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On The Vine

One of the reasons I got into the investing side of things was Instagram. Over the years as a writer, I had “zeroed in” on many companies that would go on to become hot properties from an investment perspective (Twitter, Foursquare, Square, Quora, etc). But Instagram was something I had watched from its inception (when it was still Burbn), and for various reasons knew it had that potential to be the next big thing.

A little over a year into investing, there are several companies I have such hopes for (CrunchFund probably wouldn’t invest if we didn’t!), but one that stuck out in particular in the past year was Vine.

Vine, as you know, was recently launched by Twitter as their new stand-alone video application for iOS. What a lot of people don’t know (or have forgotten) is that it was a startup before it was a part of Twitter. That’s easy to forgive since the entrepreneurs decided to sell before they actually shipped a product (which, as you might imagine, is bittersweet).

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Compromise

I’ve finally read through most of the Surface Pro reviews — not surprisingly, Microsoft did not send me one (though I did briefly play with a couple last week). What’s hilarious — and already pointed out by John Gruber — is that nearly every single review goes on and on about how the Surface Pro is a product full of frustrating compromises. This is in stark contrast to Microsoft’s statements while building Windows 8 that it would be all about “no compromises”.

I mean, just read Joanna Stern’s ABC News title for chrissakes: Microsoft Surface Pro Review: A Tablet/Laptop Hybrid With Compromises.

It’s almost as if Microsoft time traveled a few months ago to read today’s reviews for the Surface Pro, then went back to try to brainwash everyone with the opposite rhetoric — only to have it backfire miserably. I mean, it’s really amazing how nearly every reviewer came to exact opposite conclusion of Steven Sinofsky’s “no compromises”.

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Civil Fucking Conversations, Finally

It’s hard to say what I hate worse: the disjointed nature of trying to have a conversation on Twitter, or blog comments. Actually, no it’s not. It’s clearly blog comments. They are quite possibly the worst and most useless thing on the internet. But both of the aforementioned things are the reasons I love Branch.

I first wrote about Branch almost a year ago, when they were just getting started. CrunchFund subsequently got involved in an advisory role to the company because they were trying to do the impossible: create a civil, smart place on the internet for discourse. Today, they’re officially launching out of private beta and into the public.

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Stamped: Is It Worthy?

When I first met the Stamped team in mid-2011, I got excited. They were finally throwing away the notion of the 5-star rating system in favor of something much more natural: if you like something, say so. If not, do nothing. It was an app built solely so you could give your “stamp of approval” to things in the real world. Simple. Brilliant.

I wrote up a preview in September of that year, and a few weeks later, the app launched. And while the app got a lot of kudos at launch (most praised its looks and simplicity), it had a big problem: it simply wasn’t sticky enough. Users would stamp things, but have no true reason to go back to the app. So the team went back to the drawing board.

The result, is Stamped 2.0, which launched a couple days ago. It’s a complete re-write of the app, while keeping the same fundamental idea intact: if you like something, stamp it. But the scope has been expanded quite a bit. And they’ve made the app useful on a continual basis, while loading it up with some impressive new UX/UI elements.

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Thoughts On The Latest Chromebook And The State Of Chrome OS

I’ve watched Chrome with much interest over the years. While lately I’ve been generally harsh on a number of Google products, there’s still no doubt in my mind that when it comes to the browser — at least on the desktop — Google is winning. That’s a big part of why Chrome OS fascinates me.

Chrome OS is Google taking their best product and broadening its reach. The aim isn’t just to erase the stain that is Internet Explorer (which sure seems to be working), it’s to go after one of Microsoft’s legs: Windows. So far, it doesn’t appear to be working.

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Sales Versus Surveys

When comScore released their latest U.S. smartphone market share numbers earlier today, I was a bit confused. According to comScore, Google (Android) usage surpassed 51% last quarter. Apple (iPhone) meanwhile, was at 30.7%. Those numbers alone aren’t necessarily surprising, comScore measures overall market usage, not just new sales and Android devices (as a whole) had been outselling iPhones for much of the last couple years.

