Managing Risk

Palamida recently announced an important new focus area - security. Most corporations use open source software, and Palamida helps its clients determine whether they are in compliance with open source licenses. Now, Palamida also determines whether its customers are vulnerable to over 400 open source security issues, 148 of which are defined as High-Severity Common Vulnerability and Exposures. (These include cross-site scripting and buffer overflows, to SQL injections.) As Mark Tolliver, CEO of Palamida, put it, "Open source is inherently no more risky than commercial software. The majority of open source projects provide a patched version to any issue within hours of discovery. Users of open source, however, need a way to quickly and accurately verify what components they are using and associate them with known vulnerabilities so they can retrieve updated versions. Without a mechanism in place to perform this function, organizations put themselves at risk for introducing security vulnerabilities into their code base." Here's a link to Palamida's press release on the subject.

Glam Hits the Books

In this article, The New York Times' Saul Hansell writes about Glam's recently announced deal with Lifetime Networks, which he calls "a textbook example of how to co-opt potential competition":

[Glam CEO Samir] Arora has big plans for Glam. He would like to do similar deals in other categories including health, shelter and entertainment. He’s been able to attract high-powered managers including John Trimble from Fox Interactive and Joe Lagani, the publisher of Conde Nast’s House & Garden. (That’s a sure sign that Mr. Arora convinced them that either a public offering or a pricey acquisition is not that far off.)

The big question here is how many of these ad networks end up surviving. If there are many dozens, Glam may win because it locks up relationships with multiple partners. If smaller networks wither, Glam may still win because it has the right to roll up the inventory of the networks it runs into one big package that may be more appealing to advertisers.

Facebook Considers Its Options

With hiring already tough in Silicon Valley, Facebook has just made its HR head's life much more difficult. Here's an excerpt from an article in today's Wall Street Journal about the company's options dilemma [subscription required].

There is a little-noticed downside to Microsoft Corp.'s investment in Facebook Inc.: The deal will likely raise the price of stock options issued by the social-networking company and could make it more difficult to hire talented employees.

Last week, Facebook appeared to score a major victory when Microsoft said it would invest $240 million in the Palo Alto, Calif., start-up, in exchange for a 1.6% stake. The investment values Facebook at $15 billion, up significantly from last year when a financing round valued the company at $525 million, according to a person familiar with the matter. Microsoft's investment cemented Facebook's reputation as one of the hottest Web start-ups in Silicon Valley.

With the rise in valuation comes a rise in the value of employee stock options. And in Silicon Valley, where stock options can be a major component of employee pay packages, more expensive stock options mean less potential upside for the option holders once start-ups go public or are sold.

Pandora Gets Some Ink in Inc.


Inc. magazine has a cover story on Pandora in its latest issue. Here's a link to the story, and here's an excerpt:

Westergren realized he had a huge weapon in his arsenal: his customers. Westergren sends a welcome e-mail to everyone that signs up. It's an automated e-mail from an alias address, but whenever anyone replies, he replies back. Last year, when he was touring the country looking for new music, Westergren decided to begin holding meetings with listeners. He'd choose a locale, post it on the Pandora blog, and invite anyone in the area to attend. Four people attended the first meetup in Austin, but as he traveled to a senior center in Phoenix, a taco joint in San Antonio, and a lecture hall at MIT, the groups grew, and soon dozens, even hundreds, of listeners were attending. All the effort spent courting nonpaying customers might seem excessive, but it lets Pandora spend next to nothing on marketing. In any case, the listeners responded. Some have become so fanatic that they've written songs about the site, sent boxes of fudge, and even made donations.

That work turning customers into fans, Westergren realized, meant he could rally them behind the royalty rate issue. So he sent an e-mail to all the Pandora listeners that identified their representative and senator and asked them to write in. Pandorans responded. Westergren estimates that about one million e-mails, phone calls, or faxes were made or sent by Pandora listeners. California Democratic Senator Dianne Feinstein received 25,000 e-mails; in the office of Jay Inslee, a Seattle-area representative, correspondence about Internet radio equaled that concerning the Iraq war. Inslee and Illinois Representative Don Manzullo drafted a bill that brought Internet radio rates in line with those of satellite stations; in the Senate, Sam Brownback and Ron Wyden sponsored a companion bill. "I said, 'Oh, my gosh, this is a bombshell ready to explode with the small radio stations,'" says Manzullo.

