NBC and YouTube, sitting in a tree

Not that long ago, NBC was beating up on YouTube.com for hosting copyright violations like the brilliant “Lazy Sunday” video clip from Saturday Night Live. This struck me as completely asinine, as I mentioned at the time, because the viral quality of the clip — which was downloaded more than 5 million times in a couple of weeks (and that during the Christmas holidays) — gave NBC and the normally lame SNL show millions of dollars worth of free publicity. Not only that, but telling YouTube to take it down made them look heavy-handed and uncool.

It seems that someone at NBC finally woke up and got a clue about the marketing impact of an event like that, and the potential that a site like YouTube offers, because the two have now struck a deal whereby the video site will promote clips of NBC’s new shows and host a contest as well. YouTube CEO Chad Hurley said that the deal is clear proof “that we’re building a viable, long-term business, and it’s showing there’s common ground between traditional and new media.”

This comes at the same time as Warner Brothers has struck a deal with a video site called Guba to sell and/or rent full-length movies and TV shows. Warner has also signed a partnership with Bram Cohen’s BitTorrent to use the peer-to-peer technology to distribute content. Of course, said content will be all crapped up with Microsoft’s DRM (digital rights management) restrictions, but it’s a start.

Okay, I guess I’ll take your money

As more than one observer has pointed out, one of the benefits of being a Web-based startup is that you can get a lot farther with less money, to the point where some Web 2.0 companies such as Flickr, del.icio.us and Writely made it all the way from tiny startup to multimillion-dollar buyout by one of the Internet majors without any large-scale financing whatsoever.

The founders of Dabble DB, the Vancouver-based interactive Web database provider, say they had every intention of avoiding the usual venture-capital rodeo. And yet they just announced a financing deal (rumoured to be about $2-million U.S.) with Ventures West of Vancouver, a deal brokered by Ventures West advisor — and now partner — Paul Kedrosky, the Canadian-born and San Diego-based VC behind the blog Infectious Greed.

So what changed their minds? The two co-founders of the company, Andrew Catton and Avi Bryant — who tend to finish each other’s sentences, which makes it difficult to identify who said what in a conference-call interview — said before they got in touch with Paul (who I got to know in the lead up to the mesh conference I helped organize last month in Toronto), they had gotten a lot of interest from venture groups such as Hummer Winblad, particularly after they showed off their service at the venture-capital oriented Under The Radar conference in March. But they turned them all away.

“We joked about giving them the ‘soft no’ response,” the co-founders said, since that’s how many VCs describe their response to companies when they are trying to let them down easily. “But we tended to shut them off pretty quickly. We weren’t playing hard to get — we just didn’t want their money.” The two twenty-somethings said they didn’t want to go down the usual Silicon Valley route of having to give up a large stake in the company and/or board seats.

Paul described the co-founders’ reaction to traditional VCs as “almost an allergic response.” But he offered a middle way that appealed to the company. “I told them what I had in mind as a sort of entrepreneur-friendly approach,” as opposed to the traditional Silicon Valley model, he said in an interview. In addition, “most of what they would have gotten [with a traditional VC] is access to board members and access to the buyout channel, and with me they get those things anyway because I know all those people.”

The upshot for Dabble DB is that they get funding from a local VC, but one with contacts in the Valley, and they only have to give up one board seat (to Kedrosky) and they don’t have to move to Silicon Valley — as StumbleUpon, formerly based in Calgary, did earlier this year.

Om and Rafat are the future of news

Not much time to post today — in the middle of moving, which is not an easy thing with three daughters, two of whom are teenagers — but I wanted to take note of the Wall Street Journal article about bloggers finding financial backing, and not just because it mentions my friend Om Malik, who was kind enough to come north to Toronto for mesh even though he didn’t know any of us from Adam.

The story notes that Om recently left Business 2.0 magazine to go full-time as a blogger and start what is likely to become a new media organization, and it also notes that Rafat Ali and the team at PaidContent also got financing from long-time tech investor Alan Patricof’s Greycroft Partners. Rafat says they will be “hiring a journalist in NYC, starting our UK vertical, launching a redesign of all our sites, hiring more staff for operations and sales, bringing on interns, planning more industry mixers and developing conferences, starting our research arm, and more.”

