Insider Chatter by Donna Bogatin

Can Microsoft really make a free product free? NO!

Why then has so much virtual ink been spilled about a ballyhooed Microsoft intitiative supposedly turning its Works giveaway productivity app into a “free, ad suported” office suite product?

Because a Microsoft WILL go after Google Apps angle makes for great copy! Who needs reality.

Despite Microsoft’s good college try to stamp a retail price sticker on its low end Works collection of desktop apps, however, it is no secret that Microsoft’s delivery model makes it a free to the consumer software product that arrives bundled with purchase of a Windows PC.

Because Works is already “free,” the news isn’t that Works “goes free,” it is actually that Microsoft is looking for ways to START making users PAY for Works!

As it stands now, a proud new consumer owner of a Windows PC generally is by default also the proud, new owner of the latest version of Works, AD-FREE!

There is NO value-add then for consumers if Microsoft adds ads to its previously ad-free Works! After all, Microsoft Works “free AND ad-free” is better for users than Microsoft Works “free AND ad-supported”!

The Works 9 SE OEM “pilot” Microsoft has in the works not only turns a no-strings attached free to the consumer product into a Microsoft advertising delivery mechanism, it is designed to drive upsells to paid (ad-free) versions of the product.

YES, Microsoft is ingeniously, and successfully, spinning a hoped for move from a free Works to a paid Works as a new, “free, ad-supported” Works!

What a piece of Microsoft Work!

ALSO: Ning, NowPublic: Web 2.0 Bubble or Bad VC Bets?

CONTACT DONNA BOGATIN

Who is calling the NBC Universal - News Corp. online video joint venture in the works “Clown Co”? Kevin McGurn, the man leading the JV sales charge, is NOT clowning around.

From the Advertising Research Foundation’s Audience Measurement 2.0 big-ticket conference two weeks ago, to last night’s free NY Video 2.0 meetup, McGurn has been making the business case in New York City on how NewCo is being developed to be big co.

The timing is fortuitous: Uptake in online video streaming is one one of the shifts in Web behavior that is spurring Neilsen/NetRatings to measure “engagement” at sites, not merely page views.

At Audience Measurement 2.0, McGurn characterized advertiser reception to the NBC Universal - News Corp. NewCo online video offerings slated for the Fall season “extremely favorable,” as I present in my first-hand report: NBC: Millions in Upfront Video Ad Sales

At the NY Video 2.0 meetup last evening, McGurn underscored the JV is well on its way to creating an optimal online video platform to meet the needs of all constituencies: content producers, advertisers, distributors and viewers.

During a discussion aimed at figuring out “What’s next for online advertising,” Dan Rayburn of Streaming Media posed simple, but direct questions, such as: Is anyone making money in online video, covering their costs? and Are video sites just popping up, hoping to figure out what users want?

McGurn on the NBC Universal case:

NBC as a content producer is making money: NBC.com, iTunes, NBBC…

NewCo is conducting ongoing, extensive market research, focus groups, studies, analysis…to determine what works and what doesn’t from all perspectives: video content, ad formats, page layouts, user interface…

I asked McGurn if such extensive preliminary research was done to support the launch of NBBC and, if so, what is the rationale for folding NBBC into NewCo.

McGurn told me NBBC was designed as a “proving ground” and proved successful and profitable. Why is it being absorbed by NewCo then? NBBC did not offer a “video destination” and optimal deployment of NBC assets necessitates a focused deployment of resources for the NewCo, McGurn said.

McGurn did not weigh in though on the rumored billion dollar valuation of NewCo. In Video Valuations: YouTube Billions Rule! I analyze how NewCo just may have a billion dollar shot!

ALSO: Facebook Platform Misses 1.2 billion Internet Users and Valleywag: Lots of Ham, Where’s the Beef?

CONTACT DONNA BOGATIN

Google takes to its official blog network to make a PR case for why government regulators should turn the other cheek on its proposed acquistion of DoubleClick: The world will be better off!

In typical Google fashion, Google ignores the substance of the legal challenges it faces in seeking approval of the deal while painting a glowing picture of a happier, more Googlified online advertising space.

