Below you’ll find four key take-aways from teaming up with Google. I believe they can be applied by any startup, in any industry.

Lesson 1: Set the agenda

Consumer adoption of the mobile web is outpacing the rate at which mobile web experiences are being built. In less than three years, more people will access the web via a mobile device than by any other way. Google recognized this trend, and now its showing others where the world is headed.

By painting the bigger picture for everyone else, Google is also framing what the future will look like. Setting the agenda may sound like a lofty goal for a startup, but that’s what you should be focused on.

Startup companies are all about painting the big picture before anyone else can see it. Without a big picture idea, who will join you as a co-founder on your high-risk, potentially hallucinogenic quest? Who will fund you? Who will buy your product, rent you office space, listen to your pitch, or support your ideas? It’s this kind of foresight that creates new opportunities in the marketplace.

Lesson 2: Make your innovation tangible

Now that you’ve created your framework, you need to show it to your audience.

Google goes to great lengths to make its products approachable for users and developers. And they work hard to get users to test out new products as soon as possible.

For the GoMobile initiative, they built the GoMo Meter — a mobile preview tool that “shows you how your current site looks on a smartphone, and provides a report on what’s working and what you can do better.”

The GoMo Meter embodies several aspects of Google’s philosophy when it comes to new products. It has a low barrier to start, requires no commitment to use it, and offers easy access with a simple and obvious interface, all tied to a topic that interests each of us endlessly — ourselves (or, in this case, our websites).

How do you make your startup’s innovation tangible?

Start by figuring out what makes your innovation meaningful to your customers. What do they see and feel in their initial product encounter? When they ask themselves, “What is this?” and “Is it for me?” guide them to the right answer.

Look too for the human behaviors that your product is working on. It’s humans who will make decisions and judgments about your products, and you can tap into some enduring human traits in well-known ways. For example, after successfully raising a VC round, Redfin CEO Glenn Kelman mentioned that well-known VC Roelof Botha only invests in consumer companies that let consumers indulge in one of the seven deadly sins.

Lastly, give users something obvious and easy to do. This could be watching a video or slideshow, clicking a button to initiate an action, entering a few data points, showing some before and after screenshots — anything that leads to a tangible and specific interaction.

As a startup, if you get people interacting with your product, you start to influence their behaviors. Their behaviors then influence their beliefs, which again influence their behaviors in a virtuous cycle.

You could try to influence beliefs. Untold millions are spent everyday attempting to influence beliefs – that’s much of the advertising you see. But it’s very hard both to influence beliefs and to measure changes in beliefs to learn if you’re effective. So focus on behaviors and let them lead to beliefs.

A simple way to prove that you want to influence behaviors over beliefs is to consider fast food. People eat it (a behavior) but they don’t believe it’s good for them. And how many of the seven deadly sins does it appeal to? Sloth, to start, and greed and gluttony for good measure.

Ask the hard question: what are the behaviors you want to have happen because of interaction with you product? Are those behaviors plausible and part of human nature?

Lesson 3: Focus, focus and focus

Focus on the parts of your business that are fundamental to how customers use your core product.

Since a growing number of customers are accessing Google’s core search products through mobile devices, the company has purposefully allocated time, people, and money to development in this sector. It may sound simple for a multi-armed beast like Google to redistribute some of its wealth, but having a lot of resources means the company can easily get derailed and scattered. It’s just as hard for a large company to focus as it is for a startup.

While a startup tends to have a scarcity of resources, it also has the freedom to focus wherever it chooses and to change that focus whenever it wants. The popular term here is “pivoting.” Startups, like all businesses, find success in momentum, and momentum is all about velocity. A startup that changes direction all the time ends up going in circles.

Lesson 4: Track the micro, decide on the macro

Google has built a superb business by understanding the value of data and gathering that information so that others can make meaning from it.

Google tracked the traffic it generated from the Go Mobile event to see if the initiative had been persuasive. Let’s call those micro-metrics.

Micro-metrics — visits, conversions, leads — were used for tracking and tuning, and the macro-metrics — years of mobile adoption, traffic, revenues — drove the strategy and focus.

Eric Ries, author of The Lean Startup, has a great blog post with much more detail on startup metrics (and tracking the micro while making decisions on the macro) called “Learning is Better than Optimization.

The hard part is balancing the micro and the macro. Every day in a startup involves a ton of detailed work in the micro details of execution, while each decision in the micro details of execution influences the macro strategy.

The answer to balance out the two? Habits and self-reflection.

For Google’s GoMo we connected monthly on a few measurements we’d established to track our success – traffic numbers, leads and conversions.

Internally at my company Mobify, we have a weekly process where each team lead announces their key numbers. Then on a regular basis we review the key numbers. In that review we talk about both the key numbers – their sources, influences and meaning – as well as whether these key numbers are the right numbers to be tracking.

A great framework for figuring out your key performance indicators (KPIs) is to think about your segment ABCs: Acquisitions, Behaviors, Conversions. This ABCs framework is from Avinash Kaushik, Google’s Digital Marketing Evangelist and author of two great books on web analytics. His blog post Web Analytics Segmentation is a terrific guide to getting started and improving your abilities to balance the micro and the macro.

Combine the ABCs framework with good habits and self-reflection and you will find meaning in measurement.

Bringing it together

While it’s hard to imagine that your startup has much in common with a giant like Google, these four strategies should resonate with any sized-business. Think big and paint the picture before anyone else can see it. Have the resolve to focus where attention is needed. And most importantly, never lose sight of what makes you meaningful to your customers. Your company may never reach the size and scale of Google, but your startup can still make a sizable difference.

Igor Faletski is the CEO of Mobify, a web platform that optimizes ecommerce and publishing sites for mobile and powers more than 20,000 sites.

Image courtesy of Flickr user thinkpublic

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Facebook is selling investors on the dream that the company is just getting started — not only with selling ad space on its current product, but in creating nearly an entirely new Internet, one where Facebook doesn’t simply create connections between sites and people but creates many different social products too.

This ambitious goal creates an interesting dichotomy. Although every hot startup wants to be the next Facebook, Facebook needs to be every hot startup as well. To execute its vision of total web dominance, Facebook is recreating and competing with nearly every significant Internet product of the last few years. It’s an unprecedented pivot that threatens Facebook’s core products and may eventually benefit the very same startups Facebook is trying to crush.

Back in the Day

For the first five years or so, Facebook helped users do three simple things: share photographs, status updates and links with friends. But somewhere along the line Facebook recognized two important facts:

1. If it was going to be worth tens of billions of dollars, it needed to attract hundreds of millions of eyes to the site every day. To do this, it needed to be a portal for every type of content, or better yet, the shell for all consumption of that content. In other words, they needed to become the entire Web.

2. New companies, like Twitter and Instagram, were creating compelling social products that not only challenged Facebook’s dominance but threatened to steal users’ time away from Facebook.

If Facebook was going to be more than a destination for sharing updates with friends and family, it had to move fast. And it did.

Unparalleled Ambition

It’s hard not to respect Facebook for its relentless innovation and lightening fast product updates, as well as its fearlessness in pushing the limits of privacy, user experience  and integration with the web as a whole to achieve its vision.

However, if you look at Facebook’s list of 22 (and growing) products– not to mention the thousands of third-party apps — you begin to wonder if Facebook is overreaching and confusing its members.

Over the last couple of years, consumers have been trending towards products with the opposite approach. Simple, stark, and direct sites and apps that do one thing very, very well. We open Instagram because we want to do one easy thing — share a great picture or see our friends pictures. It’s fun. It’s lightweight. It scratches an itch.

What itch is Facebook scratching? Most people I know can’t clearly articulate why they use Facebook. Now that we’ve reassembled our high school physics class, shared every song we listen to, and uploaded every cat video out there, our feeds (we now have two feeds!) have become cluttered news tickers without any focus or context.

Facebook’s expansions of services and connections don’t come with a backup plan. After Facebook realized that we don’t want to connect with close friends and casual acquaintances in the same way, what did the site do? They added yet another new feature so that we could segment the giant list of friends that they pushed us to assemble in the first place. Meanwhile, the easier option is to just declare Facebook bankruptcy and start over on another social network like Path.

That’s the real irony of Facebook’s recent moves. By copying the startups that threaten them, Facebook actually muddles members’ experience so much that it enhances the need for its competitors.

Here’s an incomplete list of companies Facebook is actively competing with:

• Flickr/Picasa/Instagram (pictures)
• YouTube/Vimeo (video)
• Beluga/GroupMe (group messenger apps)
• Foursquare (location sharing)
• Twitter (activity feed)
• Turntable.fm (shared listening)
• vBulletin (groups)
• News.me/Flipboard (frictionless social news/reading)
• Tumblr/Pinterest/etc (share other people’s pictures)
• AIM/GChat (chat)
• Gmail, Yahoo Mail, Hotmail (Facebook Messenger)
• About.me/Flavors.me (Timeline)
• Google+, Path (create rings of friends/acquaintances)
• Plancast (events)
• Craigslist (classified listings)

Many of the hottest startups have easy to use, beautiful and elegant sites built around small but significant problems. Several, including Foursquare, Tumblr, Living Social and Groupon, have had astounding results even in the face of Facebook’s attempts to move into their spaces.