This is a nice counterpoint to Richard Siklos’s recent piece in the New York Times, in which he talked about how minuscule new media ventures are compared with “old” media such as News Corp. — and there’s no question that the relatively tiny sums given to Om and Rafat (less than $1-million each) wouldn’t even show up on the books of a major media outlet.

But I would argue that any media organization with brains should be paying close attention to what Om and particularly Rafat and his team are doing — it may sound apocalyptic, but PaidContent is the future of journalism in many ways. They are doing more enterprise reporting than lots of newspapers and magazines, and at one-tenth the cost. As Jeff Jarvis notes, from small seeds. Cynthia Brumfield at IPDemocracy (another excellent site for news and commentary) compares it to the early days of cable.

Digg takes on the Old Grey Lady

My old-media pal Scott Karp over at Publishing 2.0 latched onto something that I noticed as well — a “data point,” as I like to call them — in Mike Arrington’s post about Digg launching the new broader version of its news filter next Monday. According to TechCrunch and Alexa’s traffic stats, Digg has about 800,000 unique visitors a day and page views of about 9 million a day (and those numbers continue to grow at a fairly dramatic rate). Extrapolating from those figures gives Digg almost as many page views a month as the New York Times, and almost as many unique visitors a month as well.

That is a pretty staggering number — and it has to be fairly sobering for anyone who works at the New York Times and is paying attention, not to mention anyone at a traditional media organization like the one I work for. There are issues with the traffic numbers that TechCrunch is using, of course, as one commenter on Scott’s post pointed out: Alexa’s measurement tools only track the U.S. audience, and the New York Times almost certainly has a fairly broad international readership. Still, the NYT’s online readership is likely growing relatively slowly, and Digg is still climbing like a rocket.

Scott notes that filters and aggregators such as Digg.com are “leeches” on traditional media such as the New York Times, and he is right to a certain extent, although I think the word leech is a little over-the-top. It’s true that aggregators don’t do original reporting, which is why they will never replace the journalist who goes to cover a battle in Afghanistan or uncovers corporate fraud at Enron or whatever. But here’s a little secret: many newspapers and media organizations, including the NYT, don’t do as much original reporting as people might think. In many cases, they make extensive use of wire reports and other material — does that make them leeches too?

Digg and others like it (I like Reddit.com and Rojo’s filter too) are not going to replace investigative journalism — that’s a giant red herring. But they can still replace much of what newspapers do, and it would be stupid to ignore that.

Bill Gates, TV pirate

Sometimes it pays to read all the way to the end of an interview. In a recent chat (subscription required) between Microsoft co-founder, chairman and gazillionaire William Henry Gates III and the Wall Street Journal’s tech guy Walt Mossberg, the discussion turned to the phenomenon of “social networking” and sites like video-sharing service YouTube.com.

At this point, Mr. Bill admitted that he had watched several programs — including excerpts from shows about the legendary basketball team The Harlem Globetrotters and some physics lectures (he is a geek, after all). Here’s an excerpt from ComputerWorld magazine’s website:

WSJ: “You watch physics lectures and Harlem Globetrotters [on YouTube]?”

Gates: “This social-networking thing takes you to crazy places.”

WSJ: “But those were stolen, correct?”

Gates: “Stolen’s a strong word. It’s copyrighted content that the owner wasn’t paid for. So yes.”

As a commenter on the ComputerWorld blog notes (sometimes it pays to read to the end of the comments on blogs as well), copyright infringement isn’t technically theft — at least, not as far as the U.S. courts are concerned. Still, that doesn’t make it right.

But then, Mr. Gates has what you might call a “nuanced” approach to piracy, even when it involves Microsoft products. In 1998, he told CNET News that he knew large-scale bootlegging of products was occurring in China, but didn’t seem overly concerned.

As he put it: “About 3 million computers get sold every year in China, but people don’t pay for the software. Someday they will, though. As long as they are going to steal it, we want them to steal ours. They’ll get sort of addicted, and then we’ll somehow figure out how to collect sometime in the next decade.”

Send your avatar to a conference

I was having dinner with my fellow mesh organizers the other night, and I half-jokingly suggested that our next conference on Web 2.0 topics should be held in Second Life, the virtual world/game that some are calling “the new golf.” There have been book signings (Cory Doctorow’s) and talk shows in the online world, and several companies have set up shop there — including the hip T-shirt maker American Apparel, which is going to sell clothing to avatars for $1 each.