Evidence Machine

H5 receives prominent coverage in this week's Forbes. Here's a link to the article [membership required] and an excerpt:

Corporations are evidence machines, generating terabytes of electronic documents, e-mails and digitally recorded phone calls each year. Lawyers try to sift through all this dross in search of the smoking gun that can determine the outcome of a case. But, so say studies by library scientists and others, the lawyers aren't very good at sifting. Worn down by the anesthetizing process of flipping through thousands of digital images a day, they miss as much as they find. That's where a San Francisco company, H5, comes in. "Our work is to discover the ideal narrative to walk into court with," says Nicolas Economou, 42. "We give you the bullets designed to win."

Mexico or Bust

This article about Pandora in today's Oakland Tribune adds a little color to Tim Westergren's recent article in VentureBeat.

"At our worst moment, we were being evicted from our office, sued by four employees for back pay," Westergren said. "We owed almost $1.5 million in back salaries. We were living on credit cards: I was making plans to go to Mexico."

Instead, he went on the road — meeting potential investors, making constant pitches.

When it was over, the cash was in hand. He said he went back and counted how many times he spoke to investors in four lean years.

"I just kind of kept going. We had survived the bust when no one else had and we had built a pretty significant data base," he said.

Finally, Larry Marcus, managing director of Walden Venture Capital of San Francisco, got on board, followed by Labrador Ventures of Palo Alto.

Funding finally came on his 348th pitch, Westergren said.

Motivated Investors

Check out this article in VentureBeat by Pandora founder Tim Westergren. In "What Motivates an Investor to Say 'Yes,'" Westergren explains that he was turned down 347 times before Walden's Larry Marcus agreed to invest the first institutional capital in Pandora. Here's an excerpt:

As I reflect back on this most unlikely turn, I have come to a belief about what motivates an investor to say ‘yes.’ Or perhaps more accurately, what causes an investor to shift from looking for ways to say ‘no’ to looking for ways to say ‘yes’. For, in my mind, this is the key to raising money. Venture investments by their very nature require a leap of faith (none more than ours) that only comes when an investor becomes aspirational – when he or she wants the investment to make sense (even though statistically deals never do make sense). I believe that shift happens when three things come together for the investor: They personally believe in the entrepreneur; they have a sense (and it’s often just a gut feeling) that the idea could be very big; and finally they have a personal interest or background in the industry that gives them a leg up the diligence curve. Put these together and an investor will start bending their investment criteria.

Larry M. was a musician (or at least a drummer) and an avid student of digital media. In the Music Genome Project he saw an idea that could be big, and as an expert in the sector he had the confidence to trust his own ability to spot potential, even if it was buried in mud. We also got along very well personally. So we had the three ingredients that tipped him into the aspirational mode. He wanted to make the investment and we started working together to make it happen – convincing his colleagues and other investors.

Yahoo to Acquire BlueLithium

Here is an excerpt from Yahoo's press release, which is available here.

Yahoo! Announces Agreement to Acquire BlueLithium

Important Next Step in Yahoo!'s Mission to Lead the Transformation of How Advertisers Connect To and Engage With Their Customers

SUNNYVALE, Calif. & SAN JOSE, Calif., Sep 04, 2007 (BUSINESS WIRE) --

Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today announced that it has entered into a definitive agreement to acquire BlueLithium, one of the largest and fastest growing online global ad networks that offers an array of direct response products and capabilities for advertisers and publishers. Under the terms of the agreement, Yahoo! will acquire BlueLithium for approximately $300 million in cash.

"BlueLithium's products, technology and team will be an integral part of our drive to build the industry's leading advertising and publishing network," said Jerry Yang, chief executive officer, Yahoo! Inc. "This acquisition will extend our ability to deliver powerful data analytics, advanced targeting and innovative media buying strategies to our customers, who are increasingly looking for these insights. By leveraging BlueLithium's complementary expertise and tools, we will be able to better address the needs of our performance-based display advertisers and enhance the value of our publishers' inventory."

Survey Says ...

The iPhone numbers are out, and they are disappointing. In a study conducted with IDC in June, Market Insight predicted that this would be the case.

Here's an excerpt from the joint press release:

The survey, designed to gauge consumer interest in the iPhone, found that only 10% of respondents were interested in paying full price and signing a two-year contract with AT&T, the only carrier currently slated to offer the device. AT&T has stated that it will not offer a subsidy for the iPhone, which will retail for $499 and $599, depending whether the subscriber wants 4GB or 8 GB of flash memory. Nearly 18% of the respondents indicated a willingness to buy the iPhone if it were priced under $299.