Does Facebook really believe it can implement every solution better than its competitors? Does it think its social graph is so much of an advantage that it can sustain a confused and complicated product?

A lot of VCs ask startups what they’ll do when Facebook copies their features. But come IPO time, maybe Facebook’s shareholders should start asking what happens when Facebook tries to do too much.

Edward Aten is the founder of Swift.fm, a social distribution service for musicians. He’s an active startup advisor, blogger and marathoner in San Francisco. Follow him on Twitter @edwardaten. The views expressed here are personal and do not necessarily reflect those of any Company with which he is or has been affiliated.

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But who has time for that? This is a social media world. We’re live in 140-character sound bites. So I decided to ping my favorite CEOs via Twitter to see what kind of wisdom they could drop on me. Here’s the great advice they shared.

Daniel Ek, CEO, Spotify

Figure out what the top five most important stuff is, focus relentlessly on that and keep iterating. Less is more.

Dennis Crowley, CEO, FourSquare

Don’t let people tell you your ideas won’t work. If you have a hunch that something will work, go build it. Ignore the haters.

Sarah Prevette, Founder, Sprouter

Just do it. Get it out there, absorb the feedback, adjust accordingly, hustle like hell, persevere and never lose your swagger.

Sarah Lacy, CEO, PandoDaily

Follow your gut. it may be wrong, but you won’t regret it if you fail. You’ll regret it if you ignore your gut and fail.

Craig Newmark, Founder, Craigslist

Treat people like you want to be treated. Apply to customer service.

Gary Vaynerchuk, CEO, VaynerMedia

Do work for your customers, not for press or VCs. The end user is what matters long term.

Matt Mullenweg, CEO, Automattic

Only reinvent the wheels you need to get rolling.

Jason Goldberg, CEO, Fab.com

Pick one thing and do that one thing — and only that one thing — better than anyone else ever could.

 Alexis Ohanian, CEO, Reddit

Make something people want. Then give more damns than anyone else about it and you’ll make something they love.

Chris Brogan, President, Human Business Works

Buy @ericries’s book. Beyond that? Build a platform. This is the big year.

Matt Howard, CEO, ZoomSafer

Startup wisdom: The number one job of a CEO is to not run out of money.

Brian Wong, CEO, Kiip

Always be learning from others. Whenever you meet someone, you don’t want something from them, you want to learn from them.

Seth Priebatsch, Chief Ninja, SCVNGR and LevelUp

Something my dad taught me: Ask forgiveness, not permission!

Hooman Radfar, Founder, Clearspring

Give away the wins, own the loses. Your job is to curate greatness.

Alexa Hirschfeld, CEO, Paperless Post

Users and employees are key predictive indicators of a company’s success; press and investors generally months behind.

Got some other great wisdom for your fellow CEOs? Leave me a comment!

Peter Corbett (@corbett3000) is the CEO of the creative agency iStrategyLabs, and is the founding organizer of DC Tech Meetup.

Image courtesy of Flickr user Search Engine People Blog.

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Whether on smartphone or tablet, business leaders now demand access to corporate email and documents 24/7. When they get such access, they begin to see the potential that comes with it: increased productivity and flexibility, improved efficiency and perhaps even a reduction in the amount of office space required as people are able to work remotely. When this occurs, senior execs start asking why there isn’t a company-wide mobile strategy in place — which is exactly where the troubles can begin for beleaguered IT teams.

Tablets equal headaches

We have all heard the phrase “consumerization of IT.” But despite its overfamiliarity, it is a genuine phenomenon. If enterprises don’t issue their workforce with smartphones or tablets, employees become increasingly intent on using their own devices. This trend, affectionately known as Bring Your Own Device (BYOD), is a real headache for IT teams. Recent research from Dell KACE showed that of 750 IT professionals surveyed, almost nine in ten said that their staff were using their own devices for anything ranging from email right through to CRM and ERP.

More devices means more operating systems, which in turn means added complexity for IT departments. Concerns about network security breaches, IP theft and loss of data mean that a strategy for addressing BYOD is imperative.

The best approach

Essentially what is happening is a shift from IT assets inside the firewall to IT ​assets outside the firewall. While this does present challenges, it is by no means an insurmountable problem.

Your enterprises should begin by choosing at least three smartphone platforms to support. It is, of course, impossible to support every platform, but an audit of the most popular devices in an organization will reveal the most appropriate. Then your organization must decide what type of approach it wants to take: Do you still want to provide and retain control of all devices, software and apps? Or is there merit in a hands-off strategy? Perhaps your IT departments should recommend devices and apps but ultimately let employees source their own, with any required controls applied in the cloud?

Business has changed, IT must follow

The way in which so many of us work has changed dramatically over the last decade. There is no longer a requirement for today’s web workforce to be stuck in one location or connected to one enterprise server. Web workers are mobile and flexible — reflective of the way businesses operate in 2012.

So the traditional roles and responsibilities of an IT department are changing, just as the way that businesses operate is changing. An IT team worth its salt needs to be aware of this. The consumerization of IT and BYOD are not passing fads, and the sooner organizations embrace this, the sooner they can reap the many benefits that such an approach brings. People are going to use devices that make their working lives easier whether an IT Director likes it or not, so surely acceptance is the way forward for any right-minded organization?

By relinquishing just a little control, IT departments can unlock their organizations from the constraints that come with the old approach to device management and usher them into a new era of productivity, flexibility and collaboration.

Andy McLoughlin, co-founder and EVP Strategy at Huddle, can be reached on Twitter @Bandrew.

Image courtesy of Flickr user rhodes.

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But what if all of this changed? What if consumers actually enjoyed signing contracts? What if carriers just gave away phones — all of them —  for free?

What do consumers get?

Carriers need to rethink the current model of phone ownership. It’s not working for them or consumers. So let’s propose a new one: phone leasing. It would work like this. A consumer can get a free phone, any model they would like, and can keep it for 12 months. No charge aside from their monthly bill. If there are any issues with the phone, they would most likely still be covered by the manufacturer’s warranty. And any reasonable issues not covered by the manufacturer’s warranty would be covered by the carrier for free.

What’s the catch?

The carrier owns the phone, and it must be returned after the 12 months is up. Moreover, instead of signing a two-year contract, consumers would have to sign a four- to five-year one. But, and this is a big but, when a consumer gives that 12-month-old phone back to the carrier, they’ll get a brand-new one of their choice — every single year of the contract.

What do carriers get out of this model?

Three things: More phone “sales” — lowering the cost of phone acquisition will lead to more contracts; longer contract means more customer loyalty; and leasing instead of selling phones means the phones can be resold once the 12 months is up (a typical iPhone goes for $300-400 on Craigslist). So instead of a carrier purchasing a phone for, say, $650 from a manufacturer and only getting $200 at retail from a consumer, losing $450 in the process, they’ll be able to resell that phone after 12 months for $300-400. This process will be repeated until the contract ends.

But why would a carrier go this route when the churn rate (the percentage of consumers leaving) is so low? More profit. Smartphone adoption is growing, but it would be growing much faster if smartphones were free. Moreover, carriers are basically competing with the same phones (barring T-Mobile, which still doesn’t have the iPhone) and very similar monthly plans. Adding such a plan would be a game-changer that would provide a worthy competitive advantage. Lastly, churn may be low — Verizon, for instance, reported 1.1 percent among 88 million contract subscribers. That equates to 88,000 people, or nearly half the population of Richmond, Va., leaving every quarter. With each subscriber worth $54.89 of revenue, $4.8 million worth of churn walks away each quarter.

Why not prepaid instead?

Of course the prepaid phone market is an option, but for most consumers it is not a tantalizing one. Part of the reason could be due to the lack of cachet; the perception remains that prepaid users don’t have good enough credit to get a contract. But an even greater reason is the lack of cutting-edge phones the prepaid market offers. For instance, the iPhone (as well as many popular phones) isn’t available as a prepaid option. And for carriers, on average, prepaid has a higher churn rate and creates less revenue.

Carriers have little choice but to shake up the cellphone market. It’s ripe for a revolution.

John S. Wilson is a freelance writer who focuses on technology, politics and health policy. He writes for NewsOne, The Loop 21, and Mediaite, and can be reached on Twitter: @johnwilson

Image courtesy of Flickr user jason.lengstorf.

