James Hong of HotOrNot Talks About Staying Scrappy

I went to the Startup2Startup event tonight, hosted by Dave McClure, where the featured speaker was the insightful and also hilarious James Hong. The co-founder of HotOrNot talked about how to build a Web company from scratch, how to bootstrap the company and how to decide on a revenue model.

One of the biggest points he made was “how cheap and scrappy we were.” Because bandwidth and hosting costs were so high (this was in 2000), Hong and his partner had to take extreme measures to save on costs. (He says he almost shut down the site early on because he calculated that the site could cost upwards of $100,000 per month to operate.) So they asked users to post their pictures on Yahoo’s Geocities. Yahoo later shut down other sites that were using Geocities just to host pictures for their separate sites, but strangely they didn’t shut down HotOrNot. Hong later found out that people at Yahoo really liked HotOrNot and therefore let them slide.

Later they were able to cut deals with Ofoto and Shutterfly, who were looking for lead gen for their photo services, to have photos hosted on those sites. In this way, Hong turned one of his largest expenses (photo hosting) into a revenue source.

To save on bandwidth, Hong and partner Jim Young pilfered bandwidth from UC Berkeley, where Young was a grad student. They stashed a CPU under a desk and piled some books around it to hide it. Eventually they got caught and had to find bandwidth elsewhere.

Later they cut favorable deals with Rackspace, convincing the company that HotOrNot would be the perfect test case to show that Rackspace could really scale a company to huge proportions. Rackspace which was relatively new at that time, was willing to take the risk on Hong.

It’s all about survival for start-ups, Hong said. Which means spending as little as possible especially in the early stages.

I’ll add more later on Hong’s take on revenue models. (He says his company may have been the first to sell virtual goods.)

The Ignorance Of The Crowds: IMDB Gets Dark Knighted

Dark Knight was a great movie, But nowhere near the greatest movie of all time. (Brando v. Ledger is no contest.) That’s what Dark Knight fanboys on IMDB have rated it. They have also voted down The Godfather from its perch at #1 to move Dark Knight to the top.

Yesterday I noted new forms of crowdsourcing in the planning of a restaurant. The IMDB example shows how the “wisdom of the crowds,” a key tenet for many Web 2.0 companies, is a system that can still be gamed. The out-of-control crowd was most famously seen in the Digg-DVD code affair.

<via CNET>

Clicks to Bricks and Mortar: Crowdsourcing A Restaurant

The Washington Post has a story on a restaurant that is attempting to crowdsource a restaurant, from the interior design, to the concept, to the name.

Newspapers, radio shows, NASA projects and inventions of all kinds have been crowdsourced, so why not a restaurant? The term “crowdsourcing” was coined by Jeff Howe.

See also: Web 2.0 really.

A Comparison of the iPhone App Platform Vs. Facebook App Platform

What are the business prospects for iPhone applications compared to Facebook apps? There are some interesting comparisons to be made between the two on the types of apps, the revenue models, and virality.

“Useful” vs. Fun Apps

Web services seem to be polarizing between utilities and entertainment, as Alex Iskold notes. Both Facebook and iPhone are popular for games, but the iPhone has many more business/productivity apps. While Facebook has a few “useful” apps, comparing it to the iPhone platform clarifies for me why it will be hard to make it a place for useful apps. Unlike the iPhone platform, it was never designed for serious activity, it was built for communication, flirting and staying in touch. (Here are 10 useful Facebook apps.) The iPhone, like any smart phone or computer, is designed for productivity, in addition to entertainment. This is no judgement on fun vs. useful apps. But because of this, the iPhone will have more options for a range of applications than Facebook.

Who’s Willing to Pay?

While the prices of iPhone apps are still in flux and the prices did seem high early on, it appears that free apps are decreasing in proportion and paid apps are increasing, according to Pinch Media. The common price point may end up forming around the 99 cent and $9.99.

People are clearly more willing to pay for apps on the iPhone than they are on Facebook. If you pay $200 to $600 for a phone, whats $5 or $10 more? The willingness to pay is a function of the platform. It’s a higher end, higher price point market, which means in theory it will attract more developers. Social games for Facebook generate say $0.50 or $1 CPM compared to an app for the iPhone that could cost $10 to purchase, though granted the $10 game would require much more work to build. If Facebook’s payment system or some undetermined new ad system proves a success, that could change things.

Advertising: Social-ness vs. Location-ness

Right now, advertising on social networks like Facebook is still a crapshoot for the most part. The best prospects are for social-related ads, which take advantage of the social graph on the site. Mobile ads are also still in the early stages of development. But they do offer one thing that ads on Facebook do not: location. Serving specific contextual or behavioral ads based on where someone is located would provide interesting options that PC-based social networks do not.

Virality: Friends, Friends, Friends

Facebook wins on virality, even with changes to its platform that have made gaining users not quite as easy. The downside for iPhone apps at least right now is there is not the kind of viral growth magic that you get on Facebook. This could change if and when developers come up with social networking apps that take advantage of the iPhone’s specific benefits, such as location and touch screen.

