I’m not speaking out of school. I talked to him about other issues too that I won’t talk about. He just sort of said, it’s very hard when you type in the word Twitter into the iOS app store, you see 17 different things and Twitter doesn’t have a client. He told me confidentially Twitter will have a client at some point. It just haven’t gotten around to it. They wind up buying a company and making that the Twitter client team. So I don’t blame Twitter so much but I do think Dick Costolo needs to do a better job. He’s not communicating these changes well. What they’re doing is they’re creating this pinned-up energy for a revolution. You have Dave Winer, myself, Scoble, Dalton… you have people who are saying, “I kind of liked that open fluidness of innovation. Don’t kill that.” They’re not responding to that and that’s what’s enabling App.net.
Kirin: But at the same time when you consider that they’re actually trying to launch these kind of things on the Today Show. They’re trying to reach mainstream America. They don’t really care what you guys think.
Jason: No they don’t. They won’t but what they will do is enable, potentially, somebody to come along and move their cheese.
Kirin: Or are they so big that it can’t be moved?
Jason: Yeah. I mean things do get inertia. MySpace had inertia too. That moved pretty quick. AOL had… It was a 10 year story of AOL losing their user base. It was what… a three year story of MySpace losing they’re user base? So I think things are accelerating. The ups and the downs are accelerated these days. While you do have this inertia effect I don’t know that it’s a 10 year inertia effect like it was for AOL. They had billing and credit card. Twitter could come apart in 3 years. Sure. Why not? You know. Facebook could to. I doubt it. It is possible if they did a couple of blunders. That could happen. When we get back let’s talk about the iPhone 5. That’s the next story up?
Jason: Alright. When we get back from commercial. Oh god. This commercial is so easy to do cause it’s not a commercial. It’s a testimonial. I have used MailChimp… let me just get my shirt. I feel I need to be proper for such a proper buttoned up, awesome product.
Kirin: You need to do your Eee?
Jason: I need to do that, yes. Excuse me one second here. OK. EEEeeeEee. There you go. There you have it folks. There’s the commercial. God Almighty. I’m 41 years-old, a kid… Anyway MailChimp is the greatest product on the planet. We use it everyday here at Launch and ThisWeekIn. If you’re not building your email list you’re a dummy. I mean really, wake up. Start collecting emails today. Go to MailChimp, sign up, put a little form on your website “Updates from blank company”, put your email in. Everyday you, get one you get 100, whatever it is. Every month that goes by you’re losing thousands of people. Your most important constituents who would be giving you their email are not giving it to you because you’re so dumb. You are so clueless. You are so out of the loop. Yes I am talking to you. The person who does not have an email sign-up form on their website. You are a dummy. Listen to Jason OK. I know what I am talking about. Get off your ass, get to MailChimp, sign up, and put that form on your website. If you would wind up having 500 people. What if you’re Brian? Brian you better have a MailChimp sign-up on your website. I’m going to Disconnect.me.
Brian: We do.
Jason: Thank God you do. I’m an investor and I could pull rank.
Brian: Ha, ha.
Jason: Exactly. Not in these days. You gotta get people’s emails. For the love of God collect those email addresses. If you get those emails… Do you email your people Brian?
Brian: We haven’t yet. Hopefully we’ll start sending out a monthly newsletter at some point.
Jason: Yeah. You gotta send that. When you have ideas or something like that. Just send a short email. You’re a smart guy. Craft that message, take the time, say “Hey. I had some ideas about this.” You send it to your constituents and they respond. They hit the reply key. That’s my big tip. When I send to my 20 odd thousand people I say, “Hit reply and tell me what you think.” Then I get hundreds of emails back. Sometimes it’s a famous person. Sometimes it’s somebody who’s a nobody but who’s going to become a famous person. That’s the power of email. Your social networks change like you change your underwear but your email is for life. Unlike your underwear. Hopefully you’re not wearing your underwear for life. Hopefully your email is for life. It’s true people keep their email forever. You use MailChimp everyday, multiple times a day.
Kirin: I do indeed. That’s how we send the Launch Ticker daily email and the Hyper Ticker.
Jason: The Hyper Ticker. Explain what that is.
Kirin: We have an option for people who are obsessed with tech news. Maybe they can’t be in the doc all day and they want to know what’s happening.
Jason: 2 or 3 times a day?
Kirin: We can send them a…
Jason: How many times does that go out? Twice?
Kirin: We’ve been sending it generally once in the morning, then in the afternoon.
Jason: Send it 3 times a day.
Jason: I want it 3 times a day. Send it after the first hour or two. This way you get something out the door, the first 5. Just do the first 7. Get that out. Then do the next 10. Then do the end of the day.
Kirin: That’s a much smaller group than the ones you…
Jason: 10% though.
Kirin: Yep. About 10%.
Jason: Which is great though because those are the power users. We’re just hyper hyper hyper servicing them. God the product is so great, it’s so seamless. I use it all the time. By the way 2,000 subscribers free and 12,000 emails per month free. Mobile-friendly email templates. That’s really good. They’re constantly putting out features. These guys are a profitable, strong, intelligent company. They can afford to lower their prices as they increase their value. That’s the kind of partner you need. That’s what the revolution of software as a service, you hear SaaS and enterprise and this whole enterprise 2.0? MailChimp was one of the original SaaS innovators. They crushed all these previous competitors. I could list 100 competitors who were charging 10-100 times more than MailChimp charges for a fraction, 1%, 2%, 3% of what MailChimp offers in terms of product. They have revolutionized the space and they are leaders in their industry. You can trust them with their email. Really you can build an entire business off email. The free plan will always be free. That’s their promise to you and to me. Thank you so much MailChimp for producing such an amazing product. Next story.
Kirin: Ok Jason. You want to talk about the iPhone 5 which you have had in your hands for a couple of hours now. You’ve been playing with it. As we know there were lots of people who pre-ordered it. 2M in the first 24 hours. The orders are back-up of course. Some people aren’t going to get it for 3 or 4 weeks. Huge lines at stores all over the country, all over the world. In fact, kind of funny, I saw the story this morning. There were some enterprising thieves in Japan who stole the iPhones before the store even opened.
Jason: I was thinking of doing that. No I seriously walked by the iPhone store and I looked at the alley. I just said… I grew up in Brooklyn. We boosted, did some stuff. I said, “Somebody could just go to the back of the Apple Store and just boost the whole shipment. I don’t think you can use them after that. They’re all ID’d.
Kirin: Well in Japan they were stealing them from non-Apple stores. They were other retail stores. Well the japanese version. It’s not clear if those 3 robberies were linked. They had 195 iPhone 5 that were stolen.
Jason: How dumb are these people? Don’t they understand that it’s going to…
Kirin: They’re going to jailbreak them.
Jason: Oh. They’re going to jailbreak them. Is that it? I guess that’s probably right. They’re going to jailbreak them. Anyway go ahead.