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Artists are entrepreneurs, too, and deserve to be able to monetize their work

SOPA is clearly too extreme to be a practical solution, and it threatens core pieces of what make the Web great. In spite of even the best-intentioned efforts of those in the film and music industries, I do not expect this legislation to pass. Still, the issues that the act seeks to address are very real, and the impact of non-action will continue to affect those of us in film, music and television. Those of us who are so up in arms about SOPA also risk forgetting that the underlying issues are nonetheless quite pressing — not just for the big media companies, labels and studios, but for the artists who produce great content, and whose livelihoods depend on viable monetization of their commercial work.

We forget that artists are entrepreneurs, too — every new record, and every new film production is its own startup, so to speak. Lost in all of the anti-SOPA backlash (whether you agree with it or not) is the fact that these artist-entrepreneurs create incredible value every day, and deserve much better from all of us. What if your proprietary source code was stolen, and shared freely with anyone? What about your underlying data? What about your breakthrough algorithm?

The technology industry has progressive cultural habits like open-sourcing that have proved out new modes of ownership, and community. Artists from Radiohead to Louis C.K. have taken notice, and experimented with radical new distribution models that challenge traditional notions of “free” and “commercial.” But technology also has more patent warfare than we know what to do with, not to mention uniformly sharp competition. Words like “moat” and “proprietary” are music to any VC’s ears.

The “discovery” benefit doesn’t actually translate to profits

The Internet is neither a panacea nor an imminent danger — it produces enormous benefits, and some unfortunate byproduct. We need to seize opportunity and mitigate risk simultaneously. SOPA swings the pendulum too far to one side. But this issue isn’t going away, either.

Why?

Because the “discovery” benefits, of free-flowing music, film, and TV, contrary to popular belief, do not generally trickle down to the actual artists who create these works. This is important to understand. There are exceptions, of course, breakout hits and outliers. But for most artists, the magic hand of discovery is never realized. New fans do not in fact materialize out of the Internet and start paying for content, as if on cue.

As general manager of Austin City Limits, I live this reality day in and day out. We’re a nonprofit, and for us and the artists we diligently work with to create unforgettable musical experiences, the discovery argument rings hollow in practice. The benefits are more directly realized by marketing departments, maybe, and top artists who are already trending. Stating that a Lily Allen or Arctic Monkeys were “discovered” or  that they “broke” via the Internet is a convenient copy point in a label-written artist bio, but for each of these valid success stories, there are thousands of artists losing the income necessary for them to live and dedicate themselves to their craft.  For every pirated download or freely shared file, there is not in fact a new fan created who will someday purchase a concert ticket or t-shirt.

Don’t believe me? Read this article and absorb the research. Take for example the number of record labels that have been shuttered, or the large number of layoffs at the music companies that are still in business, or the statistics showing the drastic decline in sales over the last 10 years  — it’s apparent that free online music discovery does not generate new fans — at least not fans who are interested in making purchases.

Now, some may say that that’s part of the creative destruction of the old music industry model, the big business run by a few major labels crumbling as a new model of all-digital distribution takes its place. That may be the case, but the artists don’t make money off the new model, either. In Forrester’s report, cited in the same article, it found that “just 44% of U.S. Internet users and 64% of Americans who buy digital music think that music is worth paying for.”

We do need reform, but we need the right reform

As an artist-first company, Austin City Limits endeavors to bring the highest quality live music programming to our weekly television audience. Beyond television, we are always looking at new ways to share the Austin City Limits experience with as many fans as possible through online and mobile technologies. We’re innovating on a lot of different fronts and 2012 will be a groundbreaking year for us. Certainly, innovation and reinvesting in great experiences is part of the path forward. And the proposed SOPA legislation, while targeting pirates, will also threaten the ability for legitimate content producers to innovate and bring great experiences to their respective audiences.

But at the same time, if zero limitations are put on the sharing of creative intellectual property — the internet will continue to harm artists, and the people and companies that support them, by hobbling their ability to be fairly compensated for their talents and work. The future of artists and filmmakers lies in the balance.

Legislation that chokes out the same creative flame that it seeks to protect is not the answer, but we’ve got to find some middle ground. The two extreme points of view being represented right now — on one hand, taking over the internet as regulatory infrastructure and punishing many for the acts of a few — and on the other, advocating royalty-free access with legal impunity under a deceptive “free and open” ethos — well, neither is going to work.

For those protesting SOPA for its shortcomings — you are absolutely right. But also know that reform needs to come, and will come, and that we’d all do well to collaborate and shape the right policy, instead of watching, and commentating.

Tom Gimbel is the general manager of Austin City Limits, the award-winning KLRU produced music television show.  Prior to joining ACL, Gimbel’s career includes more than 20 years in the music industry including senior positions at Arista Records and as serving an artist manager at High Wire Music.  In 2009, Gimbel founded Clatterhead, a social media marketing company.

Image courtesy of Flickr user BurgTender.

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Unfortunately, these bills, both in their substance and, significantly, the process by which they have moved along, fail this test. As such, they reveal a disturbing picture about the policy process in Washington, D.C. and threaten to create significant and unintended consequences if they are passed. And their passage was a real possibility before the tech and entrepreneurial communities spoke up.

The problems with these bills have been well-documented. I leave to others to discuss just how and why provisions authorizing a private right of action, or that leave an overly broad definition of affected websites, pose a threat to innovation and free speech. Rather than try to describe these problems, I’d like to explore what’s going on behind the scenes.

The way I see it, SOPA / PIPA is a very simple case of a small, very powerful set of industry incumbents (in this case, certain media companies, led by organizations like the MPAA) trying to use complex legislation to slow down the disruption of their industry. Ultimately, this becomes a debate between the incumbents and the innovators, the old and the new, the disrupted and the disruptors. In such debates, the incumbents tend to prevail, and the voice of the innovators — many of whom are too busy with their companies to focus on Washington or who may not yet exist — are rarely heard.

Talk to your representatives

I first heard about SOPA and PIPA in the fall. I sat down in a quiet space, printed out each bill, and read them carefully. If you’ve ever read a congressional bill, then you know that it’s hard work; they are written in a special version of English that only a lawyer could love (and I’m not a lawyer). As I read them, I got increasingly nauseous. I checked with a few friends who were lawyers to make sure I understood them, and when I did, was appalled. In my least charitable moments, I wondered why our Congress was spending time on this when there are so many more pressing issues for our country to deal with.

I then started exploring how these bills came together. I started by talking to my representative in the house, Jared Polis (D-Colo.). Jared is a very successful Internet entrepreneur (founder of BlueMountainArts.com and Provide Commerce) who has led the charge in the house against SOPA. Jared is one of the few people in Congress who has direct experience with and understanding of the Internet. I then spoke to my Senator, Mark Udall (D-Colo.). Mark just came out against PIPA and, while he is not an Internet entrepreneur, he is a huge believer in innovation and willing to explore, in-depth, the dynamics of legislation regarding innovation.

In each case, the story of how this legislation got this far is distressing. I watched the House Judiciary hearing where the chairman, Lamar Smith (R-Texas), who is also the sponsor of SOPA, unilaterally shut down virtually every amendment being proposed to improve SOPA so that it made sense. I then learned that Chris Dodd, a former Senator is now the CEO of the MPAA, which had a deep hand in crafting PIPA.  As I dug deeper, the insider game got worse.

Entrepreneurs don’t support it

More distressing, I searched in Colorado in the business and entrepreneurial community for anyone who supported either bill. I could not find anyone. Most people had never heard of either bill (this was last fall) and, when they heard about them, they had the same reaction that I did. So I started speaking out against the bills, publicly, and loudly.

Initially, those promoting SOPA and PIPA responded by being more forceful. The backlash quickly built, and starting in mid-December, the innovation economy and Internet community kicked into full gear decrying these bills in terms ranging from idiotic to unconstitutional. Then the politics really began. The proponents of these bills started referring to them as “jobs bills” and talked about the massive loss of jobs if they were defeated. Senior executives at large media companies forcefully defended the bills and lied about what was in them, and what their impacts would be.

We are now in an untenable situation. Both SOPA and PIPA are toxic. My view is that anyone who supports these bills either doesn’t understand what they are supporting or is simply no friend of innovation. And, if you are no friend of innovation, I can’t support you in any way, as innovation is the lifeblood of our economy, our country, and what I’ve dedicated my life to.

So, let’s call on our Congressmen to stop this nonsense, hit reset, and, if this issue is one that they really want to address, do so in a balanced, thoughtful way. It’s time to bury both SOPA and PIPA, and try again.

But before I get into those behaviors, I’ll start with a story about my experience with the book business, and how that led me to start a specialty e-book company called FlatBooks. The lessons I’ve learned through these experiences can help you understand why I think that the e-book business can really take off.

How I got into the book business aka Tales of a clueless author

I’m a photographer who’s known for a particular style of photography. I’ve run StuckInCustoms for the past several years and slowly built up a great audience while trying to perfect my craft. I don’t, by any means, feel like I am a fully-formed artist, but I’ve always been open with my struggles, successes and failures.