Fred Wilson (who inspired this post) raises a related question: does being first on the iPhone matter as much as it did on Facebook? In other words will there be so much virality that those that get in first like Loopt, Yelp and Twitterific take leading positions that others will have a hard time challenging? I think because iPhone’s virality is not as powerful as Facebook’s later apps will still have a good opportunity on the iPhone.

Printcasting Offers Hybrid Web/Print Publishing (And Ad Targeting)

To follow up on yesterday’s post about a custom-targeted print ad model, Jason Preston at Eat Sleep Publish points out one fledgling example of this already in existence. He interviews Dan Pacheco of Printcasting, a service of the Bakersfield Californian.

Printcasting provides micro Web sites on hyper local or highly niche topics. So far it’s being used in neighborhood and ethnic-specific publications. Users also have the option to print out the PDF of that week’s issue. The PDF includes custom targeted ads based on interests or demographics. (Can we also hope for behavioral targeting as well that would place print ads based on each person’s Web browsing experience? That online/offline combination would be really interesting.)

Printcasting is also available for bloggers and in theory would allow bloggers, publishers and Printcasting to share in the ad revenue.

Targeted Ads in Print: A New Revenue Source For Media Companies?

The launch of Sojern today, a service for placing targeted ads on airline boarding passes, raises an interesting question. Could targeted ads be a new revenue source in newspapers, magazines, or other print journalism?

Targeted ads are most well known for online ads, where they can be placed in front of a user based on past Web sites browsed–behavioral targeting–or based on what the user is doing at the moment–contextual targeting–for example, searching for shoes brings up shoe ads. There is also demographic and geographic targeting. A variety of studies show the boost in user interest with these various forms of targeting.

However, targeted print ads are more difficult to pull off. Setting aside national print magazines or national newspapers that are large enough to run different ads for different geographic regions, most newspapers and magazines have not been able to create targeted ads. Once you set an ad in a publication and it runs in print, that’s it.

One example of successful targeted (contextual) print ads is Catalina Marketing, which provides coupons on the back of receipts at the point of sale. Based on what you buy, you get different ads. Sojern is just starting out but the idea is similar. Based on what destination you are going to, as well as your budget–e.g. economy vs. first class ticket–different ads and content appear on your boarding pass, from weather info to restaurants and events.

Could newspapers or magazines implement a similar idea? While it’s clear that newspapers are moving further into digital and there is a need for rethinking models of publishing and distribution, there are still many print publications. If one were to design a newspaper (or magazine) from scratch, what type of ads would one design? Ads targeted so that home delivery newspapers or magazines have ads targeted to that specific geography, lifestyle or demographic of that household, which would bring in much higher ad rates. I’m sure this would require an expensive (maybe impossible) rebuilding of the entire printing process. But since many newspapers have cut way back on the number of print pages, wouldn’t it make sense to make those ads that are there worth more?

Maybe this only makes sense if you are talking about a print-out-your-custom-newspaper-at-home model. It especially makes sense in that case, in the way Sojern prints targeted based on destination, newspapers could offer extremely targeted ads along with the 5 stories a person wanted to take with him or her on the subway to work.

iPhone Apps That Live Up To The Hype

iPhone Apps

As you know by now, the iPhone App Store has launched. Above is a screenshot of the iPhone apps that I have downloaded so far. This is my quick take on the Apps that are my favorites so far and that I think have the most promise, starting with the best.

Pandora

This is an iPhone version of the browser-based Internet radio service. One of the weaknesses I always thought with the iPod was the lack of radio stations. What if I just want to listen to the newest songs in a radio format without having to browse through songs as I would have to on iTunes? Pandora solves this problem, which I think is even more useful on the go than on a PC. You can “like” songs and create your own radio stations just as you could on the PC version of the service. Best of all it surprisingly works fairly well on Edge, with only a short pause between songs. I agree with others, it’s one of my favorites so far.

iTunes Remote

This allows you to control your iTunes from your iPhone. Great idea from Apple. This is clearly the beginning of Apple’s home entertainment system strategy. This makes the Apple TV much more interesting to me.

Shazam

Shazam allows you to put your iPhone up to a radio (or anything playing a song) if you hear a song that you like. Shazam will identify the song and give you the option to purchase the song on iTunes and, if available, provides a link to a YouTube music video. It worked perfectly for my test on Lupe Fiasco’s “Superstar’ and even my test on the relatively obscure Zion I’s “The Bay.” Not sure how much I would actually use it, but it’s still a pretty innovative idea. I also tried Midomi, which is similar, but also claims to identify songs if you sing into the iPhone. I didn’t try the singing feature, but I tried the test with a song from my computer, but it said the system was busy. I guess it must be crashing with all the traffic today.

Loopt

One of the most promising areas with mobile is location based services. Loopt can connect you with nearby restaurants, bars, free wifi locations, based on the iPhone’s GPS feature. It can also show you where your friends are nearby and the restaurants or other businesses they have reviewed nearby are. Loopt also provides reviews from Yelp. Yelp’s separate iPhone app is also pretty good. It doesn’t provide location-based social networking, but it does provide location-based searches of, for example, the best pizza restaurant closest to you.