In addition to the cost of the device itself, the survey identified the cost of switching carriers as a deterrent to iPhone adoption. Given the widespread use of two-year carrier agreements with large penalties for early contract termination, consumers cannot easily change carriers whenever they want, wireless number portability notwithstanding. About 17% of the respondents indicated that they would buy an iPhone if it were offered by their current mobile carrier.

Mr. Fix It

In an article in today's Wall Street Journal, Pandora's Tim Westergren provides an inside look at ongoing discussions regarding music royalty rates for Internet broadcasters.

Both sides have more incentive to talk after a closed-door meeting with members of Congress last week. The message was, "Fix it," says Tim Westergren, founder of Pandora Media Inc., which allows users to create customized online radio stations. "If you don't, there's a bill waiting in the wings," he said referring to legislation on royalty rates introduced in both houses.

Clock Watchers

This development (which is reported in today's Wall Street Journal) bodes well for Pandora, whose users spend many hours on the site each month.

Nielsen/NetRatings, a leading online-measurement service, will scrap rankings based on the industry yardstick of page views and begin tracking how long visitors spend on Web sites.

The move, expected to be announced Tuesday, comes as online video and new technologies increasingly make page views less meaningful.

Although Nielsen already measures average time spent and average number of sessions per visitor for each site, it will start reporting total time spent and sessions for all visitors to give advertisers, investors and analysts a broader picture of what sites are most popular.

Currently, sites and advertisers often use page views, a figure that reflects the number of Web pages a visitor pulls from a site.

Glam Shows That Beauty Is More Than Skin Deep

Now pulling in more than 17 million unique visitors a month, Glam has surpassed iVillage on ComScore Media Metrix's Top 10 list of Women's Community Web Properties. It is also the fastest-growing 100 Web property year over year ending May, 2007. Here's the press release. Also, check out Matt Marshall's story on Glam in today's VentureBeat. Here's an excerpt:

The trends helping Glam are strengthening, [Glam CEO Samir Arora] says — as new blogs get created and advertisers search for new ways to reach readers beyond traditional media. “The deeper we go into this,” said Arora in an interview with VentureBeat last week, “the more it seems the fragmentation has increased. It is deeper and wider than we thought.”

Glam Teams Up with Google

The Wall Street Journal has a story in today's issue about Glam and Google. Here's an excerpt:

Glam Media Inc. plans to announce today that Google Inc. will begin brokering advertisements on Glam's fashion and lifestyle sites and some of the more than 300 blogs and sites affiliated with the company.

The agreement is part of Google's efforts to broker advertisements for high-end sites such as Glam, as the Internet giant tries to lure big-brand advertisers to purchase ads through its online system and expand aggressively in selling graphical and video ads.

Under the multi-year deal, Google will sell some of the video ads and graphical display ads such as banner ads that appear on Glam's sites, including its flagship Glam.com. Google will also provide search technology and sell small text ads that will appear alongside Web search results and selected content on Glam's sites and partner sites that opt for it.

Everywhere at Once


Last night, Pandora launched the Pandora Everywhere platform, which encompasses Sprint mobile phones, Sonos home music adapters, and Xing handheld devices. Here is the Techcrunch story. The announcement was also covered by Wired, CNET, PC Magazine, Engadget, Gizmodo, Valleywag, VentureBeat, San Francisco Chronicle, Associated Press, CNN Money, Billboard Online, GigaOm, Scobleizer, USA Today, CBS News ... The list goes on.

Made to Measure

In its current issue, BusinessWeek explores the resasoning behind recent M&A activity in the online advertising sector and calls out BlueLithium as a company to watch.

Now marketers are spoiled. And as big-brand advertisers move online in greater force, they're demanding the ability to apply the same kind of targeting and measurability they get from paid search to all the other ads they run. "Everybody's got the mindset that everything should be measurable," says Erik Qualman, head of North America marketing for travel site Travelzoo Inc. (TZOO) One reason: While targeted ads online may cost about twice as much as untargeted ads, they can produce twice the return on investment. As a result, says David R. Verklin, chief executive of Carat Americas, the agency that buys online ads for the likes of Pfizer Inc. (PFE), "data and data analytics are the next big battleground in marketing."

And on the Internet. Ad networks such as Specific Media, Blue Lithium, and 24/7 Real Media (TFSM) appear to be on the short list for acquisition by major media and tech companies.

Make Music, Not War

The Defense Department has decided to block soldiers' access to a number of popular Web sites, including Pandora.

"This recreational traffic impacts our official DoD network and bandwidth ability, while posing a significant operational security challenge," [a Defense Department] memo said.

The armed services have long barred members of the military from sharing information that could jeopardize their missions or safety, whether electronically or by other means.