Kirin: So a huge amount of excitement of course. The tech press as we know was a little bit ho-hum you know. This isn’t an amazing new product. But judging by the sales and so forth there’s clearly a lot of excitement out there. What are your impressions so far?
Jason: Well I can tell you right off the bat that it is incredibly… it’s got a much different hand feel or palm feel if you will. As you can see it’s much narrower. I’m holding one in each hand here on the screen. It’s a more narrower experience. I’m sorry lighter experience. The thickness. It’s probably the same width. So it’s not exactly narrower, but because it’s lighter, longer, and thinner it feels like your fingers can curl around it. Almost like if you had a guitar and the fret board was a lot thinner. It just instantly feels different. Actually it feels better. I can pull my fingers around the… it’s much faster. It’s got Verizon LTE which means it surfs the web much faster. I’m in the process of writing a mini review of it. 20% better screen. 20% better on the thickness. 100% better on the speed for the LTE. The processor feels twice as good. This is a revolutionary product even though it’s incremental. It’s incrementally better 5 or 6 different ways. Which means it is hugely better. Right?
Kirin: I think John Gruber in his review just kept on using the word ‘nice.’ It’s just so nice. It’s so nice.
Jason: One thing I can’t decide how I feel about it. That’s interesting. That is right. It has the gunmetal. Whatever this metal is. This regular metal. This might be gunmetal I think people might call it. When you have like a dark grey metal vs. the silver brushed aluminum. The iPhone 4S has a much more industrial feel. A stronger heavier feel. This is so light it almost feels flimsy. It almost feels like you would want an extra ounce or two on it cause it feels so light and flimsy. What I think this would do is it’s going to increase usage of the device. Because it’s got LTE and because it’s got the faster processor and a little more screen real estate. That means surfing the web is going to be more delightful. Surfing the web on iPhones and doing emails that’s one of the problems I think. I think it will get better. Kudos to them. It’s a revolution. It’s the best iPhone ever made. It’s the best phone ever made clearly. What about you guys? Do you have the phone on order? I’m assuming Brian’s an Android guy. Maybe he’s on that Firefox new browser.
Brian: I have an iPhone and I have an Android as well. Let me show you my iPhone. It’s probably time for me to upgrade.
Jason: Oops. I had the same thing. The back of mine is cracked to. Everybody’s iPhone is cracked. That back is made of glass.
Jay: Interesting enough I cracked my iPhone a few weeks ago. I was over at the Apple Store and the rep was like the one thing he was hoping for before the announcement was the back not to be glass. Apparently this was a big issue for them. From a customer support perspective to replace all these backs. So it sounds like that was strategically done to save money for Apple.
Jason: Yeah. It’s a smart move.
Kirin: And it’s lighter made out of glass.
Jason: I think that’s a decision that Steve Jobs would not have made. He wouldn’t let them take the glass off of the back. I think he would have felt that was part of the design. I guess in order to make it thinner you have to get rid of the glass.
Kirin: And to make it lighter.
Jason: And to make it lighter, I guess. Yeah, this plastic is lighter.
Jay: I wonder how much input Steve Jobs had into this one.
Jason: That’s an interesting question. He probably had a good amount. Obviously not final. You know what I think… do you guys think this is the end of the smart phone cycle. Because it feels like they can’t come up with something revolutionary. If anybody’s going to come up with something revolutionary it’s going to be the iPhone or Apple, right? Apple and let’s say Samsung or HTC. It feels like there’s nothing left. Oh NFC, that’s incremental. Oh LTE incremental. Screen resolution incremental. Battery life, form factor… It doesn’t feel like… When the iPhone 4 came out it was such a revolutionary feel…
Jason: … in the form factor. I don’t think that they have a better form factor.
Jay: I don’t think they’re incentives to at this point. At least Apple isn’t.
Jason: What do you mean by that? Change is bad now?
Jay: Every time they release an incremental update, like they’ve done, it blows the expectations out of the water. It’s working for Apple from a corporate perspective.
Jason: Got it.
Jay: So why do something revolutionary at this point when it’s working? Now they’re competitors need to do something revolutionary. If anybody’s going to do it BlackBerry needs to do it with a new device. But I don’t think Apple has the need to do it right now. Until and if they lose their dominant position in the market.
Jason: It is true the iPhone is half of their revenue or more.
Kirin: It’s the best-selling product they have.
Jason: That’s an interesting point. It did feel like the iPhone 4 from the 3G was a big departure physically. Much different. They took a lot of risk making the sides flat. Everybody had the curved one. There was a big industrial design change between 2 and 3 and between 3 and 4. Now… I think you’re right Jay. What is the upside in taking risks? They’re better off just making it stunningly more powerful and incrementally better. Making the apps better. Why would you risk the franchise?
Kirin: You can do what they do at the other companies, they offer another type of phone. You have the iPhone 5 and then you have the iPhone ‘whatever’ next to it.
Jason: The Note.
Kirin: Something like that.
Jason: The Note’s much bigger but not quite a tablet. That’s an interesting point. Then that would lead to confusion in the market and another skew. They don’t like having a lot of options. They like having less options. I feel like it is the end of innovation of the smart phone. Or we’ve gotten to the 90% mark. We did so quickly if you think about it.
Kirin: 5 years.
Jason: 5 years of iPhone then a couple years of Palm. In under a decade… let’s call it 7 years… the smart phone has been perfected in way. Do you think we can say that Brian? Do you think the smart phone is perfected now? Or we’re 90% of the way there?
Brian: Yeah. The improvements feel pretty incremental to me at this point. I don’t know. I feel it’s time for something new from Apple. I’m kind of waiting on the TV stuff. Waiting to see what happens with that.
Jason: Yeah. The TV then you have Google Glass. But it feels like for this platform we got there. Now the question is, is there something revolutionary left on tablets? Do you guys think… The Surface, felt that was pretty neat with the keyboard and everything. Are we also, as a technology industry, are we so good at what we do now… or is Apple really that good and Samsung. Even Google now I guess and Amazon now… that we compress the time to completion with a new device to just a couple of years? Where the PC took decades to get where it is. Laptops took decades. What do you guys think?
Jay: In regards to the tablet I don’t think the tablet’s perfected at this point. I don’t think it’s the most usable device out there. I think there’s a lot more improvements that can happen and probably will happen. From Apple’s perspective they’re going to continue to release products. One product in each category. TVs are probably next. I really hope an iPad mini comes out but we’ll see. It definitely, in some ways, goes against what they’ve done historically. I think it could be a killer device in the market.
Jason: You did see those emails about… I know if it was Jony Ive, or who it was from. One of the Apple execs. It was Phil Schiller I think, was talking about how the 7″ was really nice for reading. It was actually better for reading, in a way, than the 11″ tablet.
Kirin: You can do it one-handed.
Jason: Yeah. You can do it one-handed. Which is kind of nice. I gotta think they’re going to do the 7 because they have to have a $250 in the market. It can’t be $399 forever.