Several years ago, I was approached by three publishing houses to write a book. I chose to go with Peachpit, primarily because, in my opinion, they are the biggest and best. They usually have seven out of the top 10 books in the photography category on Amazon. They also publish the books of Scott Kelby and Joe McNally, which are regular bestsellers.

I went into this as green as the next guy. No one really talks about the numbers behind this stuff, but I will. It’s not to show off or anything, but these numbers are important when we compare traditional books to e-books later in the story. My advance was north of $20,000 and authors typically get about 15 percent of every sale after the advance has been paid back. So starting off I was pretty excited to write the book that would eventually be A World in HDR.

After many months of hard work, I finish the book and fly out to San Francisco to have dinner with some of the senior execs at Peachpit. I’m excited. I’m about to have a book in Borders and Barnes & Noble (this was before Borders went out of business); my mom and dad can go into a store to see my book and everything. In a way it’s all very personal: New authors can’t help but think about their parents walking into a store to see their child’s book. I can hear my parents talking about it to their friends at the coffee shop. This is a big moment for me.

Anyway, back to dinner. I’m sitting there in a nice restaurant in San Francisco with all these executives of a major publishing house. It’s one of these power dinners of lore. We’re there to discuss the upcoming launch of the book, and I’ll never forget what happened. They asked me, “OK, Trey, what are you going to do to market this book?”  You could have knocked me over with a feather.

My young publishing life flashed in front of my eyes.

I ended up putting together a robust launch campaign. Luckily I already had hundreds of thousands of people who came to the blog every month, a healthy Twitter following (this is before Google+) and a great network of people to help.

I did everything, including:

1. Put together a limited-edition print along with a signed copy of the book for early orders. This required me to warehouse the book with a third party, pay for massive shipping, and have a ping-pong table covered in books for two weeks while I signed all of them along with the prints, etc.
2. Organize a book tour (at my own expense) to hit several big cities like New York and Chicago.
3. Blog and tweet about it on countless occasions.
4. Sneak into hundreds of Barnes & Nobles, secretly sign my books, then tweet out the location so a little flash mob would appear to get the special signed version. (BTW, this got me thrown out of at least three bookstores by short-sighted managers.)

The book came out and did amazing. It sold out on Amazon in the US, UK, Canada and Australia. It takes a lot to sell out a book on Amazon! The book was reprinted and moved into the black within the first quarter.

And then I was exhausted. I couldn’t believe how much time and effort all of this required.

Let’s look at the profit margins

Let’s look at Peachpit. Now, I still really like Peachpit. It’s filled with very smart and clever people who are stuck in a dying system. Remember, just because I got only 15 percent of the book sales does not mean that Peachpit makes 85 percent. That money is like the great catch in Hemingway’s The Old Man and the Sea. It’s nibbled away by the book binder, lawyers, the guy that drives the truck to Borders (er, Barnes & Noble) the printing company, the book stores and all the other little people required to physically produce a book and get it into the hands of the reader. No one is getting rich off these things. In fact, everyone involved with the old book business is just barely scraping by with profit margins that’ll make your Adam’s apple shake up and down like Eve’s eyebrows.

So I started FlatBooks and now we operate at an 80 percent profit margin.

Almost immediately after launching into the e-book business, we hit six figures in income.  It blows away what I got with my advance from Peachpit. We now have about a dozen authors from all walks of life. Every month we add more and more, and things are really
beginning to snowball.

It turns out that tech companies — especially Apple and Amazon — are the new publishers. And this is, of course, because their technology disintermediates all the component steps required for a physical book. We have all seen the numbers about the growth of e-books and how every category is impinging on the traditional book categories.

These baseline trends will continue, and they will have two other accelerators added to them because of these emergent behaviors:

Emergent behavior 1: E-books are not one-for-one with the traditional book business

Most e-book projections are wrong. They anticipate for every $1 billion lost in the traditional book business that $1 billion will be gained in the e-book business. This ratio is actually closer to 1-to-2 because people are collecting e-books like nuts for the winter. They are easy to buy and download, much like music. And, frankly, it’s fun to fill up your iPad with a colorful, robust set of thumbnails in your library. I don’t know why this is a good feeling, but it is.

E-books are also more efficient in the way they communicate ideas. Our e-books happen to be mostly instructional, and it seems most people prefer an e-book that is about 50 pages long. Here’s a secret: Most authors can tell you all you need to know about a subject in 50 pages. The reason that many instructional books in bookstores are 300+ pages is so they look impressive and thick. Just like those old wonderful computer game manuals, a bit of heft indicates quality.

If you ask many non-fiction authors, they will openly admit that they put a lot of “filler” into these books. For example, if you were in the airport bookstore, no one would think a 50-page book on business to have anything significant inside of it. We’ve all been brainwashed in a way. Thankfully, none of that matters with e-books.

Emergent behavior 2: Social media is a marketing multiplier

For new products and services, old styles of marketing don’t really work anymore. I remember that Peachpit told me they managed to get a two-page spread in LA Weekly, and it did not make a blip in sales. For many of us, that’s not surprising; we spend the majority of our time on the Internet.

The best way to successfully market something is to have true believers with big followings talk about it on the Internet. Since we have many authors who are socially popular, a multiplier effect begins to take place.

Personally, I have over 750,000 Google+ followers, 150,000 daily photo views on the blog, and a good number of Facebook and Twitter followers. So do many of our authors on FlatBooks. We have well-known people writing e-books, such as Lisa Bettany (who wrote an iPhone book) and Ben Willmore (who wrote a photography book). Each of them have tremendous followings, and their followings will affect sales of their e-books, as well as our other e-books. It is a hyper-networking effect.  This kind of behavior just doesn’t happen when people walk into a Barnes & Noble. It’s a completely different way of marketing and selling things.

This is just the beginning for e-books

Traditional books will never die completely. I still have a great library here at home with countless stuffed shelves heaving forth with wonderful books. I expect many people do the same thing I enjoy doing: collecting my favorite books in real life. I like to get first editions, rare copies, signed editions, and this sort of thing. I use Alibris to find signed copies and interesting editions of books to collect.

Many people may think that the e-book market is already a mature market, but I think it is just beginning. It will evolve in many unexpected ways. There will be as many strange business models evolving as we see with music today. The marketing of these e-books will become increasingly social.

The spread of good books has always been a word-of-mouth phenomenon. Now, with social media, e-books are word-of-mouth-on-steroids.

In 2005, Trey Ratcliff started the photography blog StuckInCustoms, where he has posted one photo a day ever since. He specializes in high-definitiondynamic range (HDR) photography and has published one book and many, many tutorials and e-books on the topic. He founded e-book publisher FlatBooks in 2011.  Follow him on Google+, Facebook, or Twitter.

Image courtesy of Flickr user GlennFleishman.

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Fresh off its $1 billion valuation, Airbnb is the most common reference point for all manner of “this for that” pitches bouncing around the Valley right now, with many new ventures proposing to be the “the Airbnb of X.”

But Airbnb is only one species of the sharing economy genus — a genus that will stratify over the next few quarters.

Real-time makes your brand a hero

Hotel Tonight is a great example of the flip side of the Airbnb coin. It focuses on real-time reservations, and the real-time use of latent capacity.

Airbnb’s transactions typically take place five or more days in advance of a stay, and any requests inside that window are put on a standby list. In contrast, Hotel Tonight only offers rooms for the current night, with a cutoff of 2 a.m. local time. It’s a fascinating constraint, and one that has propelled their business forward. When people need a room immediately and you’re able to provide them one, they will remember you.

Real-time can command premiums, not just discounts

Of course, different markets and different kinds of capacity have unique sensitivities to time.

Uber’s car service business is incredibly time-sensitive. One of its most common use cases is trips to and from the airport, which usually involves a high-stakes deadline on at least one end of the journey.

Other popular uses are travel on a busy holiday (think Halloween or New Year’s Eve in New York City during a public transportation strike).

The more time-sensitive a market becomes for buyers and sellers, the more lucrative the corresponding business opportunity.

This is an old lesson — price and revenue optimization wizards hold time in the highest regard. And as the time-sensitivity of a situation increases, the number of parties we’re willing to entrust with our affairs dwindles to a small handful.

Real-time puts coveted data in your pocket

What Hotel Tonight, Uber and my company LiquidSpace have in common is that we all know a lot about our customers’ travel patterns.

Additionally, we can extrapolate a ton of information about preferences — from who customers are likely to collaborate with to where they like to work or hang out.

With this real-time data, we’re primed to find other ways to make your stay, ride or meeting that much more enjoyable. We can quickly provide add-ons that customers need, such as snacks or printing, or partner with other vendors who can.

Whether by offering new services or opening up this powerful real-time data, we are exposing new revenue streams that the sharing economy enables.

With enough time, any latent capacity can be utilized. Each year at South by Southwest in Austin, Texas, we see twelve month’s worth of planning make use of every nook and cranny.

