Solon Partners

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.“

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I remember when HBO and Cinemax, the first pay Television channels, really started to take off in America in late 80s. My parents thought it an unnecessary expense, but once per year we got to watch HBO for free during the teaser campaign that showed us everything we were missing by being cheap.

When I got  to college I immediately ordered my very own pay channels for my dormroom  TV. However, after about 2 months I realized that I had already seen the vast majority of the movies on VHS or in theaters, and the stuff I wanted to see was never on, so I canceled the subscription.  Also I immediately found other uses for the $10-20 per monthly savings - like food and beer.

However, the next time I ordered HBO I did not cancel for over 5 years, until I literally had to  because I was moving back to Estonia.  The reason for such devotion and commitment is simple - Sopranos, Wire  and Rome. Three original series that were so interesting, so well acted, directed and made that it was worth paying for the subscription all year to catch those shows as they premiered.

Historical perspective

From US market introduction in late 1940s, it took  TV over 40 years to get people to pay $10 per month for content such as HBO and Cinemax. From US market introduction in 1920s, it took 81 years to get people to pay $12 per month for content such as XM and Sirius. Therefore, directly paying for content (not through) advertising is a rather new model. Moreover, it became successful only after the content offering truly became good enough to justify the expenditure.

Market reality

When I hear people pitching me with business ideas based on offering paid  web content, I ask myself two  simple questions - 1. would I read this for free -  if yes, 2. would I really pay for this on a month to month basis? Realistically 99% of the content is simply not innovative, interesting or useful enough to get out the credit card number and fill out the address for a subscription.

While Financial Times site, FT.com has 99,000 paying customers paying aproximately €13.95 per month, Barron’s has about 150,000 web subscribers, and that 50,000 people are willing to pay $6.95 per month for their New York Times Crosswords. But honestly, how does your writing quality and diversity compare to these sites?

You can only charge for content people really want

As a start-up, you almost certainly you cannot compete with NY Times, and Financial Times in volume of stories or even quality of the writing. This should put into perspective why it is so hard to get significant volumes of paying customers for your website.

However, resignation to the free model is the wrong answer in today’s long tail age.  If you are writing about a topic that is of considerable interest to your niche  you can make money by delivering specialized targeted content.  Consider the oil painting advice website that through ebook sales  and other revenue streams can make up to $100,000 per year, or the  parrot owner’s site that can make $400,000 per year.  The key is targeting your message to the relevant market and then providing them with content that they actually want.

Another words, again it is time to go to the cliche - focus on the customer. The entrepreneurs that really want to make money don’t just treat this as a mere slogan - they actually analyze who are their target customers and whether they are giving customers something they are willing to pay for.

p.s. A very insightful explanation for why FT has to charge for the content in the face of all the free information available on the internet can be found at the Seeking Alpha blog.

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I read from Uri’s blog (written in Estonian language) today about his banker buddy from Southern Europe commenting on people getting laid off all over Europe due to the economic crisis.

The banker suggested that in Europe, where laying off people generally is very costly and involves potential law suits, several (big)companies are using crisis as a perfect scapegoat for letting people go. He also added that in most cases, these people would have been fired long time ago, but these companies just did not have a plausible and safe enough reason to get rid of them until the meltdown. The key for the downsizer is to blame it on external reasons, globally applicable if possible!

“World markets are all down. We can’t possibly afford to keep you around anymore.”

“Our revenues are down. It is sad, but we are forced to let you go.”

“Our export clients aren’t buying anymore. Your department needs to be shut down despite your great personal performance.”

“Everybody is talking about cutting costs and staff. So, letting you go now is only fair, right?”

Rather interesting observation I would say. It certainly makes (brutal)sense when considering how hard it is to fire workers in normal conditions due to inflexible socialist regulations that make it prohibitively expensive to adjust staff  according to changing market conditions.

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Now not in China

Foreign Ministry spokesman Qin Gang, according to Reuters, stated that: “Many people have a false impression that the Chinese government fears the Internet. In fact it is just the opposite.”  Moreover, “China’s Internet is open enough, but also needs to be regulated by law in order to prevent the spread of harmful information and for national security.”

Then China shut down YouTube access.

I understand that aside from videos of a Humping Storm Trooper and a sleepwalking golden retriever there is a lot of other harmful information which may affect Chinese national security.

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Challenging Goliaths takes something special

I have noticed that too often in exploring business ideas and considering projects I have come up against a strong established market leader and said  - ok there is no way to compete with that!  Maybe that’s the “safe” strategy, but you also miss out on some sensational opportunities.

Its a dilemma faced by many start-ups, as by definition they are just stating up while some market leader is already the preferred provider.  However, there are many ways that you can outwit the Goliath and service their customers much better.

Collis Ta’eed has written a great piece giving us advice for taking on the perceived  market leaders.  Collis is the co-founder of the successful start-up FlashDen. Here is my summary of the main points if you don’t have time for the full article:

• Specialize (Technorati and Kyak’s sites are getting nice traction in subniches despite the power of Google)
• Dramatically Change the Product Features (make a much better product, if you are cutting prices - make it dramatic)
• Position Yourself as the Alternative ( Pegging yourself against a big player raises your profile too)
• Internationalize (Bebo and Orkut can make money in markets underserved by Facebook and MySpace)
• Generalize (Superniche for the superbrave entrepreneurs who think they can be bigger, better and than anyone)
• Parallel Niches (same basic product idea as the Giant but apply it to different audiences in other contexts)

Obviously Collis, has no silver bullet and there are many other ways to do it as well.  Nevertheless all, giantslayer start-ups really must differentiate themselves. Your suspicions are probably right  -  just 10% cheaper, or 10% better is usually not enough advantage to overcome the big boys.

