Joltid Ltd, a British Virgin Islands company founded in 2001 by Niklas Zennstrom and Janus Friis, the team that created Skype, Kazaa, and Joost, is threatening to shut down eBay’s Skype service. Skype’s approximately 450 million users generated $500 million in revenues in 2008, a figure expected to grow to $1 billion for 2011, according to the Wall Street Journal.
eBay bought Skype from Joltid Ltd in 2005 for $2.6 billion, but the deal did not include the complete assignment or transfer of the “Global Index P2P software,” merely a license for this core technology component.
Joltid Ltd. still holds a key patent on the content distribution platform technology that allows Skype to manage bandwidth efficiently. US Patent number: 7480658 filed on 14 July 2004 lists Joltid Ltd as the owner, and the Estonian programmers Ahti Heinla and Priit Kasesalu as the inventors of the technology.
eBay’s 10Q quarterly report filed with the SEC disclosed that in March 2009, Skype Technologies S.A. filed a claim in the English High Court of Justice (No. HC09C00756) against Joltid Ltd. due to its cancellation of the software license, and Joltid counterclaimed for copyright infringement and license repudiation. The outcome of the dispute will be determined by the UK trial scheduled for June 2010.Joltid has now canceled eBay’s license, and if effective, the cancellation could disable the whole service, as re-engineering the entire P2P architecture for half a billion users around the world within 10 months would be a mission to mars. eBay would have to rapidly develop, test and roll out world wide an alternate non-infringing technology, license an alternate technology, or abandon the service altogether. According to the 10Q eBay has chosen to try to develop an alternative technology.
This kind of an IP disaster is reminiscent of the Volkswagen deal to buy various Rolls Royce and Bentley factories and assets, but failing to buy the Rolls Royce trademark which was sold to BMW. For more embarrassing IP disasters look here.
The moral for entrepreneurs – make sure that you get qualified advice when negotiating and documenting technology deals to avoid such colossal PR, technology and financial disasters. The advice applies equally to those start-up founder/heroes that fancy themselves Renaissance-men capable of playing any role in any company, consultants that attempt to give occasional IP advice as an up-sell on their other services, and those CEOs thinking that their in-house lawyers should be able to handle it – I mean – how hard can it be?
eBay and Volkswagen found out the hard way.
The steady drizzle of criticism questioning the viability of Web 2.0 social networking site’s “free” business model turned into a monsoon. A flood of stories swept over blogs and news reports querying why building huge audiences with cool new entertainment experiences has not translated into profits. Some of the additional attention was no doubt related to the reportedly “somber” and “bearish” tone the journalists witnessed at the Allen & Co. hosted conference of media industry heads in Sun Valley.Assuming even a very generous $0.40 CPM rate, Dodge calculates that your Facebook/MySpace app will not earn earn $1 million from advertising, until the app gets to the outrageous number of 2.5 Billion page views per month. [for perspective - Yahoo has a total of 1.5 billion searches per month and Google has a total of 6.1 billion searches]
Social Networking’s ‘Naked’ Truth, a CNBC.com story published on 10 July by Silicon Valley Bureau Chief Jim Goldman questions whether we are “staring another dot com boom/bust right in the face.” Goldman’s post blows the whistle on social media’s inability to generate profits in the foreseeable future.Facebook is addictive, even magical to millions. Same goes with MySpace, and Twitter, and LinkedIn, and Digg, Badoo, Classmates, Bebo, Flixster, Friendster, Orkut, and hundreds of others. They are powerful, fun, convenient. They offer value. And they build connection. Look no further than the Michael Jackson news tsunami to see how social networking affects our lives and drives information.
But with hundreds, even thousands of these sites out there already, with many attracting millions in venture capital, I simply ask, Where’s the return on the investment? What’s the business model to MAKE money and not merely to attract investment?
Partly this web 2.0 bashing is just the old media’s response to quickly losing entertainment market share to the “free” competition on the Internet, but there is something to these warnings of overvaluation. If the current advertising revenue rates remain the same, the Web 2.0 landscape will be forced to change, consolidate and find brand new new revenue models.
Looking at Zynga’s revenues and the profits of virtual gift business around the world, we can see that monetization can be done quite successfully with some formats. Warrent Buffet recently suggested that he would be willing to pay $5 per month for the pleasure of watching YouTube, and I know I was happy to pay $13,95 for HBO’s great programming in the US (although it took airing of such phenomenal content as the Soprano’s and Rome to get me to subscribe).
At a recent speaking event in Estonia I reminded the enreprenurs in the audience that while it is important that they contribute creative online content to better promote themselves and their businesses – everything they say can and will be used against them at some point.
In case there was still doubt – here is a California Appeals Court decision to cement that truth. Cynthia Moreno, a student at UC Berkeley, posted on her MySpace page an online rant about how much she thought that the neighboring town Coalinga sucked – stating among other thing “the older I get, the more I realize how much I despise Coalinga.”
Low and behold, the Coalina local paper sensing an opportunity to rabble rouse printed the rant in the paper – which naturally caused a flood of hate-mail directed at Moreno and her family. According to the complaint, Moreno’s father’s 20-year-old business in Coalina lost so much money that it had to be shut down and the family had to move out of town.