On short notice, sharing economies are harder to organize, and they involve more risk. Real-time capabilities mean that you sit closer to purchasing decisions, closer to strategic imperatives, closer to profit and loss, closer to sealed deals and averted crises.

Real-time is difficult, and precisely because it is so challenging to do real-time well, and safely, the market will reward those who invest in making the “here and now” a priority. In short, you’re closer to risk, and closer to reward.

Consumers want real-time access, and businesses demand it. The sharing economy is not only online, it’s also picking up speed.

Mark Gilbreath is co-founder and CEO of LiquidSpace, a mobile application that helps people find and share available workspaces.

Image courtesy of Flickr user psd.

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As target data center availability nears 100 percent, each small increase in availability requires an order of magnitude increase in complexity, which further increases depending on the level of data center. For instance, running a Tier IV facility is vastly more complex than running a Tier III facility, running a Tier III facility is more complex than a Tier II facility, and so on. So, naturally, each availability improvement is more difficult and complex to achieve at each corresponding data center level. As a result, many leading cloud providers with in-house data centers are actually operating at a Tier II facility level.

Keeping all of this in mind, public infrastructure-as-a-service (IaaS) providers face one of two choices: either build in-house facilities, or co-locate at externally administered data centers. Most large cloud providers choose the latter, but the choice has a cascading impact on a cloud provider’s operational abilities and strategy, which is often overlooked.

Pros of in-house data center ownership

1. High degree of control over facilities
2. Guaranteed capacity and easier expansion planning (within one building anyway)
3. Potential for greater power efficiency through specialization
4. Easier security management with a single-tenant facility

Clearly greater control means that a cloud provider that owns and runs its own data center facilities can more easily plan capacity and expansion needs as appropriate. Likewise, the ability to control low-level systems within the data center can enable a high degree of specialization for its particular use case, which can result in significant power savings. Similarly, metrics such as power density limitations can be determined in-house by the cloud provider. Google  and Facebook are two companies that are excellent examples of highly efficiently run data centers that also take a very transparent approach to their facilities with the Open Compute Initiative.

Cons of in-house data center ownership

1. Limited geographic expansion abilities
2. More limited connectivity options
3. Tendency to choose locations away from premium areas and network hubs
4. Tendency to run lower-tier facilities
5. Distracting to the core business
6. Very capital intensive

One of the most profound effects that choosing to run and own data centers has on a cloud provider is its strategic direction. Purchasing and running a data center is a massive undertaking that requires significant amounts of capital investment up front. This means that it is difficult for cloud providers to expand geographically in a timely manner. What’s more, building permissions and power supply contracts can be time consuming to secure. There is also a tendency to want to choose fewer locations given the heavy logistical burden of adding each additional location to the operation. This can lead to a less localized offering with few larger silos, which results in higher-than-average latency to customer access locations.

Finally, data centers that are owned and operated in-house tend to be in less desirable locations and lower-tier facilities than those provided by specialized data center operators. The result is significantly lower reliability and security with limited connectivity options as it’s challenging and costly to get carriers to connect to a new data center. Consequently, cloud operators running their own data centers tend to rely on a reduced number of carriers, and at a higher cost due to the lack of competition as compared to a carrier-neutral data center with significant economies of scale and connectivity options. Overall, for in-house operated data centers, this creates reduced redundancy, reliability and performance in comparison to using a specialized and focused data center operator. 

Why public IaaS cloud providers should outsource their data centers

While there are some advantages for cloud providers operating data centers in-house, including greater control, capacity, power and security, the challenges, such as geographic expansion, connectivity, location, cost and lower-tier facilities can often outweigh the benefits. In response to many of these challenges, an increasing number of cloud providers are realizing the benefits of working with a third-party data center provider.

Running a cloud isn’t like running a data center

The job of effectively operating a data center would be a huge distraction from cloud IaaS providers’ core service proposition. Fundamentally, operating a public IaaS cloud is a networking and software management/development task. Whereas, conversely, running a data center is a utility operation akin to operating a power station! They require a very different focus, skill set and staff. Furthermore, the challenge of keeping redundant power and cooling systems in place is a substantial proposition.

Phil Collerton, former head of operations at Interxion, the leading European carrier-neutral data center operator, comments:

“There are so many moving parts within a data center to consider. Everything from the facility’s security and power to its redundancy and cooling need to be running at peak performance to ensure customers’ maintain high availability and reliability for their infrastructure and services. There’s no question that running a data center is a full-time job.

Add to that the complexity of operating a cloud and you’ve got a hefty undertaking that requires double the staff, each with very different areas of expertise. For instance, the same person responsible for ensuring immediate failover for power supplies in the data center most likely does not have the same level of expertise to maintain backup systems for data stored in the cloud. Both tasks are essential, but maintaining responsibility for data center operations when you’re primary business is providing cloud infrastructure is a distraction from your core competency and vice versa.

The solution? Having these tasks operated separately — each by true data center and cloud experts — ensures the most highly performing services are delivered. This not only hones the focus of the providers’ business, but also gives customers a more reliable and effective structure for their own company.”

Supply-driven versus demand-driven

Furthermore, the data center business is a supply-driven business. Data center operators make a few infrequent decisions about creating and deploying capacity (supply), then aim to sell out that capacity as soon as possible. By contrast, a public IaaS cloud should ideally adjust capacity very frequently in line with demand. Whereas a data center experiences a steady growth in demand with relatively stable (but rising) utilization over time, a public cloud must manage dynamic demand in real time, as well as an overall growth trajectory.

Fundamentally, therefore, a public cloud should have dynamic capacity abilities and cloud operators need to focus on managing utilization and resource allocation. By doing so, public clouds can deliver performance for customers, as well as the elasticity they require, entirely on demand. That’s a totally different mindset and approach from a data center orientated approach.

Connectivity options

Unlike the connectivity limitations outlined in the “cons of in-house data center ownership” section, by outsourcing data center operations, especially to a carrier neutral co-location facility, cloud providers get access to a wide choice of connectivity providers. This not only allows customers to ensure the most optimal connection is in place for their business, but that they are protected from outages and have an immediate fail-over option that ensures redundancy. What’s more, this choice of provider creates competitive economies of scale, giving customers the most cost-effective options for high-performing services.

In reality, taking a look at public cloud providers, those with legacy businesses in hosting, including Rackspace and GoGrid, tend to run their own facilities, whereas pure-play cloud providers, like my company CloudSigma, tend to let others run the data centers and host the infrastructure. The business of operating a data center versus operating a cloud is very different, and it’s crucial for such providers to focus on their core competency. If a provider attempts to do both, there will be sacrifices and financial choices with regards to connectivity, capacity, supply, etc. By focusing on the cloud and not the data center, public cloud IaaS providers don’t need to make tradeoffs between investing in the data center over the cloud, thereby ensuring the cloud is continually operating at peak performance with the best resources available.

Patrick Baillie is the CEO of CloudSigma, an Infrastructure-as-a-Service (IaaS) provider offering a flexible web based and API driven platform based in Zurich, Switzerland.

Image courtesy of Flickr user The Planet.

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Meanwhile, your business users are continuing the drumbeat for more agility and flexibility — all at lower cost, of course. Adding to the pressure is the fact that your competitors are using cloud to reallocate capital and operating resources to driving innovation and value, placing your company in an untenable — and unsustainable — competitive position. It’s probably also the case that your service provider has no contractual, economic or technical incentives to suggest cloud migration strategies that might improve your position.

Seems you’re stuck. Right?

Maybe not. Just because you’re in a long-term relationship with a service provider does not mean you’re out of options. Most managed services agreements were written without cloud in mind. So, if you’re creative, you might find ways to renegotiate or possibly bring in a new vendor with cloud offerings that fit your business and workloads.

Four steps:

1. Review the contract. Make sure you know your contract before booking meetings with your service provider or a cloud vendor. Pay particular attention to the process for negotiating changes to the agreement, as well as minimum volume commitments and what happens if your workloads exceed those minimums. Your contract is probably silent on how new workloads are to be serviced, but check that as well.
2. Focus on work volume, not dollars. Most master services agreements are built around units of work performed in each time period rather than a dollar volume commitment. And once minimum volumes are met, most agreements allow customers to take additional volumes to other vendors and platforms.
3. Look for a high-value test case. Identify a basket of workloads that are well-suited to cloud migration. Public cloud examples might include dev/test or backup and archival. Private cloud examples might include high-volume transaction workloads running on legacy systems that can be forklifted to a virtualized environment. Use this list of workloads when engaging your service provider and/or cloud vendor. It will focus the conversations on specific, immediate paths forward and help you build financial and technical cases to support your eventual decision.
4. Amend, if it makes sense. It might not. The reality is that your current service provider likely is not technically equipped to deliver cost-effective, reliable cloud services. If that’s the case, they’ll do everything they can to discourage you from going down that path. Thus, the reality may be that in order to preserve your competitive position, you simply can’t wait for your current provider to figure it out. If that’s the case, you’ll want to move new workloads and cycles beyond your contractual minimums to a provider with the right cloud credentials.