If you can be 50% better, or open up a brand new market there is no reason not to take on the Goliaths. You will know that you are really doing it right when the Goliath offers you an obscene amount of money to by you out.

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Printing money is hard work

When writing my March6 blog entry I wondered when we would the United States be added to the list of countries resorting to printing money to boost the economy.  That day has already come.

In the words of Goldman Sachs analyst Jan Hatzius, the Fed is going to the “kitchen sink” strategy of throwing everything it had to jolt the economy out of its downward spiral.

The Federal reserve is dropping a $1.15 trillion money bomb into the bond markets to boost lending. Yes this money will literally be eased out of the printing machine in major quantities (official term being “Quantitative Easing”). Ok maybe I am not using  exactly the proper description they teach in the MBA program.

Wickipedia defines QE as follows:

The term quantitative easing refers to the creation  of a pre-determined quantity of new money ‘out of thin air’ through open market operations by a central bank as the start of a process to increase the money supply. It can, more simply, be understood as an indirect method of printing money.

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Skype

According to “sources” at the Counter Terror Expo in London,  the  cryptologic intelligence agency of the United States government  - National Security Agency (NSA) is ready to pay “billions” for technology that would allow listening in on Skype IM and phone call traffic. Apparently there are other clients lined up as well - German and UK clandestine services are also ready to pay big money.

Naturally this brought out the naysayers claiming that this message is just a diversionary tactic, attempting to assure the users of Skype that their calls are not already all being monitored “to get would be criminals to be more brazen.”

Estonia’s programmers should be capable of cracking Skype as they programmed significant portions of the system, but they should really rush to take the job as eBay (Skype’s parent company) may be tempted to recover some of its $1.4 billion it has already been forced to write off as a loss for the purchase of Skype.

I am joking of course — kind of…

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Traditional papers are closing their doors, drastically reducing staff, and shifting all their operations online. This week the Seattle Post-Intelligencer, Seattle’s oldest business publishing papers since 1859, closed its doors after losing $14 million in the

Employee commentary on the wall of Seattle Post

last financial year. This follows on the heels of Rocky Mountain News, Denver paper founded in 1863, publishing its final edition after losing $16 million last year. This April the 100 year old The Christian Science Monitor closed the print operation of the paper and moved all of its content online. The Miami Herald, San Francisco Chronicle and Minneapolis Star-Tribune are on the verge of bankruptcy and are up for sale. The New York Daily News is losing 7% of its readership per year and took a $30 million loss in 2008. Four owners of 33 U.S. daily newspapers have sought Chapter 11 bankruptcy protection in the past 2 1/2 months. Similar trends are seen in the magazine industry with a significant reduction in paid advertising pages.

The old media revenue streams (read - advertising) have dried up significantly over the past two years, and it is simply not possible anymore to keep a staff of 150 professionals and carry the cost of physically printing and distributing newspapers and magazines. Online versions of the publications require a staff of less than 20 employees and distribution is fully scalable with very low costs. Moreover, the advertising views are quantifiable and traceable providing useful metrics and targeting tools impossible to achieve with traditional media.

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Author and designer Amy Jo Kim

Designing applications based on a game model can make them more effective and a much more fun experience for the users - which in turn should make your application more popular.

Just like I prefer working out while playing games versus hitting a weight bench for hours, I have to admit that I certainly prefer information presented to me in a format that incorporates fun rather than reading FAQ, Help or some other documentation.

Jeff Atwood in his post  World’s Largest MMORPG describes this approach to application programming and design as enabling applications that are “simultaneously complex and easily learnable.”

Jeff aptly references Amy Kim’s experience with “bridging the divide between game and web design.” She points out that lots of popular websites like YouTube, Flicker and others have picked up on this and are now using game elements in their UI - check out the opportunities for customizing and rating videos, keeping count of views, leaderboards and other game like attributes.

This may sound to some like a new trend, but in reality companies like Bank of America, Cisco, U.S. Army, Hilton Hotels, Alcoa, Volvo, Miller Brewing Company, Phillips Healthcare, Accentur, AOL and many others are already in the second generation of simulation and skills games to train their staff more effectively. The results have been very positive, with faster learning times and more engaged as well as better trained employees.

So developers, don’t be afraid to include some gamelike elements into your applications - you are making the users’ experience more effective and fun - even the serious companies are now doing it!

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Erik Ries

Erik Ries offers some good advice on his blog Lessons Learned regarding timing your start-up PR and marketing campaign launch. Reis is a founder of IMVU and an advisor to Kleiner Perkins, and serves on the boards of a number of technology startups including pbWiki, Bunchball, FooMojo, Causes and KaChing. BusinessWeek named Ries one of the Best Young Entrepreneurs of Tech in 2007.   Ries explains why launching  too early without product readiness may be a big mistake:

We really did it well, with a great PR firm and great coverage. New York Times, Wall Street Journal, CNN, the works. But it turned into a crushing defeat, because we couldn’t capitalize on all that attention. The product didn’t convert well enough, the mainstream customers we were driving weren’t ready for the concept, and the event fed expectations about how successful the product was going to be that turned out to be hyper-inflated.

Read the rest of the story at Don’t Launch.

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