Kirin: Then you have that confusion a little bit again or not?
Jason: I don’t know. It just feels like it’s such a loved product that there’s got to be something between… when you have the form factors that are this disparate, there has to be something in between. There has to be.
Jay: I think if we see it we see it for the holidays.
Jason: Oh yeah. So that’s like the October November
Jay: Yeah. I think that’s when they release it. It’s the killer products for the holidays. $199 or whatever it is.
Kirin: If you’re talking about iPhone 5 you have to talk about iOS 6.
Jason: Yeah. OK let’s do it.
Kirin: Which as we know the iOS 6 update just came out earlier this week. The first thing everybody notices is that Apple’s own maps app is not perfect. It has lots of issues. You have parts of cities that don’t appear. You have these 3D flyovers that are very distorted. It’s like looking at a Salvador Dali painting in some cases. It even had an irish minister who claimed that…
Jason: They put an airfield on his area.
Kirin: Well the name of the farm is called Airfield and they called it an airport. They marked it as an airport.
Kirin: He called it dangerously misleading.
Jason: Yeah. It is possible although highly improbable that a pilot might mistake that… might mistake that… they really would never use their iPhone but if they had some failure they might take out their iPhone. They might have service. They might see that as an airfield if they typed in a search for airfield. But they wouldn’t obviously land on top of a house and not see an airfield so that’s not dangerous.
Kirin: It’s a bit of a play to say, “Oh my God. Look at what they’ve done.”
Jason: I do have to say that the photo upgrade is pretty nice. Cause it gives you nice logos like do you want to send this to, use it as your wall photo, print it, copy it, Facebook, Twitter. Very easy to sort of… it doesn’t use the old buttons. It uses actual icons for all of those. It looks like the photo app is much nicer. The app for maps is terrible, clearly, but it has some innovative features. What else is the major change?
Jay: For me the biggest change was the change in the keypad. Now granted I can’t remember what the old one looked like now, but I can tell you I don’t like the new one.
Jason: Yeah. It is a little different. Does it seem faster or slower to type?
Jay: I’m not on 5.
Jason: You’re not on it yet.
Jay: About the same.
Brian: Also QA’ing something as big as Maps is awfully hard to do without getting it in the hands of real users. Google maps took a long time to get good as well.
Jason: I have to say… it’s sort of counter… you can’t… This is one of the problems I think Apple has in this specific space is, in order to build services they do have to be built incrementally, in alpha, in beta. Gmail had only a couple hundred people on it. Everybody could invite one person. Then you got a couple more invites. They rolled it out over years. It took 2 or 3 years for some people to get on. I don’t know when they publicly opened it up. Even Pinterest took a year in their sort of private beta. That’s not in Apple’s DNA. They want to release stuff all at once. They have to change their DNA for services to say, “iCloud is available to a small group of people. Here it is, but it’s only in beta. We’re going to roll it out to 1,000 people at a time.” Or something. And, not have the secrecy.
Kirin: It’s really difficult for a company like Apple, that’s been doing something a certain way for so long, to change the way it does business.
Jason: They just have to do it for services. They don’t have to do it for hardware.
Kirin: I know.
Jason: Just for services. It’s really interesting to look at the… the new store is really different. You have these… you swipe through the… yeah, when you guys get the new…
Jay: The new store, I thought was good.
Jason: Yeah. It is really compelling. It looks more like your desktop but even better.
Jay: Why did Apple roll out their own maps application? What do you think their motivation was on that one?
Jason: I don’t know. Brian do you have thoughts on it?
Brian: I imagine they want to decouple from Google. Having Google integrated into their most important products seems problematic for a company as big as Apple.
Jason: Yeah. I guess it’s the Cold War between these two companies. If you look at maps… I guess they was they looked at what percentage of time is spent on each app? They know mail, browser, and obviously maps are in the top 3 or 4. Phone obviously is up there. So the top 5 apps, they have to own all of them.
Kirin: They already did it with messaging.
Jason: They did it with messaging. They have their own messenger. That’s just standard operating procedure. I also think, how soon is it before we have other Apple products that replace Google products? We saw YouTube was kicked off. Their 5-year deal or 3-year deal ended. Does that mean that Apple will come up with a YouTube competitor? They’ll have video hosting? Why not? They sort of have landing pages for photos right? From what I understand. I haven’t seen them yet.
Kirin: I haven’t either.
Jason: When you tweet a photo, you can actually go to an Apple landing page? I don’t know what the URL is. I understand that’s how that’s going to work. So it’s really only a matter of time. Will they have a Gmail competitor? They have mobile.me mail. That’s more like PoP email. It’s not like you log into a website or anything. It’s going to become a pretty compelling war between these two companies.
Kirin: Are you saying we shouldn’t hold Apple to the same standard that we hold it for hardware to its software?
Jason: That’s an interesting question too. I don’t think they can perform on a… their services businesses: mobile.me, then iCloud, then maps. Previously we had the Stock Ticker, Weather. Those things just haven’t been great. I guess stocks was OK but it had mistakes in it, in the beginning. I just don’t think that group is as good as the group that does the hardware.
Kirin: Why is that?
Jason: I don’t know.
Brian: Google has sort of the opposite DNA problem. Right? They want to do everything incrementally so you have this incredibly fragmented Android ecosystem.
Jason: Someone’s got to take the Google approach to software and services and then couple it with the Apple approach to hardware. That’s the sweet spot. If Apple could be more like Google on the software side. Now you see Google is becoming more like Apple, with the Nexus 7. You also see MicroSoft doing that as well. Although MicroSoft really hasn’t been at the standard bearer of software in a long time. Or ever. They were the biggest but they were never good at rolling it out. It’s a brave new world but all these companies are becoming the same. Zuckerberg’s talking about, “It makes no sense for us to have a phone.” It makes no sense, until it does. So if you’re not working on it or you think it’s 3 years out, then you say it doesn’t make sense. But when you start to get closer, I think you’re going to see them change their tune. They shut down Ping in this release. If they figure out how to do maps how hard could it for them to figure out how to do a social network? They’ve got a social network right on here. It’s called your address book. Let’s say they buy Path or they buy Twitter… which is what they should have done instead of the dividends. They should have just backed up the Brinks truck and bought Twitter. Which I think they would get for $20B. The investors are probably realizing a $20B offer would do it. I don’t know why they don’t just back up the Brinks truck and make Twitter their native social network. What happens to Facebook? Then Facebook has to have a device because it’s integrated. What do you guys think?
Jay: I’m shocked. Are you saying Facebook should build a phone?
Jason: I think they should actually. I think they should. I think they should start with something that is very niche. Like this is for people who don’t have… it’s a $10 a month, no talking on the phone, just data device and it’s just for kids.
Kirin: Except Facebook isn’t for kids.
Jason: I guess so. Make the Instagram phone.