A win/win?

Let’s assume your current provider is up to the task. Here’s where to look for the win/win:

Successfully migrating a set of workloads delivers value to you (increased agility, reduced costs, more productive employees), and also to your service provider (new capabilities and infrastructure roadmaps that they can sell to other customers). With a mutual win for both parties, the stage is set to work with your service provider to forge a contract amendment that makes the next workload migration more procedural. Sweeteners for a deal might include shared cost savings, bonuses for hitting KPI metrics, or a contract extension.

Of course, all of this assumes they can deliver the goods, and that’s probably a long shot.

This time it’s different

Start planning now for your next rebid. Cloud has so fundamentally changed the procurement landscape for managed IT services that your procurement process must fundamentally change as well. Map out your RFI/RFP game plan to:

a) attract service providers who “get” cloud

b) build a next-generation set of performance metrics and incentives into the contract, and

c) account for new elements of value that only cloud providers can offer.

In the next generation IT outsourcing world, service providers are going to look very different from what you find in today’s marketplace. There will be more of them, their capabilities will be different, and the value propositions they offer will need to be accounted for in how you evaluate your choices. Management and governance will follow new models, and metrics will be fundamentally different.

Today, the market is unsettled, and until that changes, the ball will be in your court to procure IT outsourcing agreements that put your company in the best position to reap the competitive benefits of cloud strategies.

Scott Bils is a partner at Everest Group and leads the firm’s Next-Generation IT practice.

Image courtesy of Flickr user NobMouse.

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We see hundreds of great ideas, but only a few have the right combination to get traction and scale right now. With that in mind, here are a few predictions for the payments industry in 2012.

Mobile payments continue to skyrocket

We got a taste of mobile payments growth in 2011, and this growth will continue. The mobile industry is shifting into “third gear,” with smartphone penetration reaching global scale and well on the way to becoming the dominant connected device for 2 billion+ people over the next few years. Add mobile innovations like the iPad, which has already become the fastest adopted electronic device in history, and mobile is really hitting its stride.  The future of computing is happening now, and quickly reaching a level of scale to enable global innovation.

Although scale is impressive, the true power of the connected mobile device lies in how dramatically it is changing consumer behavior and disrupting existing franchises. Use an app like Uber to get a town car, and you never do it the old way again. The new Nordstrom iPad App replaces a salesperson with a whole new in-store experience. Living Social can fill a restaurant in hours with a mobile offer, allowing local restaurants to skip the process of building a website. Payment helps accelerate these models through convenience and accessibility and, in turn, is forced to innovate itself to keep up.

Don’t think that mobile devices will be your future identity? Try spending an hour walking around without your phone, wallet, or keys. I barely made it to the end of the block before the panic set in. That was not the case just two years ago.

 A fuller integration of the online and offline commerce worlds

When we talk about the blend of online/offline in terms of commerce, we tend to focus on the ability to find local inventory or scanning a product in store. In truth there is much more happening here than that. In 2012 we will see a rise in virtual currencies and the ability to use them to pay for “real” goods. Imagine paying for groceries at Safeway with Facebook Credits or using extra frequent flyer miles for that cup of coffee at Starbucks. If you are 15 years old with no credit card or bank account, this future needs to be here yesterday, and retailers looking to attract the young digerati, who already switch seamlessly between their online and offline lives, will welcome virtual currencies with open arms.

Social commerce has seen some exciting developments recently that show more ways that the online and offline worlds are becoming more closely integrated. We just watched Louis C.K. disrupt the media industry by profitably producing and selling a comedy special directly to his audience through his website, clearing more than $1 million in 12 days. Zynga just went public at a multi-billion dollar valuation, thanks to its ability to sell digital tractors and barns to its ever-expanding user base. It’s not hard to imagine more social commerce innovation, such as person-to-person payments of non-cash currencies (“Help me fly to visit my mom by lending me your miles”) or creating massive fundraising movements (“Take a photo of my charity road race number so you can donate directly to my cause”). The possibilities seem endless — and are incredibly powerful if you think about it.

As our online and offline worlds continue to merge, the war of commerce will land right on the doorstep of small merchants. In early December, Amazon offered to give consumers a store credit of up to $5 if they used the Amazon Price Check app to scan in the price of a product in a physical store. And that’s only the beginning. Small merchants will need to adapt, while at the same time making sure the online world doesn’t drown them in fraud. Louis C.K. isn’t crazy to go direct to his fans — those who don’t know their customers and communicate with them regularly will take a beating from competing on margins in this connected economy.

Birth of alternate commerce devices

I’m a big believer that a key driver of payment innovation is going to be the enabling of alternate commerce devices. We’re seeing requests for payment capabilities on everything from gas pumps to Laundromats. As all devices become “smart and connected,” it provides more consumer choice and enables the digital wallet in the cloud to show its true value.  I know we all can’t wait for the day that we don’t have to clip coupons and remember loyalty card numbers, and our wallet intelligently figures out how you should pay for things. 2012 will see this come to life in many forms, and the “a-ha” moment around digital wallets will make sense to many. As payments move to the cloud, essentially anything with an “on” switch and an IP address can become a payment device. Think about Samsung’s Wi-Fi enabled refrigerator or cars from manufacturers like Cadillac and Audi. It’s a small jump to turn them from Internet enabled to Internet-payment enabled.  And, this experience is already making its way into our living rooms with t-commerce (commerce from your television).

I think 2012 is also going to be the year where t-commerce will happen. Yes, it’s been talked about a lot, but the pieces and players are beginning to fall into place more so than ever before. eBay’s recently updated mobile app for the iPad includes the ability to “Watch with eBay,” so I can watch my favorite sports team on TV and buy the latest jersey, all from my couch. (Note that PayPal, my company, is part of eBay.) By this time next year, you should be able to buy from your TV as easily as changing the channel. Scary to imagine, but you would do it, wouldn’t you? If a signed Jimi Hendrix guitar popped up for auction while I was watching his biography, I’m not sure if I could control myself.

These are exciting times for consumers, and it’s bringing a ferocious level of change to a payment industry that quite frankly could use it. 2012 will provide enough innovation clusters to give this industry a good shake. It’s exciting to have a front row seat!

Scott Dunlap serves as the VP of Emerging Opportunities at PayPal, exploring new technology and user experiences for payment, mobile commerce, virtual goods, virtual currencies, deals and couponing, multi-channel commerce, point of sale integration, analytics and risk management. 

Image courtesy of Flickr user vintagedept.

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This person, let’s call him Kobayashi (I’m a Usual Suspects fan), is one of the most interesting people I’ve ever met. He was a well-educated entrepreneur who ran a profitable business that employed dozens of people. He lived in a swanky downtown Los Angeles penthouse. His kids went to private school. He kept his fridge well stocked with imported beer and wine for guests even though he didn’t drink. He was, by all measures, a gentleman.

But Kobayashi ran an unusual business. He was in the business of organized crime. He started this venture quite young, expanded his operations, diversified revenue streams, and created very profitable independent business units. “I have two lawyers,” he once told me. “I keep them both because they hate each other. Neither one of them can get out of line because the other one is watching him. That keeps me safe.” Kobayashi was brilliant, witty, and dangerous. He was a friend and mentor to me during an interesting period of time in my early 20s.

Everything I need to know about startups, I learned from Kobayashi. While I can’t get too deep into specifics (would you?), I can share a few the things he taught me.

Don’t sell rocks when you can sell mountains

Kobayashi didn’t work with small packages. His business transactions involved risk at every stage – product acquisition, transport, and distribution. But the marginal risk on each decreased with the size of the transaction. Working in large volume reduced his overall risk and rewarded him with a shrink-wrapped palette of cash rather than a suitcase of cash.

As founders and early stage employees, we go to great lengths to mitigate risk. So why do we overlook the total marginal risk?

Building a profitable small-market company is difficult and carries a high risk of failure. Building a profitable large-market company is also difficult and carries a high risk of failure. But the marginal risk in building a company decreases as the addressable market increases. While a larger company may require more total work, the relative effort is less. Make no mistake: small-market companies still come with 18 hour days, flaky vendors, upset customers, and exasperated spouses.

Thinking small increases our risk. So let’s think big.

[Notes: “Large vs. small” is a different debate than “bootstrapped vs venture-backed”, though the two are often conflated. It’s also worth noting that serving a small segment and progressively expanding outwards to serve the larger market is a totally legitimate large-market strategy.]

Cut out the middleman

As Kobayashi’s businesses grew, he was in a position to start bypassing middlemen. Instead of dealing with distributors, he went straight to producers. Instead of hiring contractors, he purchased required equipment and moved people onto payroll. Everywhere he saw a third party making money, he figured out a way to replace that person or bring them in-house. He reduced costs at every step. He constantly encouraged me to do the same.