But something happened last quarter. On the nation’s two largest carriers, Verizon and AT&T, the iPhone actually outsold all Android devices — combined. The nation’s third-largest carrier, Sprint, did not give a number for total smartphones sold last quarter. But they did disclose that they sold 1.5 million iPhones, which was higher than expected. Given the numbers, it sure seems like the iPhone is the majority of their smartphone sales as well — maybe by a lot — but it’s hard to know for sure. Yet, according to comScore’s numbers, Android market share rose 3.7% versus 1.1% for the iPhone.

This leaves two distinct possibilities.

First, that T-Mobile and regional carriers (which don’t offer the iPhone) more than made of the difference between Android and iPhone sales at the big guys. Eric Slivka of MacRumors notes there are around 70 million wireless subscribers in the U.S. without access to the iPhone, so it may be possible. That assumes that basically all of those people chose Android devices, but that’s also possible given the shrinking market share of Microsoft and RIM.

Second, that comScore’s method of measuring smartphone market share is flawed.

It certainly could be the case that the first scenario is correct, but it just doesn’t feel right. I’ll concede that the people without access to the iPhone could have offset the iPhone dominating Verizon, AT&T, and Sprint, but enough for Android to see nearly 4x the growth rate of the iPhone? That seems suspect.

Then consider the numbers from NPD. As a rival to comScore, NPD has their own methods for gathering smartphone market share. In their most recent report, they had Android controlling 48% of the U.S. smartphone market versus 43% for iPhone in Q4 of last year. In the same span, comScore had Android at 47.3% and the iPhone at 29.6%. 

Forget the actual numbers, focus on the differences in the numbers. It’s pretty clear that the methods these firms are using to measure smartphone usage aren’t an exact science.

Digging deeper, you’ll find that the way comScore gets its numbers is through a service they call MobiLens. How is MobiLens calculated?

MobiLens data is derived from an intelligent online survey of a nationally representative sample of mobile subscribers age 13 and older. Data on mobile phone usage refers to a respondent’s primary mobile phone and does not include data related to a respondent’s secondary device.

A survey. 

So on one hand, we have actual, verified and legally reported public data from the three largest U.S. carriers. On the other hand, we have a survey. 

I’m not denying that Android still has the larger overall market share in the U.S. I’m just disputing comScore’s stats that it’s still growing faster then the iPhone. 

Regardless, one thing is very clear: when the iPhone is available on a carrier, it dominates. This is backed up by cold hard sales numbers, not surveys. If Android is still “winning” in some segments of the market in the U.S., it’s only because Apple is allowing it to. 

Update: comScore has written to clarify things a bit. It turns out their numbers do show iPhone subscriber growth outpacing Android on the “Big 3” carriers (13% vs. 11% from December to March). But the overall growth Android saw came mainly from other carriers (T-Mobile and regionals) where Android is dominating.

Fair enough. This reinforces the last point: that Android is dominating the areas where the iPhone isn’t competing. Yet.

“Silicon Valley’s math is getting fuzzy again.”

In my last post, I linked to something that First Round Capital’s Josh Kopelman wrote in 2007. His post was prompted by — wait for it — a New York Times piece declaring that “Silicon Valley’s math is getting fuzzy again.” We were in a BUBBLE! Ahhhhh!!!!

Reading over that post now, it’s pretty awesome.

As Brad Stone and Matt Richtel reported in October of 2007:

Internet companies with funny names, little revenue and few customers are commanding high prices. And investors, having seemingly forgotten the pain of the first dot-com bust, are displaying symptoms of the disorder known as irrational exuberance.

No, that wasn’t written yesterday — but it sure reads like it was.

“Bubble” proof point #1 from 2007:

Consider Facebook, the popular but financially unproven social network, which is reportedly being valued by investors at up to $15 billion. That is nearly half the value of Yahoo, a company with 38 times the number of employees and, based on estimates of Facebook’s income, 32 times the revenue.

Oh that silly little Facebook with its insane $15 billion valuation. 