Jay: So Facebook should build a non-phone phone for kids, who aren’t supposed to be on Facebook?
Jason: I think it would be an iPod Touch-like device. They should build an iPod Touch device that has games and any apps that you have on Facebook. You turn it on and it’s Facebook and it’s free. That’s actually the idea. You know they have these whisper nets, these networks you can buy. So if you buy it for $99 or $149, it comes with a certain amount of data for the life of the device. You can take it out and update your status at any time. You can play any of the Farmville games or any of the games. Maybe you can surf the web maybe you can’t. It’s basically a limited use device.
Kirin: Would you be able to do video and chat?
Jason: Sure. Why not? Video, chat all that stuff. It’s a Facebook device. Like if AOL came out with a phone in the heyday that would be incredible. I think kids would use it. I don’t know. Are kids not using it anymore?
Kirin: That’s actually the interesting thing, Facebook has been losing it’s cool factor among younger people. So they’re not as interested in Facebook as they used to be.
Jason: Yeah, it’s interesting. They hate it.
Jay: They also have smart phones.
Jason: A lot of them are using iPod Touches to do it. I think Facebook and Twitter are really at risk with Google and Apple having social networks built into the products they make. I don’t know why Apple hasn’t gotten there yet.
Kirin: Apple’s not a social company.
Jason: They’re not but the device is. You know. So if the device’s primary use, or one of the primary uses… we just said the use case is maps. They weren’t a map company now they’re a map company. They’ve bought their way into that space. They weren’t a photo company now they are. They’re not until they are. Now if they decide we need to have a social network in there… They did Ping. Why wouldn’t they buy Twitter or just turn on your address book and make it a social network? You’re SMS’ing with people. iMessage is sort of a social network.
Kirin: But you wouldn’t have access to people who don’t have Apple devices, necessarily.
Jason: Yeah. Unless they came out with an Android device that you could connect to it. I don’t they necessarily care.
Jay: I think Apple needs to stay on what their mission is.
Jay: To make incredibly great hardware devices that have good platforms on them and revolutionize areas. They did that with music. They did that with phones. TVs are logical. Home automation down the road. I think they gotta do what they do well. Building social networks doesn’t seem to be what they do well.
Jason: Or maps.
Jay: Or maps apparently.
Jason: I guess but if you have $100B and there’s this opportunity to make the one system that unites it all, soup to nuts. Which was always Steve Jobs’ vision. Which was to own everything. It’s like, why not throw a couple million bucks at a social network. Throw a couple billion bucks, sorry, at maps. What do they do, spend a couple of billion dollars on maps? They’ll get it right eventually. Right, Brian?
Brian. Yeah. Although there’s not a whole lot of revenue in maps. I mean it seems like an ‘F.U.’ move to Google more than anything.
Jason: It does feel like an ‘F.U.’ move. It could have been started in the Steve Jobs era. It does seem like that war is starting to level off. Are we going to see an Apple/Google Armageddon lawsuit over patents.
Kirin: Are they going to play nice and say this is too much of a distraction, waste of money, you know.
Jason: And time.
Brian: The rumor is that Google has their own iOS app ready to go. We’ll see how long it takes Apple to approve it.
Kirin: That’s right.
Jason: Oh. Google has their own maps app ready.
Kirin: Right. And actually…
Brian: I was going to say, they have supposedly been working on it in secret for, I guess, a couple of years now.
Jason: Makes sense.
Kirin: And there’s live street view, which is one of GDGT’s (Gadget) recommended or must have transit apps. You pay 99¢ so there’s no ads. You can have the live street view on top of your native app in iOS 6.
Jason: So you put Google Street View…
Jason: … onto the Apple maps?
Jason: GDGT has it on their site. So you can’t get Google Maps now or only in your browser?
Kirin: I don’t think if you…
Jason: You can get it in your browser.
Brian: There’s no stand-alone app yet.
Jason: Then if you get the stand-alone app would it direct when you click on your address book Can I change that default to go to that new app?
Jay: Not yet. That’s the big anti-competitive thing that spur out of this. Is since you can’t set default apps for anything on the iPhone. So you can’t say when I click on an address default to Google maps vs. Apple maps. Or open this email tool vs. the Mac mail tool. Or Chrome vs. Safari. That’s where it’s become interesting in regards to potential lawsuits.
Jason: Isn’t that where MicroSoft got themselves into trouble? It was the defaults. Defaults matter.
Brian: But Google does the same stuff, right? They’re integrating their content into search results now.
Jason: Yeah. In that case they don’t talk about the fairness of that. You can’t set that. You can’t say I want Yelp content in my local. Or I want… pick between Zagat or Yahoo’s local information. You can’t pick there. When you have the monopoly, you don’t allow this kind of choice, that’s the best practice. Then when you don’t have the monopoly, you say the person with the monopoly is being closed and then you give the choice. With Chrome, when they didn’t have the monopoly, they were like Chrome let’s you set which search engine you use. Microsoft doesn’t let you set it. You have to use Bing or whatever. It’s hard to set it. When you turn Chrome on it’s like which search engine do you want to use? It gives you a choice. It forces you to select. But they do that because they know it doesn’t matter. Most people are going to pick Google because they have the mind share. But it is this sort of classic hypocritical nature of technology Defaults, yeah we’ll allow you to customize the defaults when we’re losing. Once we’ve won, no more changing for you. Right?
Kirin: Even that O off stuff. It’s all or nothing with that. You don’t get to customize. You don’t get to say, you can see this but you can’t see that of my data.
Jason: Right. Interesting. Last story. Or two more stories.
Kirin: Alright. So I think you wan to talk about Yahoo.
Kirin: They closed a deal with Ali Baba, $7.6B. Of which $3.65B is going to go back to the shareholders. Leaving about $650M in Yahoo’s coffers.
Jason: What is that, about $3 a share goes to the users?
Kirin: Yeah. It’s not a huge amount of money for the shareholders but…
Jason: Well it’s 20% on the stock price.
Kirin: Sure, sure. It’s sizable for them.
Jason: That’s like a 20% dividend. That’s sizable. That’s like getting a 20% discount on whatever.
Kirin: The question is can Yahoo now afford to buy interesting startups?
Jason: Well they do have the value of the company. Which is whatever, $15B or something. I’m not sure what the value is. What’s the value of the company now?
Kirin: They have $2B cash.
Jason: Yeah. But they’re profitable. What’s market cap of Yahoo right now? Cause they could just use their… market cap is not coming up here? In my new… why is Yhaoo’s…
Brian: Look like it’s $18.6B.
Jason: Yeah. That’s about right. They’ve got this huge market cap. They’ve got $20B n sort of cash and market cap to play. That’s enough I think. It is kind of weird. Cause wasn’t there stories just a couple of weeks ago that Marissa was going to keep all the money from this?
Kirin: Right, right. It was something that was promised before she became CEO.
Jason: That she’d give it back?
