America / Western Civ can no longer innovate because it has no internal or external enemies, only threat of annihilation can overcome human nature’s aversion to the fear / deadly career risk of supporting innovation.

ONE – Do you have a product?

If no, build an MVP.

If yes, get customers.

TWO – Do you have customers?

If no, get potential customers.

If yes, develop against their feedback.

THREE – Do you have potential customers?

If no, get at least 5.

If yes, develop against their feedback.

CUSTOMERS ARE YOUR GOAL, GET THEM AS EARLY AS POSSIBLE, DO NOT “BUILD IT AND THEY WILL COME” (Yes, you have to build “something” it’s called an MVP, but it needs to be as limited as possible, what can you do with a powerpoint deck and some excel macros? Validate the pain point and your solution before you invest or scale).

YOU ARE THE RULE, NOT THE EXCEPTION — You will not raise $8MM against an unproven idea with no customers and no business model because you are not Evan Williams, Biz Stone, a Facebook founder, etc.

You (yes YOU, non-facebook founder) need:

1. PRODUCT-MARKET FIT – aka a Solution someone will actually pay for
2. CUSTOMERS – aka Sales aka Revenue
3. SALES PROCESS – Not discussed above, a SCALABLE methodology (documented in as much detail as possible) for generating new sales

Obsess over these goals and nothing else, and you won’t need a business plan, because instead you’ll be building a business, and then you can raise money at much more attractive valuations (or just raise it, period), after you’ve proved out product-market fit and sales.

Bottom Line: There is NOTHING worth working on besides product-market fit.

IBM Watson's final score on Jeopardy.

Last year, Paul Graham wrote an essay about What Happened to Yahoo.

In summary, Yahoo was getting paid so much by their legacy business, enough that when technology moved on (faster than the market, as usual), they were incapable of changing (because they were getting paid too much not to change), and so they got left behind.

On February 16th, we saw that IBM’s Watson computer had defeated the two greatest human contestants to ever play the trivia/wordplay television game show Jeopardy!

Last night, it occurred to me that Google’s getting paid SO much by a market where humans do all the search. Will it recognize that technology has just (potentially) moved on?

The end of Google may not come through social networks (Facebook). We do plenty of stuff online that, for multiple reasons (not least to avoid boring our friends to death), we are not going to want/need to share with our friends.

But I do see a clear path from where we are now to a future where search robots are researching and organizing information for us. Our “virtual assistants” become truly virtual.

A lot has been written, including the Paul Graham article above, about Facebook’s “hacker culture.” Another way of looking at this, from an outcomes perspective, is to say that Facebook rewards people who build things even more than Google (and their vaunted “20% time,” which we never hear about anymore), and so for the moment, Facebook is winning.

Aside:
This “corporate cambrian explosion” will likely be come to seen, or has already been seen, by someone on the HBS faculty, as a distinct and repeatable phase in the creation of incipient monopolies. There is a “golden age,” after exponential growth begins, but before the primary business model solidifies, when engineers are maximally rewarded for creative output. This is celebrated in Silicon Valley from Fairchild Semiconductor on down, but I bet you can find it in airlines, autos, oil, trains, every major non-military technology back to the dawn of the industrial revolution. This would be a great read…

I think it’s a fair generalization to say hackers have a low tolerance for things that bore them, they are intrinsically motivated. I had a co-worker once who needed to move, and he wrote a program to monitor all of the NYC property management websites for new no-fee listings. He reduced the time needed to research housing opportunities by a factor of 5-10 (at least compared to a non-coder like me).

Internet search is incredibly useful at the moment, but when the tools to automate information retrieval get good enough, we will move on to even more interesting things, just like my friend did, thanks to his apartment search robot.

A robot-optimized search engine might become a true competitor for Google. It might even be able to monetize the traffic through ads, exactly as Google does, if the ad seems like the best solution in a Watson-style analysis, the machines might be happy to explore sponsored links, just like we do.

Aside:
There is no API for Google’s index. Google is researching machine learning to improve search results, which is conceptually similar to Watson’s information-retrieval AI, but the Google project, code-named “Seti” is trade-secret, you won’t find it hosted on code.google.com.

Google.com
Google.de
Google.co.jp
Google.co.uk
Google.fr
Google.it
Google.es
Google.ca
Google.nl
Google.cn
Google.com.au
Google.ru
Google.pl (Poland)
Google.com.br

Why 14? Because that’s how many are in SEOmoz’s top 500 domains list.

Circulation exceeded five hundred thousand in every issue in 1954, rose to six hundred thousand the following year, and climbed steadily through most of its history (to more than three million a week in 2009). It quickly established itself as by far the most famous and influential sports magazine ever published in the United States. … Not until 1964, however, ten years after its first issue, did Sports Illustrated produce its first profit.