Ms. Moreno sued the newspaper for invasion of privacy and intentional infliction of emotional distress – claiming that the writing was intended for just her MySpace friends.
The California Court of Appeals decided that even if Moreno intended the information for a limited audience, there is no expectation of privacy online. The ruling by Judge Levy dismissing the privacy claim states that:
Cynthia’s affirmative act made her article available to any person with a computer and, thus, opened it to the public eye Under these circumstances, no reasonable person would have had an expectation of privacy regarding the published material.
So the moral of the story is again that everything you post of Twitter, MySpace and Facebook is public information which your employers, business partners and the public in general will see. Think before you post!
In an announcement recently posted on Amazon’s website, the company revealed that it will no longer pay referral fees to Associates that send them traffic through keyword bidding and other paid search results on Google, Yahoo, MSN, and other search engines.
Amazon announced the following:
After careful review of how we are investing our advertising resources, we have made the decision to no longer pay referral fees to Associates who send users to www.amazon.com, www.amazon.ca, or www.endless.com through keyword bidding and other paid search on Google, Yahoo, MSN, and other search engines. As of May 1, 2009, these paid search Associates will not be paid referral fees.
The reason I bring this up is that I have seen references in some software startup business plans to earning revenue from the Amazon Associates program. So – make sure you deleta that from the business model and revenues before sending out business plans and powerpoint slides to your Angels and VCs
Recent study about men’s preferences says that video games are taking over our bedrooms!
You can almost hear how the world suddenly polarizes into two by eliciting masculine yodeling from Mars inhabitants and distressed booing from femine Venus. An intergalactic balance and harmony is yet again at risk!
But not so fast! Another study concerning women revealed that they would also prefer virtual fun over pristine physical romance. Although, while men have found their niche in video games, women opted for more generic and socially acceptable assortment – simply surfing the web. I quote:
The study was commissioned by Intel and shows that 46-percent of all women would rather give up sex for two weeks than the internet for two weeks. When looking at the 35-to-44-year-old age group, that number increased to 52-percent.
There, it has been said! Now that we have evidence from both sexes (although semi-anecdotal, but I still choose to belive it), could we just throw away the masks, raise the iron curtain and liberate ourselves from antique world order so that we could embrace the newly found balance?
An Estonian entrepreneur and CEO at Resta Ltd. Baldur Kubo thanked me recently for speaking up for the “free” business model associated with the long-tail effect of the internet. I think providing quality free content in nitch markets is one of several viable ways of finding loyal pre-qualified customers for your business.
This got me thinking about the veritable cornucopia of web apps – and how can one actually make money in this e-gold rush.
In investigating who makes money on line I found a a very useful overview by Box UK regarding the most popular business models used for generating money with web applications. Their staff went through the Webware 100 Top Web Apps for 2008, analyzingand classifying their business models. Turns out that of the most popular business models:
You can see the complete survey results at Box UK.
A group of scientists from the Munk Centre for International Studies at University of Toronto claim to have exposed a GhostNet – a 103 country wide electronic spy ring. The scientists report that they received a request from the exiled Tibetan leader the Dalai Lama to review his computers for any indications of malicious software. The New York Times report states that the computer scientists at Toronto Univesity discovered that 1,295 computers were affected by vrious malware.
This not just run of the mill university computer labs or library computers picking up viruses, but included computers “belonging to embassies, foreign ministries and other government offices, as well as Dalai Lama’s Tibetan exile centers in India, Brussels, London and New York.”
The scientists claim that there were direct real-world effects due to the cyber monitoring, including:
After an e-mail invitation was sent by the Dalai Lama’s office to a foreign diplomat, the Chinese government made a call to the diplomat discouraging a visit. And a woman working for a group making Internet contacts between Tibetan exiles and Chinese citizens was stopped by Chinese intelligence officers on her way back to Tibet, shown transcripts of her online conversations and warned to stop her political activities.
The Chinese government denies having played any role in the monitoring of the Dalai Lama.
We have our own experiences with cyber attacks. For Estonian’s the Chinese denial may sound ominously similar to the Russian government’s denial of involvement after the 2007 cyberattacks on Estonia. Estonian bank and government computers were subjected to denial of service attacks after the government relocated a controversial Soviet WWII memorial. Although Estonian Foreign Minister Urmas Paet strongly accused the Kremlin of direct involvement in the cyberattacks, no direct link has ever been conclusively established.
The closest link has been allegedly established by by Sergei Markov, a State Duma Deputy from the ruling Unified Russia party. According to the report on a Russian blog Ekho Moskvy the Russian parliamentarian Markov stated:
“About the cyberattack on Estonia… don’t worry, that attack was carried out by my assistant. I won’t tell you his name, because then he might not be able to get visas.”
NATO last year established a large electronic warfare installation, the Cooperative Cyber Defence Centre of Excellence (CCD COE) in Tallinn, Estonia. NATO recently published Estonia’s experience as one of the six “video reports illustrating the impact of its activities on the everyday lives of its citizens.“