Kirin: Yes. Then when she came in she was like I don’t know about that.
Jason: Right. She did a 10Q… not 10Q. She did some sort of notice, she may or may not give the money back. Then I guess it became a negotiation. They must have told her… it’s always a negotiation with the board and the large shareholders. So she must have said, OK give me some cash. I want to do these three things. We don’t know what those other 3 things are that she got but I’m sure she’s a good negotiator and got a couple of other things. Like maybe she’s going to be able to spend a little more money here or there. It took them long enough to do this. Thank God they got it done. They need to start buying some stuff. What’s the vibe Jay, in the venture community, about Yahoo now that Marissa is there? Are people hopeful that she’s going to go on an acquisition spree?
Jay: I think it was a major coup for them to get her. I think it’s a great renewed interest to see what they can do. The potential’s been exciting. Anytime there’s a company with large bank behind them, they can go and buy startups, we all get excited. So it’s going to be interesting to see where Yahoo is a few years down the road.
Jason: When do you think she starts buying stuff? Is the word on the street that she’s looking for stuff now? If so, what is she looking for?
Jay: I think the obvious areas that they really need to be focused on are social and mobile. That’s where the growth is. That’s where I would expect to see acquisitions coming from.
Jason: When do you think we will see one? Inside of 3 months, 6 months? When do you think you’ll see the first couple?
Jay: I think she’s going to go as quick as possible. To make her mark and to see how much movement she can have in the business. What would be the best move they can do?
Jason: That should be sooner rather than later.
Jay: She’s smart enough, she knows the industry. She doesn’t need time to catch up by any means.
Jason: Brian what do you think the vibe is in the valley about Yahoo? Are hackers and technology folks saying, “Hey, it’s not a bad place to work. Maybe she’s going to do some interesting things.” Do you hear vibes about acquisitions coming from there?
Brian: I think people are talking about Yahoo, in the developer community, for the first time in a very long time. I imagine that Marissa is going to focus on acqui-hires. The Facebook style strategy. It’s the first time Yahoo has had a product person at the top. The don’t really have the engineering resources to kind of fill that vision. Yahoo has always been, from my experience, pretty weak on the inside.
Jason: Yeah. So they’re going to basically buy up some of these small Y Combinator and Tech Stars companies that maybe are 5 or 10 developers. Then put them on a Yahoo project maybe.
Brian: That’s what I would expect. I mean they do have really valuable properties that just haven’t gotten the attention they deserve.
Jason: What do you think they should focus their energy on? If it was you what would you be focusing on? Flickr?
Brian: Definitely Flickr. That’s where I would start. Maybe it’s too late with Flickr, but it’s a huge missed opportunity there. Especially now that Instagram’s gone to Facebook. I think they missed an opportunity to gain an audience there.
Jason: Yeah. They should be just pounding. They should have a really great mobile app with the filters and everything. They should just have when you load Flickr it should look like Facebook. If they just made Flickr look like Facebook they would be on the way to having a great social network.
Kirin: Flickr should have an app like Instagram.
Jason: Yeah. Exactly. They did release their app finally. I don’t think it holds a candle to apps like Instagram. Next story. Last story.
Kirin: OK. Let’s talk a little bit about Zynga cause you mentioned that earlier. Another executive left this week. Nils Puhlman, their Chief Security Officer since 2009. By our tally that’s 10 execs since early August. That includes: The COO- John Schappert, Infrastructure CTO- Allen Leinwand, Chief Creative Officer- Mike Verdu, Chief Marketing/Revenue Officer- Jeff Karp. Now on the plus side they did get Maytal Ginzburg who’s the COO of new markets. Basically because she has a gambling background. The stock’s actually had a little bit of a recovery. It was rock bottom a couple of weeks ago. It’s above $3 a share. Have we seen the last of the departures? What’s going to happen next?
Jason: I don’t have any inside information on this. Obviously I did call the bottom of the stock. If you mathematically do the stock, people would leave a company for a couple of reasons. One is the stock options. They just don’t… the stock options are underwater. They’re not repriced to the level they feel. I did hear rumors that he was repricing people’s stock options. So I think he was addressing that. The next reason people might leave is because they think there’s something fundamentally wrong with the business.
Kirin: That they’re not going to be able to…
Jason: That it’s to hard to fix.
Jason: Or they think the future is going to be painful. Right? Which sort of dovetails with the first two. There’s only so much he can do in terms of repricing people’s options. Because if they don’t believe the companies got a future…
Kirin: They’re going to leave.
Jason: … they’re going to leave. That’s number 3. If you reprice them and people think it’s too hard to fix the problems then they leave as well. I think a lot of the people who joined maybe joined thinking, “OK I’m going to ride the stock.” Then when the stock crashed to 25% of what it was when they joined, it got kind of depressing for them. They’re like, “Wow. This clean up is going to be too hard.” That doesn’t mean that other people aren’t going to look at it and say, “Now the stock’s at 3. This could go to 30.” They’ve got a ton of cash and they’ve got a base of users. Everything is… there’s always buy and sell in the market. So if the housing market collapses people realize, at a certain point renting is more expensive than buying. Wow. Mortgage rates are incredibly low. What am I doing wasting… and they don’t believe the stock (i.e. the house) can go any lower… If you don’t believe the house can go any lower… which is how I feel about Zynga, it can’t go any lower… then you think there’s upside. For people who are there it’s hard if you paid $5M for your house and now it’s worth two and a half, for you to want to buy that house for two and a half because you just saw it go down 50%. But it may actual be going up. That is a very psychological thing. For executives like that who are getting pulled by Facebook, or Twitter, or Pinterest or there’s some up and coming AirBnB-like company. Or something coming out of Tech Stars. Some up and coming, promising startup. That can be much more exciting than, Oh, my God we’re getting beat up in the press everyday. These things can cascade.
Kirin: Sure, sure. Is the gambling business the right business to move into?
Jason: I’ve always said on this program, without inside knowledge, that they would go that way. They sort of tipped their hand a little bit when they bought that card hands company. Which is a company that studies the card hands of poker players and let’s you get information about them. It was pretty obvious they would do that and if poker was where they started that’s where they’re going to finish. I do think that they will do that. I do think the stock will become a $10 or $20 stock relatively soon. That’s why I bought 10,000 shares at $3 or something. Just thinking, who’s going to bet against Mark Pincus and $1B in cash, $2B in assets, and $1B in revenue. He’s obviously going to figure it out but it’s going to be painful. Just like when the housing market came apart it was painful for people.
Kirin: I don’t know that you can equate those two quite that way.
Brian: Are they working on gambling internationally? Or are they relying on stuff passing in the US?
Jason: That’s an interesting question. I don’t know the answer to it. If they were doing it internationally they would have already done it. I think they’ll take a global strategy certainly. They do have a footprint around the world. But I don’t know how big it is. You have to start somewhere. I think they’ll start in the US and they’ll wait for all this stuff to clean itself up. Which it is cleaning itself up it seems.
