Download - Michael Arrington @ FOWA Feb 07
The Magic Formula
Michael Arrington
February 2007
Topics
• Market Timing
• Key Factors
• Areas of Opportunity
Looking Back At 2006
Was 2006 a “healthy” year for the web, orwas it the beginning of Bubble 2.0?
$600 million in venture capitalwas invested in “Web 2.0”
startups in 2006.
…Bubble?
However, a single acquisitionwas completed for $1.65 billion,
paid for in cold, hard Googlestock.
Nearly 3x the total amount invested by venture capitalists
Not Yet
Facebook was almost acquiredby Yahoo for $1.62 billion.
MySpace generates $25 millionper month in advertising
revenue.
My Point Is…
We’re just getting started.There is nobubble. And the best Internet apps arestill to come.
What To Focus On
1. Have a good idea!• Invent a market• Destroy a market• Remove Friction
2. Have a business plan3. Have a revenue model4. Build it cheap, test the waters5. Avoid high burn rate
However
1. Threw away their original businessplan and one founder bailed out.
2. Flaunted international copyright law.
3. Had no revenue stream.
4. Was spending $1m/month inbandwidth.
It worked because…
1. They removed friction by providing amuch needed service - IPTV (not usergenerated video clips).
2. First to market.
3. So much growth that money poured into cover burn rate.
Case Study: MyBlogLog
1. Launched October 19, 2006
2. Acquired January 8, 2007
3. Never raised a venture round
Case Study: Amie Street
1. Launched mid 2006
2. Three university students
3. No capital raised
4. Can do to music industry what Diggdid to news industry
Case Study: Jingle Networks
1. Free business information (411)
2. Has taken 3+% of U.S. market
3. Forced AT&T to compete
4. UK opportunity?
Shared Attributes of Winners
• Passion for what they are doing
• Doing Something Extraordinary
• Removing Serious Friction
• Great Founder Dynamics
• Never Raised Big Money, or Raised It After They Won
• Perfect Revenue Model Not Required
• Had a lot of buzz about their product early on (free marketing)
Shared Attributes of Losers
• Poor Founder/Team Choices
• Lifestyle/Ego Entrepreneurs
• Raised Too Much Money
• Spent Too Much Money
• Over Business-Planned
• Forgot About Scaling (Don’t be Friendster)
• Had to try too hard at marketing
The Buzz Factor
To be successful you must create buzz aboutyour product:
• Solve a real problem• Do not be the 200th video sharing platform
– Instead, be Aniboom
• If you don’t have a blog, start one now• If buzz isn’t happening, seriously rethink your
product (not your marketing)
Areas of Opportunity
1. Offline/Online• Apollo• Firefox 3.0• File system + html/flash/ajax
2. DRM and Music/Movies/TV3. Data and service portability (teqlo, ning,
pipes)4. Mobile
Discussion