Interesting things happen when we cut out the middleman. In addition to reducing cost, we often end up creating an internal byproduct that can be productized and sold to a completely new customer. (Amazon Web Services is an example of this.) Sometimes the middleman’s market is so huge, that a freaking enormous business can be built simply by providing their customers a lower cost and more efficient option. Two-sided marketplace businesses are a textbook example of this type of disruption.

Don’t shit where you eat

“When someone’s doing something for the money, people can sense it, like a desperate lover. It’s a turnoff.” – Derek Sivers, Anything You Want

During this period of my life, I was running a couple businesses that overlapped around the edges. One business had loyal and enthusiastic customers. This business was glamorous, but hemorrhaging money. The other business was transactional and lacked any customer loyalty or love. This business was “anti-glamorous” and a bit closer to Kobayashi’s world than I care to admit.

As time passed, I felt increasing pressure to monetize customers from the first group. I began to overlap these businesses more and more. While they included the same customer segments, there were two completely different products. This pollution of something beautiful with something cheap was my act of shitting in the proverbial kitchen. I watched as revenues increased and looked away from the damage I was causing to the customers I really cared about.

Thankfully, Kobayashi pulled me aside and straightened me out.

The lesson for us is simple. Don’t screw with your users. They are your golden-egg-laying goose. Protect them from rapacious cofounders and investors. Don’t spam them. Don’t abuse them. Don’t be a douchebag.

If it don’t make dollars, it don’t make sense

“A business without a path to profit isn’t a business, it’s a hobby.” – Jason Fried, Rework

We can build an awesome product and then give it away for free. We can bolt advertising to it. We can turn it into a lead-gen property. We can even sell some virtual goods.

Kobayashi wouldn’t.

He would have built Birchbox rather than Pinterest and Airbnb rather than TripAdvisor. He would have found product market fit and a viable business model before spending money on development resources. Kobayashi stayed close to the money, close to a transaction.

Kobayashi was around for the late 90’s tech bubble. He knew many of the players and saw the writing on the wall long before they did. He talked about the first tech wave as if it was a fad that had simply passed, saying things like “when dot-com went out…”

“If it don’t make dollars, it don’t make sense” may sound like a gross oversimplification. But Kobayashi outlasted those late 90’s startup founders. And he’ll probably outlast most of us.

Closed mouths don’t get fed

I’ve written before about the importance of networking and moving from wallflower to evangelist. Kobayashi was adamant about the importance of this. “Closed mouths don’t get fed,” he would say. “If you want something, you have to either ask for it or walk up and take it.”

We can’t expect good fortune to fall into our lap. It’s our responsibility to create the circumstances for it and then capture that good fortune. The meek may inherit the earth, but they’ll be getting it from Kobayashi.

Be a badass

“There’s only one thing that will make them stop hating you. And that’s being so good at what you do that they can’t ignore you.” – Orson Scott Card, Ender’s Game

My friend Chris DeVore makes a comparison I love: pirate ships as organizational models. Pirate ships combine an “us against the world” mentality with a hunt for treasure. This crucible of chaos and ambition somehow allows unstructured groups of mercenaries to complete complex tasks without killing one another (very often). A pirate ship is a meritocracy where he/she who is most badass, leads.

I’ve met several “badasses” over the years, though Kobayashi is the most memorable. Each one of these people had a gravitational pull for talent and resources. The world reorganized itself around them as they passed through it. They were larger than life, energizing everyone in their periphery.

The one thing these badasses shared was the source of their power: influence rather than authority. This lesson is the most important and also the most difficult to implement. There’s no pill, book, or retreat that will turn us into badasses. But if we want to captain a pirate ship, we must become the most badass version of ourselves. Kobayashi taught that we lead only with the influence we earn.

Donald DeSantis is a developer and UX designer at TechStars company Giant Thinkwell. In his free time, he travels to faraway cities and helps make Startup Weekend events successful. You can find him on Twitter at @donalddesantis.

Image courtesy of Flickr user Abhisek Sarda.

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In twelve days, Louis C.K. earned more than $1 million from people downloading the special — far more than the $170,000 it cost to produce the video. Louis C.K. gave his thoughts in a post on his site:

“I would have been paid [less than $200,000] by a large company to simply perform the show and let them sell it to you, but they would have charged you about $20 for the video … This way, you only paid $5, you can use the video any way you want.”

Coming from the online marketing world of The Search Agency, I was particularly interested in how he was able to reap a significant ROI without using any of the traditional or online marketing efforts usually made on behalf of comedians and entertainers. Google “Jerry Seinfeld” or “Jay Leno” and you’ll see the paid AdWords links.

Instead, Louis C.K. announced the release of the special on his website and followed up with a personal plea from his Twitter account: “Please don’t torrent this video. I paid for the whole thing with my own stupid money.” He also participated in a Reddit Q&A session with his fans and he discussed his video on “Fresh Air” on NPR. He didn’t appear on Letterman or Leno, he didn’t do an interview with the New York Times. He didn’t do any of the more traditional publicity executed by the PR and marketing teams in the lead-up to a big media product release.

He let his fans do all of the PR.

An alternative comedian, Louis C.K. does not have a PR team or community manager to manage social media assets. He claims to have little knowledge of social media. He told Conan O’Brien that he “hates Twitter.”  There is no official Louis C.K. Facebook page, and he personally manages and occasionally engages his 897,707 Twitter followers. At the end of the day, Louis C.K. followed the most basic best practices of social media and promotions outreach and reaped all the benefits of a best-case scenario.

Let me reiterate something — Louis C.K. is not terribly famous.  He doesn’t have a built-in fan base that will buy anything he tweets.  He has been a successful writer behind the scenes, but has not had enough onscreen time to earn mainstream fame.  His TV show “Louie” on FX was very quietly nominated for two Emmys in 2011, but the show’s highest viewership in history was recorded at 1.57 million viewers.  This is just a fraction of reigning comedy The Big Bang Theory’s lowest rating of 7.34 million viewers. Even reruns of The Big Bang Theory on cable syndication regularly defeat Louie — just last week 4.3 million viewers turned in to TBS to watch a rerun.

Without the luxury of stardom, Louis C.K. sold $1 million of video downloads by trusting his audience. He showed this by selling DRM-free videos, then gently asking them to purchase, not pirate. This openness built a relationship of mutual trust and respect with his fans.  Companies looking to create successful online marketing campaigns should try to build similarly long-term relationships with customers based on trust and direct communication.

All this success happened in the middle of the Stop Online Piracy Act (SOPA) bill controversy. Louis C.K. promoted his own video and demonstrated innovative entrepreneurship without losing significant revenue to Internet piracy. And he did this without any legislative digital protection, proving that making original content available, convenient, and reasonably priced can be enough to quell illegal downloads. Louis C.K. said on his website that “if anybody stole it, it wasn’t many of you. Pretty much everybody bought it.” Perhaps the burden should fall on companies to create products that appeal to willing buyers instead of asking legislators for protection.

Here is my list of lessons from the success of Louis C.K.’s self-released video:

1. Build relationships with customers using an approach that is engaging, personal, and honest.
2. Work toward long-term relationships with your customers so that they will trust your brand as long as you deliver high quality content and products.
3. Create a reasonable price. When the price point is attainable, both fans and people on the fence are willing to pay for the product rather than hunt for a pirated version.
4. Read up on the Stop Online Piracy Act. Stay informed when the bill returns to the House of Representatives this year. Check out Sergey Brin’s Google+ post and I Work for the Internet.

The thing is — Louis C.K.’s online marketing campaign wasn’t really a campaign. It was a public agreement that he made with his audience. He promised to create and release an honest product, and the audience promised to continue supporting his future projects. The consumers didn’t just buy a DRM-free download of Louis C.K.’s standup special — they bought into a trusted relationship with the comedian.

Jessica Lee is a SEO specialist with The Search Agency, an established search marketing firm with expertise in search, display and social media. 

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Not my face, but several parts of who I am online. My travels looked world class. The concerts I attended were of epic proportions. My everyday walks down the street were notable and even my shopping looked as though I had impeccable taste (though admittedly I don’t).

And it’s all going to look even better in 2012.

Unsurprisingly, the tech community didn’t really seem to notice. Instead, we spent a lot of time this year talking about measuring, quantifying and creating influence. We focused on our reach, response metrics and the algorithms we use to quantify it.

But most normal people aren’t deeply motivated by their Klout scores or the statistical impact of their activities on others. In fact, most of the services we saw explode in 2011 aren’t even measured in your Klout score. Instead, they focused on the other side of the social equation — enhancing the quality of our emotional connections with each other.

Looks Matter

What do I mean? The successful web companies of 2011 and beyond are just simply better looking. I don’t mean that on a surface level regarding their precious gradients and logos. I mean, quite literally, visual experiences are starting to become the gold standard of web success.