Kirin: Did you ever get your money back from that…
Jason: Full Tilt?
Jason: I didn’t actually go in and claim it yet but it’s been settled and you’re going to be able to claim your money. I think I have $500 in there or a $1,000. There’s not like a lot of money. Yeah. They put the money in there for me cause I was a Full Tilt pro. So it wasn’t really my money.
Brian: Poker News has been posting an interview with Howard Lederer this week that’s quite interesting if you’re a poker fan.
Jason: What is the interview about?
Brian: Just the demise of Full Tilt Poker and what went on behind the scenes in Lederer’s perspective.
Jason: What is his… he is claiming he wasn’t part of it or…
Brian: Yeah. So it’s a little bit hard to believe. He basically claims he really didn’t know what was going on. There was a ponzi scheme or pseudo ponzi scheme or whatever you want to call it. He claims not to have knowledge of the how much of a discrepancy of how much they were crediting players cash funds and how much money he actually had.
Brian: Which is hard to believe for the de facto COO for ten years basically.
Jason: Yeah. It’s sort of like Bernie Madoff’s son saying he didn’t know. Or wife right? Really you didn’t. Hard to believe. Right?
Jason: Interesting. It’s all settled now right? There’s not going to be any criminal prosecution. Or is there?
Brian: I think it’s still ongoing.
Jason: I guess the poker stars bought the asset. That doesn’t mean the people who were involved in Full Tilt are off the hook. That just means that that portion of it is settled.
Brian: Right. There’s been rumors that Poker Stars got some inside info that online poker would be decriminalized in the US. That’s why they went ahead with the purchase. But that’s just a rumor.
Jason: It’s pretty clear it’s going to be decriminalized. The states need the money. Everybody knows it’s going to. Zynga wouldn’t be hiring. The writing’s on the wall. Just like we sort of new crowd funding would happen. Because once you have Obama and his people and senators say, “We’re going to do this.” the process has started. They let people know the process has started so they start preparing. Then they tell everybody else, “I don’t know if it’s going to happen or not. Probably not.” They have the inside line so they’re investing in it. They know it’s going to happen. So reasonably it’s going to happen. Just like crowd funding. We had these rumors for a year that crowd funding laws would change, then all of a sudden they changed. Now all of a sudden people who are in the Catbird seats, in terms of getting those licenses and setting up those sites like AngelList.
Jason: Jay what do you think? Zynga.
Jay: I agree with you. I think it’s a buy right now. I bought it at $2.75 or so. I just looked at it and said there’s more upside than there is downside. Kind of given where there revenues are in respect to the markets. I think it’s good buy. I think the exodus from the senior management is probably a build up of a lot of things. My only concern would be, how much of it is the stock price? That wouldn’t concern me as much as are there fundamental problems? I think it’s related to the stock price.
Jason: Yeah. I’m going to agree with that.
Jay: It’s probably a pretty tough place to work right now. Given where the stock has done. Even Zuckerberg eluded to the fact that Facebook’s not a great place to work, right now, it sounded like when he was speaking. That definitely impacts morale when somthing like that happens.
Jason: I gotta think the people at Facebook… once people is fully vested and the stock is going down it’s just too much for people to get over. It’s like, “There’s no upside left.”
Kirin: But you’re still making a great product right?
Jason: Yeah. In some cases some people do that. If you’re a designer, a developer, a writer or something, you might be like, “Yeah. I enjoy working with these co-workers.” For a senior manager who’s there and has other options to gain a lot of wealth as a senior management team member. As a CFO, as a COO. One of those sort of top 10 positions. It’s like all this upside and momentum in Pinterest. Everybody’s excited about it. People would rather move on to the next thing. They’re not loyal in that way generally speaking.
Brian: I don’t think Zynga was especially ever really about the product. I mean for many of my friends they weren’t fancy executives who there but I think they had an especially immersionary culture and got ridden really hard so the disenchantment is probably a little more hard than it otherwise would be.
Jason: That’s a very astute point Brian. Because if you run an immersionary place and you say, “We’re all here to make a lot of money. That’s why we’re just going to churn these games out. They’re not going to have a lot of soul to them. We’re just going to maximize for revenue.” If they were maximizing for revenue and secondary was creativity let’s say. Or number 5 was creativity and maximize shareholder value, efficiency and all this other stuff.
Kirin: That’s not an inspiring place to work.
Jason: It is great to win. People love being on a winning team.
Jason: So when you see the numbers going up and to the right it’s fantastic and that forgives a lot. People will forgive a little bit of culture problems, or a tyrant, or whatever, aggressive culture. If people are winning. Wall Street is like that. There’s all these bad aspects to being in a bank but we’re winning and making a lot of money so all is forgiven when we get our paychecks. The problem is once the paychecks stop… wow. It’s like somebody takes 10 seats out from that game where you’re… musical chairs. It’s like musical chairs and then take all of the sats away. There’s nowhere left for anybody to sit. There’s nothing left to hang you hat on and say, “But we all had a great time.” It’s like “No. We didn’t have a great time.” “We all like each other though right?” “Actually no. We don’t like each other.” “We all love the product right?” “No. We don’t like the product.” Then it falls apart and you gotta rebuild the culture. As Jay said astutely as well, there’s more upside than downside. That’s how you have to make the decision. I think they’re going to get all these new people to come in and say, “We’re going mobile. We’re building new products. We’re being creative now.” And they have this war chest. Mark is savvy in that he got all that money into the company. He’s got those coffers there that he can just deploy. He’s a smart enough guy that he can buy his way out of trouble now or he can build his way out. I think both of those things could happen. Do the Groupon story then we’ll end.
Kirin: OK. Interesting move from Groupon this week. We all know the Square slider. You know you put on your iPhone.
Kirin: Groupon’s coming out with something similar. It’s being priced competitively for everyone but especially if you’re already a Groupon merchant. Square is charging 2.75% flat or $275 a month. Groupon’s merchants are going to pay 1.8% per swipe plus 15¢. If they’re not a Groupon merchant it would be 2.2% and 15¢. So I guess the question is can Groupon really compete with Square?
Jason: I don’t know how any of these people make money if the merchant fees are 2%. Or 3% in the case of American Express. Somebody emailed us. Did you get the email from one of the readers? they just emailed me. They basically just said… What is it that Square charges? 2.75?
Jason: They said Square is not making any money. That’s a claim…
Brian: That’s true.
Jason: You think that’s true Jay, explain it.
Brian: That was me Brian. I think Square’s plan is to make money off of all this transaction data. They will or already have this vast treasure trove of data that they can do a lot of different things with. That’s the plan.
Jason: So they make no money on the 2.75? That goes all to the merchant fees, Visa, Master Card and the American Express fees. They’re going to make money through the data? Or maybe they’ll raise they’re fee once they have a large enough footprint.
Brian: That’s a possibility as well.