Author: Alan Brinkley
Title: The Publisher
Publisher: Knopf
Date: Copyright 2010 by Alan Brinkley
Pages: 397-405

Goo.gl is a competitor started by guess-who.

How will the shortener impact Bit.ly? Here are some very imaginative numbers, and then a bit of common sense.

Bit.ly has ~8MM monthly uniques, and if complete.com is to be believed, toolbar.google.com has 1.4MM monthly uniques. With 146MM google users, my crazy guess is that toolbar adds about 5.6MM users per year (a third of its annual unique visitors).

Google launched its toolbar on December 11, 2000. Use the same install ratio for the nine years 2000-2008 (ha! total black box, as good a guess as any) and you’ve just guesstimated that about 32MM computers currently have installed Google toolbars (how many active? if you know of any toolbar activity data please comment, I’d love to see it).

Aside: Right now I think it’s a beta release, you have to manually upgrade your toolbar, or at least I couldn’t find it on my Firefox install, so I went to toolbar.google.com and upgraded, which gave me the Share button, but the URLs on shared pages where not automatically goo.gl’d for Twitter, but let’s pretend all active installs will have this feature by year-end 2010 for the purposes of this discussion.

So now for some common sense. What will the impact be on Bit.ly? Zero.

Toolbar users and bit.ly users are not the same users. And bit.ly is just more focused, URL shortening is all they do versus Google’s yet another feature to support. Bit.ly is moving faster to develop features based on their user’s needs than Google, eg. reaching its users through all of their online access points (mobile http://m.bit.ly), and I predict Bit.ly will continue to have the velocity advantage.

I don’t know what the future opportunities/exits could be for Bit.ly, a technology acquisition by Twitter or another growth-hungry fish in the internet sea is obvious, standalone revenues are not so obvious to me. I can sort of imagine where virtual goods and custom short URLs could intersect to make money, but not in very coherent detail. But, they are the best solution for active tweeters, facebookers, etc, and like posterous.com, they are using the velocity and intelligence of their product’s evolution to win. Toolbars are the lowest-common-denominator for being more productive online, the exciting activity is happening with dedicated innovators like Bit.ly and the “bleeding edge” market in the US is large enough to sustain and propagate them against lesser and later competitors.

Another thought, Google’s scale is much less relevant when the determining factor is application (versus advertising) user experience. In advertising, they historically have the advantage (search and AdSense are a “better” UX, and thus out-compete other types of ads (display) in many situations), so when they do something like purchase DoubleClick or AdMob, it’s a big deal for their competitors. With other products, GMail being I think the best example, even with a superior user experience their road to dominance is a much less certain / longer proposition.

Although average wages in the United States had risen only 0.6 percent a year since 1998 and consumer confidence had been declining steadily, GDP had risen 2.6 percent a year. This was an artificial increase–boosted by an $8.6 trillion increase in personal indebtedness and an almost $20 trillion increase in household net worth–that came from rising real estate values and the stock market. In essence, consumer debt had inflated the economy beyond its real size. This economic “growth” was simply borrowed from the future, and would have to be paid back with interest.

Attention NYC-area startups.

Have: 1 entrepreneur who’s launched web products in e-commerce, ad tech and social networking; loves

• giving web startups feedback,
• Steven Blank’s customer development / lean startup approach (wikipedia, big deck, small deck, blog, book, course)
• helping you plan the growth strategy for the seven-year “overnight success” you’re working on.

Need: More startups to help.

The Catch? There isn’t one. Well, not one that’s fungible with your corner grocer. Yours truly is rather, ahem, under-employed at the moment. Over the past two years I’ve been fortunate enough to meet many of “the really smart people doing the really cool stuff” here in NYC, and with time on my hands I’d like nothing more than to meet the rest of you. (non-NYC people, don’t be shy. Have browser, will email… or drop.io or acrobat.com…).

The details: Contact me and we can set up a time to chat. Or just send me a quick overview and a link to your site, blog or business plan, such as it is. I’ll spend a few hours with it, and you, and give you my thoughts on your product, customers (real or potential), where to look for more of them, and how to reach them. No rocket science, but solid, proven strategies for growing scalable businesses. As above, this is all totally free for you.

So, if you’re working on a web startup, and you’d like some gratis feedback on your product or go-to-market strategy… what are you waiting for? Get in touch, thanks!

Jonah Keegan
jonahpkeegan at Google’s webmail
Jonah’s Twitter
Jonah’s Skype

Moriza

Lunches with folks who have lots of social authority are frequently auctioned for charity. Does a long-tail lunch market exist?

I want a long-tail auction site for lunches that donates all proceeds after expenses to charity.

An individual willing to have a lunch (presumably someone with some amount of social authority) posts date, time and city to the site.