Google pegs display ads as representing 40% of the online ad sales pie, acknowledging it has been a “minor player” in display advertising to date, while three portals lead: AOL, Yahoo, MSN, at more than $1 billion in annual display ad sales each.

Google, via DoubleClick, to the display ad business rescue, so says Google while not explaining precisely why it will be so:

Ad serving companies such as DoubleClick, Atlas, and MediaPlex have been helping advertisers get their ads onto sites and measure how effective the ads are. Since Google has never played in this space, acquiring DoubleClick will enable us to complement our search and content-based advertising capabilities. Its products and technologies will help to improve online advertising for consumers, advertisers and publishers.

Is Google’s argument sound? If Google buys an existing ad serving business, is online advertising for consumers, advertisers and publishers automatically improved. OF COURSE, trust us, Google asserts:

The combination of the technologies and expertise of Google and DoubleClick will help publishers better monetize their unsold inventory, thus helping to fuel the creation of even more rich and diverse content on the Internet.

Could a multi-billion dollar Google acquisition aimed at acquiring 40% of the onlie ad sales market mean anything but Googley goodness for the Web?

Google does provide a smidgeon of factual insight into how the mechanics of a combined Google DoubleClick operation will play out:

Historically, we’ve not allowed third parties to serve into Google’s AdSense network, which has made it hard for advertisers to get performance metrics. Together, Google and DoubleClick can deliver a more open platform for advertisers, and provide the metrics they need to manage marketing campaigns.

AdSense will support certain ad tags so advertisers will be able to use a broader selection of formats in our ad network, improving ad relevance. And the experience for advertisers will be more efficient, because there will be an ad server that provides consolidated reporting and management of display ads on all properties and networks.

It is the very “consolidation” between Google and DoubleClick that has caused consumer and privacy advocates to solicit the FTC to protect the public in the event of such a merger.

SEE Google Privacy Trap: Consumers Beware for a detailed analysis of the New York State Consumer Protection Boards’s quest to require Google to institute meaningful consumer privacy safeguards.

ALSO: Google is WRONG On Consumer Privacy

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While LinkedIn founder Reid Hoffman teased an eager blogosphere last weekend with tales of a future “open platform” LI 8 (as in Facebook F8), the man he brought in to bolster the LinkedIn business model, Dan Nye, was hard at work doing just that.

Nye was recruited by Hoffman for the CEO position just months ago. He now reports:

What we are seeing is revenue accelerate and we expect that to continue next year. We are projecting somewhere in the $100 million range next year. LinkedIn makes money from subscriptions, advertising and fees from job recruiters.

LinkedIn aims on making even more money: The professional networking service is recruiting Patrick Crane, a Yahoo ad sales veteran, to lead a big marketing push. Yahoo schooled engineering talent is also now in the LinkedIn camp: Anil Khatri.

LinkedIn has a total of about 105 employees. Nye touts: “We are putting in place the management team of a $500 million company.”

LinkedIn may soon be puting its money where its business networking mouth is. Steve Sordello just joined the company as CFO, reportedly to assist in managing a LinkedIn IPO.

Where does Facebook stand financially? Don’t ask! So says Esther Dyson: READ my first hand reports in  Google Beware: Facebook Love Blooms and MySpace to Facebook: Our Friends Rule.

ALSO: LinkedIn vs.Facebook: NO Business Contest

CONTACT DONNA BOGATIN

In the “Pmarca Guide to Startups,” Marc Andreessen shares at his new blog his “accumulated knowledge and experience in building start-ups,” citing his recent venure Ning, a ”private consumer Internet company.”

What is great about “doing a startup,” for Andreessen?

Most fundamentally, the opportunity to be in control of your own destiny — you get to succeed or fail on your own, and you don’t have some bozo telling you what to do. For a certain kind of personality, this alone is reason enough to do a startup.

What about a startup being in control of its own destiny, then?

Ning, as a case in point. What is Ning’s business model? Ning asks, and answers:

When you create your free social network on Ning, we run ads on the right hand side of every page to support the service. That’s our main souce of income.

What ads does Ning run “on the right hand side of every page”? Google AdSense.

Ning dependency upon a third-party for its revenues is not an entrepreneurial model worthy of emulation.