The company is now weeks away from going public with a market value of around $100 billion. Yahoo, meanwhile, it now worth just under $19 billion. And they’re currently suing Facebook like chickenshits who realize their time is at an end. 

Facebook’s revenue is now past a billion a quarter. Yahoo’s revenue last quarter was about $1.2 billion. Profit for the two companies is about the same. What a difference a few years makes…

“Bubble” proof point #2 from 2007:

Google, which recently surged past $600 a share, is now worth more than I.B.M., a company with eight times the revenue.

Google still happens to be right around $600 a share. It’s now worth just under $200 billion. IBM? $239 billion. Guess what? The market corrected itself. 

But — Google has closed the gap with regard to revenue. Google’s revenue is now just about half of IBM’s on a quarterly basis. And IBM’s revenue is flat while Google’s is still growing.

Crazy, I know. Such a bubble.

“Bubble” proof point #3 from 2007:

More broadly, Internet start-ups are drawing investment based on their ability to build an audience, not bring in revenue — the very alchemy that many say led to the inflation and bursting of the dot-com bubble.

Again, that sounds like it was written yesterday. Either no startup has brought in any revenues in the past 5 years, or it’s extremely silly to imply that young companies will never bring in revenue because they’re not today. You decide.

“Bubble” proof point #4 from 2007 — a quote:

“There’s definitely a lot of betting going on, and it’s not rational,” said Tim O’Reilly, a technology conference promoter and book publisher.

I’d — wait for it — bet that a lot of investors from back then would disagree. And that’s even when you include the broader economic collapse which had absolutely nothing to do with the tech scene.

“Bubble” proof point #5 from 2007:

Putting a value on start-ups has always been a mix of science and speculation. But as in the first dot-com boom and the recent surge in housing, seasoned financial professionals are seeming to indulge in some strange instinct to turn away from the science and lean instead on the speculation.

Major bonus points for calling the housing crisis what it was, but point deduction for equating the 2007 boom times with the dot-com bust and the housing collapse. Not. At. All. The. Same.

“Bubble” proof point #6 from 2007:

“The environmental factors are much different than they were eight years ago,” said Roelof Botha, a partner at Sequoia Capital and an early backer of YouTube. “The cost of doing business has declined dramatically, and traditional media companies have also woken up to the opportunities of the Web.

“That does open up the aperture for a different outcome this time,” he said.

Wait a minute, not actually a “bubble” proof point at all! A voice of reason! There may just be a reason why Botha is one of the best in the business. Perhaps he should write the next “bubble” post for The New York Times.

“Bubble” proof point #7 from 2007:

Some trace the start of the new bubble to eBay’s $3.1 billion acquisition of the Internet telephone start-up Skype in 2005. EBay’s chief executive, Meg Whitman, reportedly outbid Google for the company. This month, eBay conceded it had grossly overpaid for Skype by about $1.43 billion, and announced that Niklas Zennstrom, a Skype co-founder, had left the company.

Not a sign of a bubble, just simply a shitty deal. Big difference.

And wait, didn’t Microsoft just buy that same company last year for $8.5 billion? Yup. Some will use that as a sign that we’re actually in a “mega bubble” now, I’m sure.

“Bubble” proof point #8 from 2007:

Google’s acquisition of YouTube last year for $1.65 billion, under similarly competitive bidding, might have accelerated the transition to loftier values. Google executives and many analysts argued that YouTube was well worth the price tag if it became the next entertainment juggernaut.

It has. And it’s now a good business for Google. That didn’t stop one analyst cited in the piece from saying “We are almost going back to year 2000 types of errors.”

Right.

“Bubble” proof point #9 from 2007:

Twitter, a company in San Francisco that lets users alert friends to what they are doing at any given moment over their mobile phones, recently raised an undisclosed amount of financing. Its co-founder and creative director, Biz Stone, says that the company was not currently focused on making money and that no one in the company was even working on how to do so.