That was a few days ago, and now I read on Steve Rubel’s blog that someone has stolen my idea. A virtual panel discussion on marketing to avatars will be held in Second Life with Paul Hemp, who wrote a recent piece in the Harvard Business Review all about… yes, marketing to avatars. Among the other panelists are Tony Walsh of Clickable Culture.

This is a fascinating area, I think. I haven’t played around much with Second Life, but I’ve checked out There.com and done some looking around a few other virtual worlds such as Project Entropia, and the whole idea of marketing to avatars is an interesting one. And let’s face it — if companies such as Adidas don’t get in there and do their own marketing, they are likely to find someone else doing it for them.


The BBC has also hosted a music festival of sorts within Second Life, and there is more about that here — the network says it wants to do more similar events, including virtual band interviews, etc.

Ad agency takes stake in Facebook

This one seems to have been overlooked by everyone on techmeme.com, and even Rafat Ali at PaidContent missed it on Friday, but picked it up today: Interpublic Group, the global advertising conglomerate, has done a deal with Facebook — the social networking site aimed at university students that is the hottest thing next to MySpace.com.

Earlier this year there was an article in Business Week magazine that said Facebook’s frat-boy founders had turned down offers of $750-million for their company, and were looking for future offers in the $2-billion range.

This number was scoffed at by many, including former tech analyst and blogger Paul Kedrosky and some observers said that the Facebook guys were either trying to get publicity or their initial investors were trying to ramp the price up. The company later said that it had no intention of selling, and that the $2-billion figure didn’t come from Facebook.

The Interpublic deal, however, tends to support that rather large valuation (at least in theory). According to an article in Mediaweek magazine, the agency has agreed to buy advertising worth $10-million on the site, in return for one-half of one per cent of the company.

If you do the math, that would imply a valuation for all of Facebook right around the $2-billion mark. Crazy? Perhaps. But then, no one thought Rupert Murdoch would ever pay almost $600-million for MySpace, or that eBay would buy a money-losing Internet phone company for somewhere between $2.4-billion and $4.1-billion.


Josh of FeelingBullish.com makes a good point in the comments about the true value of this deal, since Interpublic gets advertising for their $10-million as well as a stake in the company. And a commenter over at PaidContent made a similar point at greater length, which Rafat posted in full, and it is well worth reading — the idea being that the deal actually seems kind of desperate, and perhaps designed to bolster the $2-billion valuation idea.

Update 2:

SiliconBeat has more info here — it seems the advertising deal and the ownership stake were two separate deals, not related at all, and npoo monetary figure was given for the purchase of the .5 per cent share, so no extrapolations can be made about valuation. Darn.

Nokia and Siemens dance, Nortel jilted

Poor old Nortel Networks — or “No-tell Networks,” as one wag dubbed it after the fourth or fifth time the company had to restate its earnings. It was bad enough when the company flamed out so quickly after becoming the king of the Toronto Stock Exchange (and of many people’s investment portfolios), but then that was followed by the repeated financial restatements, the firing of senior executives, and so on. Then there was the whole Bill Owens fiasco, in which the former Navy officer did virtually nothing to move the company forward, and in fact arguably set it back (by hiring two senior Cisco executives and then quickly showing them the door).

The end result is that Nortel has been unable to make much headway in the telecom or networking equipment market, and that hasn’t changed much lately, despite the best efforts of Mike Zafirovski, the new CEO. Now, the company finds itself even further behind, with the reported merger of the networking arms of Finland-based cellphone giant Nokia and German telecom equipment vendor Siemens AG. The deal as described would create a $30-billion equipment supplier that would rank up there with Lucent/Alcatel. And it removes the possibility of Nokia merging with Nortel, an idea that was recently floated by analyst Gus Papageorgiou.

It’s not surprising that Nokia would choose Siemens over Nortel, if it ever even considered a similar merger with the Canadian company. A history of financial restatements, allegations of improper behaviour by executives, lawsuits flying left and right including class-action lawsuits, and products that have fallen further and further behind the competition over the past few years. Not a great bio if you’re looking for a hot date with one of the telecom industry’s leading players. Nortel has raised even more question marks with some of its recent moves, including a short-lived partnership with China’s Huawei.