Anyone interested in a lunch with that person bids, and the auction closes at some point prior to the lunch with sufficient time for logistical arrangements. Winning bidder gets a lunch with someone they want to meet, the “social celebrity” raises some cash for a cause of their choice.

This was inspired by the desire to have lunch with someone in NYC that I don’t yet know, First Round Capital’s resurrected office hours, John Boyd’s MeetingWave and a conversation yesterday where I was told about “interview auctions” at top-flight business schools, where demand exceeds supply for certain employers, and the open slots are filled by auction.

Tech entrepreneurs who dream of launching “the next Google” should consider customer retention, a largely untapped goldmine for search stakeholders (platform, consumers, and merchants).

Search Acquisition

Paid search has fundamentally changed the economics of customer acquisition, driving new business creation in multiple industries and reaping the enormous rewards that have historically accrued to similar transformative technologies (Intel, Microsoft, etc).

But that’s yesterdays news, entrepreneurs who dream of global scale and revolutionary economic impact want to know what’s next. What technology will unlock value for businesses (and consumers) on a similar scale, and launch the next startup into the large-cap corporate firmament? For a possible answer, let’s first look at one of the reasons paid search is so successful, it’s vibrant long tail of both consumer and merchant activity.

The long tail of search is where the entrepreneurs live, identifying and creating new markets. And key to these exploratory businesses, aka startups, is customer acquisition cost.

Acquisition is critical for any entrepreneur with a “startup” rather than a business. A startup’s costs exceed its revenue, and for the vast majority of companies, seed capital delimits the time available until profitability or failure (again, for the vast majority of companies, re-capitalizing is not an option).

Search-based acquisition affords the entrepreneur transparency and a moderate level of control over this cost, making it an enormously attractive acquisition channel.

After Acquisition Comes…

One way to get ahead of the curve in business is to identify a large group of economic actors, with a life-cycle that has known, or at least highly probable, needs, and provide a solution. Economist Burton Malkiel made a tidy fortune investing ahead of baby boomers’ needs, and profiting as boomers flooded into those markets (diapers, cars, drugs, etc).

Applying this model to the search ecosystem, we find thousands of online businesses that have identified an opportunity, and thanks to the efficiencies of search acquisition, have launched and grown to profitability.

So what’s next for search businesses? Search solved acquisition, but what are they doing to retain those customers?

Customer Retention

I believe the average search business hasn’t paid much attention to the issue of customer retention. Acquisition costs have been so low, in what are still early days for this marketing technology, that the massive pool of potential customers maintains a steady-state environment of stable profitability, and perhaps even growth. We can count on reversion to the mean in any economic system however, so these days are numbered, and many of these businesses are going to have to look elsewhere to stay in the black and/or continue growing.

The tactics of customer retention are well-established, but much as pre-internet global customer acquisition was the exclusive domain of large companies, the absence of scalable, long-tail-oriented retention platforms has kept this powerful growth tool out of reach for most small businesses.

A platform that allows an ecosystem of customer-retention applications to flourish has transformative potential, a business and technology revolution that creates the elusive “next Google.”

Examples and Opportunities

Salesforce.com (and of course, the Google Apps suite… including website optimizer) is one such player, but their top-down, vendor-services orientation cannot tap into organic customer behavior in quite the way search does, providing a true ecosystem for perpetual economic innovation.

Who has the behavioral data that will drive innovation in retention technology on par with search? Social networks.

Consider the Facebook Connect program. The consensus is that Facebook will build an ad network on top of this data asset. As the only big social network to take significant risks in the past two years, my bet is we’re in store for a lot more.

Imagine Facebook providing their applications ecosystem with access to this data, significant innovation in customer retention results, creating scalable retention solutions for multiple industries, all of them sharing the low cost of entry and (relative) ease of operation that permitted the explosive growth of paid search.

Open social initiatives have the potential to connect innovators and consumers directly, but cut out the “all the world’s a stack” kerfluff-ing (advocated most fiercely, no surprise, by folks with the biggest stake in its success) and the historical antecedents say we need a trusted walled garden to get us there first. Would the internet be where it is today without AOL? Facebook will chart this path for the industry, and elevate the art of “my lifedata online” to the point where users can accept this data swimming out of the Facebook pool to join the wider web experience.

As online economics mature, merchants will need additional innovations to generate continued sales and margin growth. A long tail-friendly retention technology platform that offers utility to both consumers and merchants is going to be a search-scale win, creating enough new value in the lives of its users that the provider’s share will catapult them into the realm of the most profitable companies.

Coda: The futurist’s are discussing this elsewhere, with a closer look at Connect and more product insight. For the early stages of one of the most important tech-entrepreneur stories for 2009, Nicholas Carlson and Ben Parr both have very good recent reads up at Alley Insider and Mashable, respectively.