This will be used as another proof point that we’re now in some sort of “hyper bubble”. But Twitter is likely to see something in the neighborhood of $400 million in revenue in 2012. Not Facebook revenue. Not massive. But not nothing. And growing.

Need I go on? Other examples from the article include Geni (which is still around, and paved the way for Yammer, a CrunchFund portfolio company which appears to be doing quite well). And Ning, which ended up selling for around $200 million — right around its perceived (and implied crazy) valuation at the time of the NYT story. Not bad for a “bubble” company.

But here was the most interesting passage from the 2007 story:

Mr. O’Kelley, formerly of Right Media, said other entrepreneurs had begun to think that the financing game is best played by avoiding actual revenues — since that only limits the imagination of investors. “It’s a screwed-up incentive structure, just like you had in the first bubble,” he said.

Compare that with:

“It serves the interest of the investors who can come up with whatever valuation they want when there are no revenues,” explained Paul Kedrosky, a venture investor and entrepreneur. “Once there is no revenue, there is no science, and it all just becomes finger in the wind valuations.”

We’re not just recycling the “bubble” talk, we’re recycling the key arguments behind all of the talk. The dangerous thing here is the implications that the same behavior that led to the 1999 actual bubble is happening all over again. It’s not.

It wasn’t in 2004. It wasn’t in 2005. It wasn’t in 2006. It wasn’t in 2007. It wasn’t in 2008. It wasn’t in 2009. It wasn’t in 2010. It wasn’t in 2011. And it’s not now.

Sometimes it takes — gasp — time to nail a business model. Some startups (and an increasing number, I’d say) focus on this from day one, some don’t. Some take the Google route. Or the Facebook route. And those routes appear to be working out just fine despite what a certain fear-mongering post from 2007 would have had you believe.

Hindsight may be 20/20, but foresight doesn’t have to be as blind as a bat. Again. And Again. And Again.

Rethinking Smaller, Smarter Social — Then Rethinking It Again

Back in October of last year, I wrote about one of our early CrunchFund portfolio companies, Everyme. At the time, they were rethinking social networking through the lens of the original digital social network: your mobile phone address book.

They put an app out there and a lot of people were testing it, sending feedback. That’s when the team had a realization: they were onto something, but they weren’t quite there. So they went back to the drawing board and rethought their rethinking of social. The result is the Everyme app launching today.

Address book information is still key, but it’s no longer about recreating your address book to make it social. It’s now about using the connections in there to create small, private networks — called yes, Circles. By syncing your address book information with Twitter, Facebook, and LinkedIn, Everyme can automatically cluster people together and populate some key Circles for you. Your hometown, your college, your current city, your work, etc.

This is similar in concept to what Google does with Google+ Circles, but the key is that most users won’t have to set up their own. And managing them is much simpler. The concept of Google+ Circles is right, but no one is going to manage them. No one does. It’s flawed.

With Everyme, the idea is to keep the Circles very small. And again, private. There are no options to share things to Twitter and Facebook — this is on purpose.

Everyme Circles are actually closer to Facebook’s Smart Lists, which the social network also populates for you based on relationships. But for many people, Facebook has become too large. It’s a network about sharing as broadly as possible for many now. Everyme is about the people you really know and care about — again, those in your address book.

In using the app and seeing how people are using it today, they definitely have some onboarding issues they need to work out. One great thing about the service is that you don’t need to use the app to use it — you can use email or SMS to interact with Everyme. But the flipside is that people are getting pinged to sign up and have no idea what is going on. They’re undoubtedly working on this.

The fact that so many people are working on smaller, more personal networks is a good sign for Everyme. They’re clearly onto something. With investments in Path, Just.me, and Pair, we’re obviously following this whole space closely as well. 

In the age of the Facebook IPO, the smaller network resonates. And that’s especially true on mobile, which is the most personal form of computing. My hunch is that Everyme isn’t an app that will easily win over the early adopter tech crowd, but it’s something a more mainstream audience should love. 

More coverage on Everyme today from The Next Web, TechCrunch, AllThingsD, and GigaOm.