So now it seems that a merger with Nokia is off the table, and Siemens is also off the market. Who does that leave for Nortel to pair up with — Ericsson? Motorola? Mark Evans has some more thoughts here. I think Mike Z. had better put on his dancing shoes and start thumbing through that little black book.

Gates to leave MSFT — ho hum

“Gates leaving Microsoft” makes for a nice headline, and plenty of speculation and commentary over at techmeme, but it doesn’t really bear any relationship to reality. For one thing, Bill isn’t leaving his “day-to-day role” (whatever that really is) for another two years or so, and in any case he will likely remain chairman of Microsoft until he passes away or is accidentally crushed by a giant bag of money.

For a glimpse of what the announcement actually means in concrete terms, it’s always instructive to look at the share price. What did it do? The square root of you-know-what. Its movement on the news wouldn’t even qualify as a rounding error. In other words, it’s neither good nor bad because nothing much is going to change. Microsoft is still spinning off lots of cash, but seems otherwise “infirm of purpose,” as Lady Macbeth said of her husband.

I was talking about this latest development with Paul Kedrosky — who as some of you may know is no friend of Steve Ballmer’s — and he said that he found the phrasing of the announcement very interesting, in that Ray Ozzie and Craig Mundie were both elevated to higher positions (with Ozzie taking over Bill’s title as “chief software architect”) and Ballmer got nary a mention at all, not even lukewarm praise.

Is that a signal that Bill isn’t too happy with Steve’s stewardship of the great ocean liner known as Microsoft? Perhaps. It’s true that the software giant continues to spin out great gobs of cash flow almost without even trying (which is why I think it should become an income trust) , but it’s also true that Vista keeps slipping, Microsoft seems to be pursuing a shotgun strategy — if any — when it comes to the Web, and MSN continues to be an also-ran.

So what should Bill do? Fire Steve Ballmer and put Ray Ozzie in charge. That would shake things up. Unfortunately, in many ways, Microsoft is too comfortable and too handcuffed by its Crown jewels — Windows and Office — to do anything that interesting.

Is it journalism or is it something else?

You would think that someone like me — being a journalist and all — would have a pretty good idea what journalism is and what it isn’t. But I have to confess that something like the new Netscape beta created by Jason Calacanis and his team, which launched this morning and promptly caused an implosion of commentary on techmeme, has me stumped.

In a way, it’s a lot easier to dismiss Digg and its ilk, as Nick Carr and others have been more than happy to do, slamming it as the “hive mind” and all that sort of rubbish. But Jason’s rather brilliant move (I hate to add to the already legendary Calacanis ego, but I can’t help myself) is to add blogger/journalists who contribute comments, links and in some cases reporting to the stories as they develop. Okay, calling them “anchors” is dumb, but the idea is compelling. Take the stories people are talking about, add commentary and links, interview some people to advance the story — that sounds like journalism to me.

But is it “real” journalism? I don’t have a clue. It certainly is interesting though — and things are going to get even more interesting when Digg launches its revamped site later this month, which will extend the Digg/Slashdot model to other types of news apart from just technology. Will it be as successful, or is there something about tech and the geeks who follow it that makes something like Digg or Reddit or Slashdot only useful for technology-related news?

There are other sites in the same kind of space Jason is trying to fill, including Gather and Newsvine.com, but it’s hard to tell how those services are doing, or whether they have what VCs love to call “traction.” One of the things that Netscape brings to the table — and it’s not inconsequential by any means — is the tens of millions of existing AOL ssubscribers (although they have been fleeing by the millions every year), and the 800 million page views or whatever they generate. That’s no guarantee of success, however.

There are plenty of things not to like about the Netscape site, including all the annoying ads and the fact that the story links make you go to another Netscape page, and then further disguise the link to the actual story, which is the sort of roach motel crap that people rightly hate. But still, all in all I would agree with my friend Rob Hyndman and IPDemocracy that it’s an interesting effort, and one worth watching.

And I will just add in passing that the last time I looked, Jason Calacanis had posted a total of more than 120 comments on stories at Netscape, many of them responding to criticisms — and he has posted many more on various blogs (including Rob’s). You can’t accuse him of resting on his laurels.