Before humans ever wanted to be influential, we wanted to be beautiful. Not just beautiful in just the attractive sense, but we want people to look at us and feel things; desire, intrigue, interest. For hundreds of years we’ve been carefully curating our appearance, clothes, jewelry, cars and houses for visceral impact (and judging others). 2012 will be the year these emotions come online full scale. They will change the way we interact with each other, the way we buy things and change our online experiences.

The first wave of the emotional web caught hold over the last year with services like Instagram, Tumblr and About.me.

It’s easy to feel the personal appeal of a product like Instagram. Though the app is simple, it somehow transforms a phone into a window through which we see the lives of the people we love. This feeling of closeness isn’t purely scientific — but somehow by using filters we don’t see exactly *what* the photographer visually sees (as they would with a raw picture) but *how* they see it.

Said another way, Instagram makes our pictures less accurate, but what we lose in exactness we gain in the ability to create instant nostalgia and show our view of our subjects. At its core, Instagram is a simple tool that doesn’t make us better photographers, but better communicators of feelings and experiences, and thats what matters to people.

What makes Tumblr tick

In similar ways Tumblr has changed the way most of us think about blogs. Not only shifting our expectation from text to images, but the structure, layout and emotional appeal we can create ourselves is dramatically improved. For years blogs with beautiful themes, style and content were relegated to design studios and art institutes — until Tumblr. With a total focus on allowing anyone to easily implement a high-art template, source quality content and share virally (sometimes at the cost of usability, or copyright) it clearly struck a nerve.

About.me placed a bet that people weren’t in need of an online directory of their online presences but a page that reflected their personalities and identities first – and directed them to their other sites second. They figured out that the primary source of our identity is how we look and built the site around a browser-sized image of the user.

Each of these services built on a few key concepts (and ultimately on innate human nature):

• Make it easy for your users to create content they are proud to share. A site that is beautiful and easy to use itself is no longer enough. Sites will be differentiated in their ability to help users’ lives look attractive and interesting. This is important wherever it happens in the process — whether it is beautiful themes for WordPress from WooThemes, images filters in Instagram and Path, or gorgeous blogs on the fly with Tumblr.
• Prioritize the emotions behind the content over the data within. Images in Instagram are but shadows of their actual situations (sometimes literally). Attribution on Tumblr is barely a hat tip (if that). The best sites will leave accuracy and unneeded information behind to allow the users voice (even if it isn’t theirs) to be heard clearly.
• Use your real estate. Each of the services made bold choices to utilize large, impactful content wherever possible. This is true especially when using images or video, filling up all appropriate space in the service of creating something beautiful.
• Dress up your text. About.me and Tumblr do an amazing job of using embedded fonts to enhance their worlds. Typekit (recently acquired by Adobe) is but one pipeline to web beauty.

The Look of Love: 2012 Edition

These services are just the beginning of a revolution that will gain speed in 2012 where all sectors of the net will incorporate their successes.

The existing social titans are already responding. Twitter’s recent redesign integrates media into the core of the site much more closely. The timeline rolled out by Facebook in the past few weeks goes a step further by not only introducing the billboard concept pioneered by Path to its 500M users but auto-creating infographics of users activities.

Business has a lot to learn from these developments as well — and not just from the marketing side.

Social shopping site Svpply is pioneering a visceral online shopping experience that forgoes the common shopping cart metaphor for a tumblr-esque feed of large images. Instead of discerning features and comparing specifications, we browse and react — much like the shopping experience humans have had for the last few thousand years walking through markets – to those products that grip us.

As these concepts gain steam, expect more rich experiences everywhere you touch the web, from travel to heathcare and music to news.

These sorts of concepts simply wouldn’t be possible three or four years ago. The benefit to web and mobile startups today is that now each and every user is outfitted with the tools that can allow for this modified, enhanced beauty: our pockets are buzzing with powerful smartphones with high-quality cameras, video capability, and the processor speeds that can handle the user-side filtering and editing necessary in 2012.

I have a feeling when I look back on 2012 in 365 days, I’ll look even better. Online, at least.

Edward Aten is the founder of Swift.fm, a social music distribution service. You can follow him on Twitter. 

Image courtesy of Flickr user Cea.

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The first report of this came in late September, when marketing software service SEOMoz reported huge price spikes on the spot market. A sudden spike in the price of “m2.2xlarge” servers (normally $.44/hour) drove the price briefly up to $999/hour, causing a site-wise outage. While this was bad news for SEOMoz, it was probably worse news for the unlucky customers who ended up paying $999 for one hour of compute time!

Will you pay $999 per hour for a server?

Why would anyone bid such a high price? It’s hard to say for sure, but the unlucky winner of the auction probably did not expect to pay $999 per hour for a server. On the Amazon marketplace, your bid represents the maximum amount that you are willing to pay: you usually end up paying much less than your bid. Many buyers seem to have assumed that the price would never rise above the fixed-price “on-demand” rate charged by Amazon.

Unfortunately, it seems like a large number of people were using that flawed strategy. And when something changed in the spot market (perhaps a reduction in the number of machines available to rent, due to increased demand) the unrealistically high bids that customers made went into effect. Amazon has since posted a video describing the different strategies buyers on the spot market use. Litmus, one of the companies mentioned in the video, describes their strategy as “bidding high for convenience.” The $999 bidder who cornered the spot market on large servers was probably using an extreme version of this strategy.

My company (SlideShare) was also effected by the recent price spikes on the spot market. Several times in October and November, all of our EC2 servers disappeared at once because of a price spike (this had never happened before). Fortunately, the software code that manages SlideShare’s cloud servers responded automatically by renting new machines at the “on-demand” rate, so we didn’t experience any actual downtime, only degraded service. But after this happened to us several times, we have changed the mix of machines that we use so that only half of them are from the spot market, and the rest are on-demand.

Spikes are a recent problem

Looking through the pricing history for various classes of machines, it’s clear that these spikes are new, and that they are happening across almost all instance types, at least for servers that are on the East Coast of the United Sates. For example, “small” servers on AWS both spiked as high as $100 an hour twice in November, when the on-demand price for those servers is $.085/hr. “m1.large” machines also spiked as high as $40 an hour. Almost every class of servers has hit spikes of more than 10 times their retail price in last few months. What is going on?

It’s hard to say why the spot market is suddenly showing more price spikes. A drop in supply (from Amazon requisitioning machines for its own purposes or for renting in the on-demand market) or a spike in demand (from the Christmas e-commerce rush) could be to blame. It’s important to remember that the AWS spot market is not a typical market, with many buyers and sellers doing business over a neutral exchange. One seller is servicing many buyers, and is also operating the exchange.

Amazon benefits from customer anxiety about getting access to spot servers: they sell on-demand instances for a higher price, and pre-paid reserved instances for better cash flow. So it’s unrealistic to expect Amazon to do anything to “fix” these price spikes. From Amazon’s perspective, they are a feature, not a bug.

How to deal with EC2 spot price spikes

For customers of the AWS spot market, there are some best practices to be learned from these recent price spikes:

• Never EVER bid more than you are willing to pay for a server on the spot market. This is the most important lesson. Don’t even bother doing “convenience bidding” of double or triple the on-demand price: when the price starts to spike it will easily go way beyond any rational price. Do you want to be the gal who explains to the CEO why the company is paying $100 an hour for servers?
• Don’t run all your infrastructure on spot market machines. In fact, don’t run more infrastructure than you are prepared to lose on spot machines. We use a thumb rule of 50 percent at SlideShare, since our system can easily survive 50 percent of our machines disappearing at one time (which is what will happen during a price spike).
• Write the code that manages your cloud infrastructure so that it responds intelligently to spot market price spikes. If you can’t get a spot machine at a reasonable price, your code should automatically request an on-demand server.
• Consider having some “reserved instances,” so that you are guaranteed the right to a minimum base level of machines. I’ve argued in the past that reserved instances don’t make sense for startups, but it’s clear that when supply dries up at Amazon it happens all at once, without warning. Your portfolio of servers on Amazon is almost like a financial porfolio. You want some diversification between risky high-reward elements (spot market) and more conservative elements (reserved instances).

These are early days for real-time pricing of cloud computing, and the spot market on Amazon is finally acting like a real market, with extreme price fluctuations. The “free ride” of getting reliable spot priced machines for less than the on-demand price is over. So if you want to play with cheap cloud servers, make sure you have the infrastructure in place to handle a price spike that could make all your servers vanish in the blink of an eye!

Jonathan Boutelle is co-founder and chief technology officer of Slideshare a web site for presentations that relies heavily on cloud computing. Previously, Jonathan was a principal at Uzanto, (a UI consulting firm) and worked as a software engineer at CommerceOne (a B2B enterprise software firm) and Advanced Visual Systems (a 3D graphics startup) You can find his presentations on cloud computing at slideshare.net/jboutelle, and his Twitter is @jboutelle. He also blogs at www.jonathanboutelle.com.

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