The new policy is different because it creates a blanket ban on several sites used by military personnel to exchange messages, pictures, video and audio with family and friends.

Members of the military can still access the sites on their own computers and networks, but Defense Department computers and networks are the only ones available to many soldiers and sailors in Iraq and Afghanistan.

Verizon to Acquire Cybertrust

Walden is proud to announce that Verizon has agreed to acquire Cybertrust. Here's a link to the release.

Verizon Business today announced a definitive agreement under which it will acquire Cybertrust, a privately held provider of global information security services. Financial terms were not disclosed.

The combination will make Verizon Business the leading provider of managed information security services to large-business and government customers worldwide. By combining Cybertrust’s global presence and customer base, focused security expertise and professional services with Verizon Business' “cloud-to-core” security portfolio, global IP network and financial strength, the acquisition creates a powerful and unique player that will redefine the global security landscape.

Google/DoubleClick Backlash

According to The New York Post, Google's pending acquisition of DoubleClick has stirred up concern in the advertising world that Google will hold too much power. As as result, demand for BlueLithium's services has never been greater. Here's an excerpt from the article:

DoubleClick swears the information it collects about its customers ad campaigns can't be shared with Google, which already dominates the lucrative market for search advertising, without running afoul of its long-term contracts with clients.

But few in the ad business are buying it. Many believe Google will find ways to leverage DoubleClick's display data to increase its Internet ad clout.

Some suggest Google and DoubleClick set rules sooner rather than later to avoid the inevitable conflicts.

"They are going to have to write some rules of engagement on the type of information that can be shared," said Gurbaksh Chahal, chief executive of online ad company BlueLithium. "It will be interesting to see them."

Internet Radio Equality Now!

Thanks to the millions of people who have contacted their representatives directly or through the auspices of organizations like SaveNetRadio.org, Rep. Jay Inslee (Democrat, Washington), Rep. Donald Manzullo (Republican, Illinois), and ten co-sponsors have introduced the Internet Radio Equality Act. This bill will invalidate the Copyright Review Board's recent ruling to increase royalty rates for Internet radio broadcasters and require that Internet radio broadcasters pay no more than satellite radio broadcasters. If you haven't registered your support for Internet radio, please stand up and be counted. The world will be a very boring place without it.

Glam in WSJ

Glam received prominent coverage in an article in The Wall Street Journal entitled "Web Network Offers Reebok Flexibility." Here's an excerpt:

When Reebok launched a new line of shoes and apparel endorsed by actress Scarlett Johansson last month, it took a different approach to Internet marketing. Instead of buying ads on mass-audience portals like MySpace, as it had done for past campaigns, Reebok struck an exclusive online deal with fashion and lifestyle Web concern Glam Media.

Glam worked with Reebok International, a unit of Adidas AG, to put together a marketing campaign aimed at young women that ranged from the traditional -- banner ads -- to less-traditional promotions that looked more like editorial features, such as interactive quizzes about Ms. Johansson and mentions in Glam blogs.

And the ads didn't show up just on Glam.com. Glam has assembled a network of roughly 300 similarly themed blogs, Web sites and magazines that it links to -- broadening Glam's reach. Glam's female-oriented network drew 10 million unique U.S. visitors in March, making it the second-largest women's online property after NBC Universal's iVillage, according to comScore Media Metrix.

"You are not just hitting one portal; you have thousands of these other sites. By showing up incrementally on these other sites, you are getting more bang for your buck," says Marc Fireman, head of digital marketing for Reebok.

Walden Invests in Telekenex

We are pleased to announce that we have invested the first institutional capital in Telekenex, a profitable, business-grade IP service provider for small to medium-sized businesses. Here are the details.

Standards Procedure

The final release of the open source GPL version 3 license is about to go live, and Palamida CEO Mark Tolliver has been very popular with reporters who are trying to gauge the impact of the shift.

"GPL 3 will certainly force awareness of licensing issues to grow, tools like ours or others that can detect and report on licenses and incompatibilities will be a standard part of peoples' IP use and software development environment," Tolliver said.

"To operate without that in this world of increasingly complex licensing will be more difficult and more risky."

Clay Aiken and Ron Sexsmith? Yikes!

Clay Aiken
The New York Times features Pandora in an article about Internet radio and calls it the "simplest option." It also highlights Pandora's superior personalization.

Now that the free ad-supported service has been operational for 15 months, it can use the behavioral data of its six million listeners to add a new layer of suggestion. For instance, even if, on paper, the musicologists think it logical to pair a song by the “American Idol” superstar Clay Aiken with one by the Canadian folk balladeer Ron Sexsmith, several hundred listeners may give the juxtaposition a vote of no confidence. Tim Westergren, a Pandora co-founder, says the database now contains half a billion useful points of “contextual feedback.”