Jason: It’s seems very weird. Jay do you think… are you an investor in Square, Jay?
Jay: No. No I’m not. I think that over time they’ll be able to negotiate better interchange rates with Master Card, Visa and AmEx as they become a bigger player. Kind of back to Groupon, I don’t see this as them trying to get into the credit card processing business. I see this as trying to build out their own platform to small business marketing and the customer. One piece of the puzzle, it’s an important piece from a data perspective, especially with what they’re doing. Really the question to me is, can Groupon grow from being the digital entertainment book to a small business marketing plan that is legitimate and that both vendors and customers want to work with. What piece of technology that they would need to do that.
Jason: It feels like they’re commoditizing what Square is doing. They’re making it part of their offerings. Which means Square could go the other way. Square could start allowing… create a consumer product for merchants to offer things, coupons and stuff like that. But I don’t think they will. This sounds like a really good idea for Groupon. They already have these relationships. If I’m coming in and I could just do payment, they’ve already… the cost of Groupon is getting sales people into the local businesses. So this is the second product they can offer them? They started with a Groupon. Classic Groupon, one deal every 12 months or 18 months. Then they the all the time deals. You can have deals all the time. Like Groupon Right Now? What do they call that one?
Kirin: I don’t know what they call that.
Jason: Anybody in the chat room, what is Groupon Right Now called? I don’t know if Brian you could look it up? They have some sort of product…
Brian: Groupon Buy Now.
Jason: Is it Buy Now? local place. It’s sort of like Buy Now. There’s some name for it. Now there’s a third product.
Brian: Now Deals.
Jason: Now Deals. I have a deal with New York Bagels. We do a deal once a year with you. Great. That gets you all your customers and all your email addresses and stuff. They’re happy with that. We’ll do that in your slowest period. Number two. You have a deal going on all the time. We get you two or three extra customers a day from that. Great. By the way, we can be your POS system and we’ll give you that for free. In the POS system there’ll be a list. We can add MailChimp to it. Then we’re going to add, you can buy keywords on whatever. We’ll add Square Space as a feature, where you can build your own website. They could just keep adding and adding and adding. Any other company has to come in has to actually start that relationship.
Kirin: But you have to like Groupon to do that. Do the small businesses actually like Groupon?
Jason: They love it. They love it. This whole thing of they don’t love it, that’s the fringe cases. You hear about the noisy people but they would not have a 9 or 12 month wait to do a Groupon if the merchants didn’t love it. The merchants don’t know how to handle, how to price, how to handle that many people. Especially if you are in the market. Think about it. If you need a Groupon it means your business is not probably doing that well. You need customers. Why is your business not doing well in the first place? Maybe your business isn’t run that well. Maybe you got bad service.
Kirin: Or maybe your a knew business and you want to get customers.
Jason: Possibly. But I think a lot of times it’s people who their business is struggling. What this means is the selection process for people who use Groupon are maybe not as deft or as good at what they do. Which means, yeah, they’re going to have more problems when they get more customers cause they’re not good at it. That’s a learning process for all parties involved. What do you think? Are you long Groupon, short Groupon, Jay?
Jay: I’m not excited about Groupon. I don’t see it having credible staying power. I don’t believe the retailers love them. I really don’t.
Jason: Really? You think it’s just that the desperate ones love it and everybody else doesn’t.
Jay: It’s only anecdotally but every retailer I’ve talked to tells horror stories about what they’ve done. They’ll do them once but the repeats are challenging. I think the concept that you just described, the platform that they are trying to build, is an amazing one. Especially I’m watching my own small business have a need for that but the question is does Groupon have a reputation that they can build that with the retailers?
Jason: Yeah. That is an interesting point. Do they have the reputation with them or not. It’s going to be interesting to see. What do you think Brian? You long Groupon, short Groupon?
Brian: Yeah, I wouldn’t be long on Groupon. If I was looking for a competitor to go out and beat Square is not the company I would pick.
Jason: Yeah. That would be like somebody trying to start a search company against Google.
Kirin: We don’t know anybody like that do we?
Jason: No. No. Of course not. That’s like jumping in front of a train. OK. I see you put the Operation Wall Street or Occupy Wall Street, whoever these knuckle heads are, as the 10th story strictly to tempt me. Go ahead. I know a tilt when I see it. You put me on tilt.
Kirin: OK. More than 100 protestors arrested in New York. Mostly for disorderly conduct when they did their anniversary earlier this week. Now they have evolved into disparate infinity groups, debtors revolt, get the money out of politics, reform health care. Now they had $600K that they collected last fall and only about $30K to $40K left.
Kirin: Can they go do something.
Jason: Weed is getting expensive. Weed’s getting expensive in New York City.
Kirin: Does anybody care about Occupy Wall Street anymore?
Jason: Of course nobody cares. Of course nobody cares. Listen. Those guys blew it. Hands down they blew it. What they did do right is, because they didn’t declare a specific mission they got all the disgruntled people to come. So they got the people about the health care. They got the people about whatever issue.
Kirin: Super packs.
Jason: Whatever issue. Whatever you were upset about there was a place you can now go. So you get a bunch of people who are whining and complaining in one place then everybody projected into this that they were concerned about the disparity in wealth, they were concerned about taxes which is related. They were concerned about health care of this or that or housing. It’s like every possible issue. I think they benefitted by getting all of those people involved but nobody can tell you what Occupy Wall Street was about.
Kirin: They spent almost $600K on what?
Jason: Weed! I’m absolutely certain. They were giving out…
Kirin: Sleeping bags, tents.
Jason: No. Theo were giving out medical marijuana at the thing. I just looked at that and I was like, “I know what Occupy Wall Street is about. That’s about people going down and meeting some chicks and smoking some weed.” It’s basically it was a Dead show. It was a Dead show. It’s like, The Dead are no longer on tour. Go to Occupy Wall Street. I just saw the people on TV. I can tell. I know that type. Brian tell me I’m wrong.
Brian: Oddly enough I was listening to… Howard Stern sent some people down there to do interviews.
Brian: I don’t remember exactly what they said. The people they talked to had no idea why they were even there.
Jason: Yeah. They’re like, “What am I…?” There is such a waste because there is a very valid issue here. Which is there is a huge disparity in wealth. There is a huge disparity in who pays taxes and who doesn’t in both ways. The rich actually pay more on a dollar basis but less on a percentage. There’s all these issues. We do have a society that has a massive issue around unemployment. It’s a permanent issue that the Republicans and the Democrats cannot solve. So if the Republicans and the Democrats can’t solve it but they claim that they are, then they’re liars. They’re in the pockets of special interest. The balls getting kicked down the road. You need somebody who can get up there and articulate that fact. Say, “Listen. We need to think about how we take care of the people who are not going to be employable. We have to come up with some solution for that. Like other countries have. Other countries have come up with solutions for that. There are some innovative ideas around it. Like making the work week four days a week. So that people work less but there’s more jobs. You know. There’s all these ideas about how to do that. I’m not saying that they’re right. They could have had a more intelligent approach. Really? What do you think Jay?