Monkey Ball

Unlike the others, Monkey Ball, based on the Sega game, costs $9.99. It’s not the best game ever created, but it is notable for its use of the iPhone’s motion sensors. It works like the Nintendo Wii by rolling a monkey based on your tilting of the iPhone. This motion sensor-based gaming should be a huge area for app development in the future for the iPhone.

A Serious Facebook? Is It Possible to Create a “Facebook Adult”?

Can Facebook be turned into a “serious” social network? This is not an idle question. Facebook has up until now depended on ad revenue, which has not been as outstanding as the company could have hoped. More serious, practical applications and associated users could mean more opportunities for revenue from a range of products and services. In a recent post, Stanislov argues that yes, Facebook can be made more serious and practical if those serious people could be organized together, separate from the giggly teenagers, and given the right features and serious applications organized for them.

Wondering whether Facebook is the best place for serious, practical apps as opposed to, say, throwing sheep, I asked Stansislov to point out some serious Facebook applications. He quickly came up with a good list (I could quibble and say serious people would rather read RSS feeds in their feed reader, but I agree with most of them). He argues that developers would build more of them if the environment was well-suited for them. Maybe. If the site could be reorganized in a way that made it welcoming for these practical apps, then that’s possible.

But another issue this raises is that doing that could pull apart the whole reason much of the giggly crowd comes to the site. Sixteen-year-olds don’t go to Facebook to do serious things like check stock quotes or read the NYT. They come to communicate, view photos and “buy” their friends. If Facebook becomes known as a serious site, they could move on to Twitter or Flickr or MySpace or the next start-up. Is it possible to split off and create a “Facebook Adult”?

LinkedIn has a leg up on Facebook in this department. LinkedIn has opened up its platform for third party developers, though granted it’s way behind Facebook. But if developers start to build banking, shopping, insurance, payroll, and investing apps on LinkedIn and Facebook (or even Facebook Adult), where would users rather use them?

Amazon’s Page Recommender Widget Moves Into Content, Challenges Start-ups

Amazon has launched a new Page Recommender widget that affiliate bloggers (and presumably other publishers) can put on their sites.

The widget makes personalized recommendations of other pages within a Web site to users, apparently based on their individual preferences. Whether the recommendations are based on 1) just their browsing history within that particular site, 2) also their browsing on other affiliate sites, 3) their product preferences within Amazon.com proper or 4) all of the above, is unclear.

In addition to the new content recommendation, the widget also recommends products. The product recommendations are also personalized based on individual preferences. From Amazon, via O’Reilly Radar:

The products that are recommended are based on the interests of each individual visitor as well as items that convert well for your website. The products that you see may be different from the ones that are displayed to others based on their individual behavior.

This move into content recommendations is not too suprising, since Amazon’s product recommendation engine on its site has been one of the best examples of recommendation engines. That is, those parts of the site that say “readers who were interested in this book were also interested in this.” In theory, using that recommendation engine for Web pages instead should not be too big of a change.

Because this is a new form of affiliate revenue, to some extent this competes with Google (Google and Amazon increasingly compete in other areas such as cloud computing), but more directly it takes on a number of start-ups that are providing similar or related services. These companies, such as Aggregate Knowledge, Inform and Loomia, and Proximic, and to a lesser extent Sphere, provide recommendations for related content and/or products based on the history of traffic and click-throughs in their networks. Some of them can do nifty things like recommend a product in a completely different area from an article that someone has viewed. For example, on a page about gardening, the service could recommend a specific type of bicycle.

However, as far as I know most of these start-ups are not basing their recommendations on personalization as Amazon seems to be, but rather the aggregated knowledge of their networks. There is an interesting strategy difference in presenting the most popular versus the most individually customized recommendations (see my previous post).

The Amazon widget also falls into the larger trend of ads and content merging together (Google’s AdSense is the most obvious example of this. When you search for shoes, the distinction between the unsponsored search results and the sponsored links has become less important for users.)

This could the beginning of a broader push into content recommendations for Amazon. However, I’m not sure this is a big challenge to Google, I think it’s a much bigger concern for start-ups.

Social News: Popularity Vs. Personalization

ReadWriteWeb has an interesting post on “collaborative filtering” on social news sites. The writer makes the point that there are two types of social news recommendation models: one that provides you with the most popular stories from all members of the site, and another that provides you with stories that are personalized to you based on your past reading habits and those with similar interests as you.

There are different camps here: Digg based on the former model of popularity and others such as Reddit, Stumbleupon and Searchles that recommend stories based on various forms of personalization. (There are also services such as Aggregate Knowledge and Loomia, which use some aspects of social recommendations to recommend related articles or products.) However, the two methods, popularity and personlization, are not mutually exclusive. Digg is about to implement a recommendation feature. And many sites, from big media sites to social media sites, could provide both a most popular section as well as personalized recommendations.