H5 Is Cool

H5 Technologies was one of only four companies included in a report by Gartner entitled Cool Vendors in Content Management, 2007.

Said Gartner Senior Research Director Debra Logan, "Any method or technology that can reliably and transparently help with a process, and thus reduce the amount of time lawyers spend on it, doesn’t have far to go to make it a worthwhile investment. H5 acknowledges that it is tackling a complex set of issues and bringing high-level expertise to bear on the problem."

Here's a link to the press release.

The Source

Palamida announced today that it has increased the size of its compliance library even further. This library now includes:
  • Over 780,000 open source project versions
  • 140,000 unique open source projects
  • 10 million Java names
  • Over 392 million open source files
  • Nearly 7 billion source code snippets
  • Over 390 million binary files
Do you know what's in your code? Maybe it's time to talk to Palamida.

Thinking Ahead

When I go to BestBuy, I am just as interested in the products that miss as the gadgets that everybody wants. Consider the Kodak EasyShare C743, which CNET rates as one of "the worst tech of Q4 2006." One word comes to mind when you hold this camera in your hand: cheap.

Consumer electronics companies end up making cameras like the C743 because they don't have an efficient way to test consumer interest in different product attributes. Traditional focus groups are difficult and expensive to organize, and sample sizes are small. Online panels help companies gather feedback much more quickly, but they often suffer from sample bias. (The problem of "professional respondents" - or people who take particular pleasure in participating in as many panels as possible - is well-known.)

Market Insight takes a different approach. This Palo Alto startup operates six free product advisors on MyProductAdvisor.com that help consumers pick the best product for their needs. One example is TVs. If you've ever tried to buy a High Definition set, you know that number of choices is bewildering. Market Insight's TV advisor steps you through the various choices and allows you to rate the importance of different product attributes through the use of sliders. The consumer data that Market Insight gathers through these product advisors is rich, immediate, and unbiased, and it enables Market Insight customers like General Motors, Palm, and Intel design and market products that customers in the market actually want.

Traditional market research is reactionary. It relies on small sets of dated data; it is project-based; and it is primarily used to optimize products that are already out in the market. But as the consumer feedback loop continues to shorten, it will become more and more expensive for companies like Kodak to market short-sighted products like the C743. Forward-looking, strategic market research will become the norm, not the exception.

Buzzworthy

An interesting article in today's Wall Street Journal about "buzz sites" like Digg. [Subscription required.]

Though it can take hundreds or thousands of votes to make it onto the hot list at these sites, the Journal's analysis found that a substantial number of submissions originated with a handful of users. At Digg, which has 900,000 registered users, 30 people were responsible for submitting one-third of postings on the home page. At Netscape.com, a single user named "STONERS" -- in real life, computer programmer Ed Southwood of Dayton, Ohio -- was behind fully 217 stories over the two-week period, or 13% of all stories that reached the most popular list. (Netscape, which gained fame with its namesake browser, is now owned by Time Warner's AOL unit and operates a news site.)

On Reddit, one of the most influential users is 12-year-old Adam Fuhrer. At his desktop computer in his parents' home in the quiet northern Toronto suburb of Thornhill, Mr. Fuhrer monitors more than 100 Web sites looking for news on criminal justice, software releases -- and the Toronto Maple Leafs, his favorite hockey team. When Microsoft launched its Vista operating system this year, he submitted stories that discussed its security flaws and price tag, which attracted approving votes from more than 500 users.

DivineCaroline.com Is Live

Real Girls Media has officially launched DivineCaroline.com, "a place where women come together to express themselves, find answers and share life through storytelling." Check it out!

Let's Get Small

Who says bigger is better? Here's an excerpt from Matt's latest piece on SandHill.com:

We continue to hear entrepreneurs tell us that they can find very few good firms willing to lead a deal that needs less than $5 million. In my experience, some of the best founders don't want or need a first round that size. I am hoping that more funds will focus on small, early deals as we have been doing here at Walden.

Glamming It Up

The trend is Glam's friend. Today, the company announced that it had taken second place on comScore's Media Metrix Top Ten Women's Web Properties list for December 2006. Glam Media recorded 8 million US unique visitors in December, representing more than a 100% increase over the month of November and an increase of over 2,666% year-over-year. As a result, Glam was the fastest-growing of top 500 Web properties in 2006 according to Media Metrix.