The downside risks of a third-party, such as Google AdSense, monetization of a startup include:

No proprietary monetization model competive advantage,
At the whim of the performance (or not) of the third party,
Startup driven revenues are shared with a third party,
Limited, or no, direct paying client relationships,
Non-innovator, “me too” image before users and tech community,
Difficult to iterate revenue stream… 

Andreessen’s Ning is not the only Web 1.0 veteran’s try at Web 2.0 entrepreneurship. Kevin Ryan, formerly of DoubleClick fame and Ben Elowitz, an alum of both Blue Nile and Fatbrain, have also joined the social startup fray: Ryan is ShopWiki CEO & Co-Founder and Elowitz is Wetpaint CEO.

Ning, ShopWiki and Wetpaint are all the Web 2.0 brainchilds of entrepreneurs who made their mark in the first commercial wave of the Internet.

What else do the three Web 2.0 startups have in common? All are highly Google dependent for their livelihoods.

Ryan and Elowitz are in the Google AdSense revenue model camp, same as Andreessen.

When I interviewed Elowitz and Ryan about their startups last year, I asked about the long term viability of a Google AdSense dependent business model.

Ryan stressed a technology differentiation strategy, citing ”advanced Web crawling technology,” not surprising given the founding team’s DoubleClick background. No perceived need to differentiate on the ShopWiki revenue model front, though, given the turnkey, easy money AdSense spigot.

While Elowitz comes from a sales driven ecommerce world, he also believes in the beauty of contextual advertising, of the AdSense variety.

It is not just “lone” entrepreneurs, however, that are outsourcing their economic future to Google: Barry Diller’s IAC is, so far, content to wage Ask.com search engine war against arch “rival” Google, while at the same time rendering Ask.com dependent upon key “partner” Google for its search advertising livelihood.

SEE: IAC’s Ask.com: Beware Google, Ask Yahoo!

ALSO: Cisco to Google: Get Real! and Facebook Generation: Entrepreneurs or Hackers?

CONTACT DONNA BOGATIN

In attempting to calm the Internet age discrimination fracas he fueled, Fred Wilson, A VC, actually doubles down on his youth rules the Web thesis, with a concluding generational rally:

I am seeing way more super young entrepreneurs than I’ve ever seen. That’s a fact. End of story. No more posting on this topic.

What are Wilson’s “facts”?:

The sheer volume of young entrepreneurs we are seeing is unprecendented in my 20 years in the VC business. This is not like what happened during the bubble. Back then it was newly minted MBAs strarting companies out of greed. This is different. This is 15 to 20 year old kids building and launching authentic Web services that fill a real need in the market.

Wilson, however, is undoubedtly not “seeing” 15 year old entrepreneurs; He is most likely being “dazzled” by teenage hackers (much as the Wilson “kids” bowl him over with their interactive communications insights).

What A VC calls “greed” on the part of (who needs?) MBAs is actually revenue-driven, solid business planning, which VCs ordinarily demand.

How entrepreneurial really are today’s whiz kid hackers? After all, any teenager now can begin “developing” a “cool” app on a Friday and “unleash” it to the Web world the following Monday, no money (or even time) down.

Who needs a proprietary, monetizable business model? Google AdSense will do just fine, just ask Marc Ning Andreessen.

Hackathons do not entrepreneurs make. Wilson, deep down, agrees.

In my post yesterday, Dave Winer vs. Fred Wilson: You Go Dave!,I underscored that Wilson is not putting his old money where his youthful mouth is.

In noting an underwhelming “youthful” Web services mindset, I wrote: If “they” are showing “us” how the Internet “needs to be used,” perhaps that is the reason why Wilson has “only funded one of these net natives out of close to fifteen portfolio companies.”

Wilson agrees with my assessment. He writes now of his “frustration” that he has been so “misunderstood” by the blogosphere:

Let me re-emphasize a point that I’ve now made three times but seems to be ignored by all the people who I’ve annoyed. We have funded only one 20 something entrepreneur in close to 15 investments we’ve made so far in our fund.

So to Dave and everyone else I’ve pissed off, please take a second to read everything I’ve written on this subject. I am not an ageist.

I didn’t ignore Wilson’s contradictory “musings.” But then again, A VC didn’t “annoy” me, he amused this (proud) MBA, and former investment banker.

CONTACT DONNA BOGATIN