Brian: There’s definitely something real and at the core there. Maybe it’s not organized in the right way yet.
Jason: Yeah. I think it’s going to be people will historically look at Occupy Wall Street as the false start for something else. Now is it the false start for a full scale social rebellion? Like you see in Greece where people are burning stuff and dying in squares. Or in Egypt. Which is based on something different. Muslim rage nonsense. Listen. If I killed somebody for every time I watched a bad YouTube video, do you know how many counts of murder I would have?
Kirin: That movie is so bad.
Jason: I wouldn’t have enough bullets to kill everybody.
Kirin: One of the actresses now she was trying to…
Jason: Trying to sue to take it down.
Kirin: Exactly. She of course isn’t going to be able to do that.
Jason: This is the other problem with the media. Why is the media and everybody so forgiving of these muslims? Not all muslims but the muslims who believe they get to kill people or burn down buildings because they saw a bad movie. I mean did anybody see Transformers? Apparently a lot of people saw Transformers but nobody was murdered. I want to kill Michael Bey.
Kirin: I bet you a lot of people who are protesting this movie didn’t see it.
Jason: I went to see Transformers 2.
Kirin: It’s just like Occupy Wall Street. You want to be pissed off about something that’s all rioting.
Jason: Jay what’s the story? Explain to everybody what’s going on in the world.
Jay: Why do you want to put me on the spot?
Jason: Come on Jay. This makes VCs very nervous when you do this. They have to be very…
Kirin: They don’t want to talk about politics.
Jason: They have to be very careful. Go ahead Jay.
Jay: Is this ThisWeekIn Startups?
Jason: ThisWeekIn Occupy Wall Street and Global Wage Disparity.
Jay: Global Affairs?
Jay: I just wonder what the competition was between going to Occupy Wall Street and being the first line sitter at the Apple iPhone event on 5th Avenue. I think that was probably a tough decision for some of those guys.
Jason: Exactly. There are better ways…
Jay: That’s all I got for you.
Jason: I’ll take it from here Jay. There are better ways to get back at your parents for sending you to Brown. I’m just going to leave it at that.
Brian: Hey. I went to Brown.
Jason: I know you went to Brown. You’re getting back at your parents by being a successful entrepreneur, trying to take on a really important issue. What is your problem Brian?
Brian: Uh, yes.
Jason: Exactly. Industrious.
Kirin: Well he’s trying to prevent people from making money on the internet by making them untrackable.
Jason: That’s not true. That’s not true. Brian is the backstop against these companies running amok and empowering individuals to take a little more control over their privacy. You know what? He’s very early but I think he’s going to figure it out. Right, Brian?
Brian: Yeah. Ultimately the way things work for publishers is kind of broken now too. We’re interested in being part of that solution. We definitely don’t want to screw publishers in this whole equation.
Jason: So the data tracking is good. Right? I want to see more targeted ads. Consumers like to see more targeted ads. more targeted stories. So there is a benefit to knowing what I like.
Brian: Right. Ultimately I think the way to do it that works well for the users as well as the advertising networks or publishers and so forth.
Jason: This is what I want. I want to be able to turn on a device and put on a web browser or something and know that everything I’m doing is not being tracked by anybody in anyway and that it’s totally secure, point to point. That’s what I want. Is that even technically possible Brian?
Brian: Any kind of 100% secure thing starts to worry me. You really can’t guarantee security. Especially not on the internet that was made for communicating data.
Jason: But what about people just not being able to track what I’m doing. If I just want to read news…
Kirin: You just want to read dumb YouTube videos.
Jason: Yeah. Without people knowing that I’m watching that dumb stuff. Right? I don’t know.
Brian: That’s definitely where we want to get to. I don’t know that anything is ever going to be 100%. I think we can come up with things that are a lot better than what we have today.
Jason: These VPNs seem like they’re getting very popular, huh Brian.
Brian: Yeah. There are a lot of them out there. The issue forever with privacy and security is you’re always going to be trading off usability for more privacy or more security. The point that we came from is that we’re trying to not have to have users make that trade off. So that you get the same or better usability and you can get privacy and security as well. That’s where we want stuff to go to. Hopefully it will.
Jason: People don’t even know what VPNs are. It’s a pretty cool service. I was using it for a while. The I got lazy and then I didn’t use it. Basically you can tunnel in and use another computer to look at your stuff. That just seems like to me the way to go. One of these VPNs was turning over their file sharers, people using Pirate Bay, to. So you using a VPN doesn’t mean their not going to turn you over right?
Brian: Right. Ultimately everything with a VPN is still going through a centralized service. Unless you’re using something like Tour which is a decentralized VPN, a peer to peer service. I think ultimately we’ll end up with things that are architected like that. Where the difference is we say privacy by policy vs. privacy by design. You want privacy by design. You don’t want your data in the hands of someone to make a decision on what to do with it.
Jason: Yeah. That would be so great if there was a commercial version of Tour, that you pay $10 a month for and everything was protected. It was privacy by design. That’s the product I want. Somebody build that.
Kirin: Not going to happen.
Jason: Not going to happen? I don’t know.
Kirin: Cause you asked for it?
Jason: You never know. Sometimes I ask for stuff and it materializes. Hey listen. Brian Kennish, great time having you on the show. Everybody go check out Disconnect.me. He’s @bygloo on Twitter. Hey Jay Levy. Everybody follow @zelkovaVC. Don’t tell anybody about the new company yet. It’s not out right?
Jay: It is actually.
Jason: Oh. It is?
Jason: Then you gotta launch it. What is it?
Jay: It’s Uproot Wines. It’s www.drinkuproot.com. It’s a new wine company based out of Napa. The most exciting part for me has been, we’re using 12 of our portfolio companies in the platform that we’re building out for the new wine company. So it’s given us a whole different view of investing. It’s allowed me to understand better which of my companies are awesome and which ones really suck.
Jason: Wow. So magnanimous. Basically your dog fooding your own companies services as part of uproot?
Jay: Yep. It’s actually been a ton of fun. I’d appreciate if everyone check it out and give us some feedback.
Jason: That’s awesome. I like that. VCs building startups in the lean startup way. Everybody check out drinkuproot.com. Make sure we tweet that as well from my Twitter account, Kirin. Thank you SquareSpace. SquareSpace. What a great product. Everybody go to SqaureSpace.com/TWIST to try it for 2 weeks free. When your trial’s over use: TWIST9 as your code to get 20% off. Thank you MailChimp for making a wonderful product. That I use everyday as well. Everybody go ahead and say thank you @MailChimp, thank you @SquareSpace. Thank you Kirin Kalia from the Launch Ticker.com for reading the news. Well done.
Kirin: Your welcome.
Jason: We’ll see you all next time on ThisWeekIn Startups.