Bill Gurley, a general partner with Benchmark Capital, takes a look at this strategy when it comes to setting what he calls the rake, or commission, between a platform owner and those using the platform. Examples of the rake include Apple’s 30 percent fee on apps in its App store as well as the service fees associated with oDesk or OpenTable.

Gurley’s article, which is well worth a read, explores the relationship between the rake and the spread of the platform through a series of anecdotes. I just wish he had some documented research; not because I think his conclusions are wrong, but because I think we’d learn even more about how the cost of doing business on a platform affects volume in more subtle ways.

For example, Gurley makes much of the benefits of having a low rake, which encourages developers/end users/merchants to use the platform and also prevents a newcomer from coming in and undercutting you on price. What he doesn’t dig into is how the benefits of scale in the digital world mean that undercutting people on price is a race to the bottom. This is one reason people are concerned that no one but Google can compete with Amazon Web Services when it comes to cloud computing, despite Microsoft saying it will match AWS pricing on its own Azure cloud.

Here’s Gurley’s take on competition and the set rake:

If your objective is to build a winner-take-all marketplace over a very long term, you want to build a platform that has the least amount of friction (both product and pricing). High rakes are a form of friction precisely because your rake becomes part of the landed price for the consumer. If you charge an excessive rake, the pricing of items in your marketplace are now unnaturally high (relative to anything outside your marketplace). In order for your platform to be the “definitive” place to transact, you want industry leading pricing – which is impossible if your rake is the de facto cause of excessive pricing. High rakes also create a natural impetus for suppliers to look elsewhere, which endangers sustainability.

And here he is discussing a favorite business model for digital platforms — a low rake with a mechanism for people who want to spend more to do so in exchange for better placement or the opportunity to get favorable placement on the platform:

You start with a low rake to get broad-based supplier adoption, and you add in a market-driven pricing dynamic that allows those suppliers who want more volume or exposure to pay more on an opt-in basis. This way no one leaves the network due to excessive fees, yet you end up with a higher average rake over time due to the competitive dynamic. And when prices go up due to bidding and competition, the suppliers blame their competition not the platform (part of the genius of the Google AdWords business model). This also allows you to extract more dollars from those suppliers who desire to spend more to promote themselves (without raising the tax on those that don’t).

The article is worth reading, and I hope that some MBA professor takes it into his head to start some rigorous research on the best commission structures across digital verticals, or perhaps the biggest factors that should influence your rake rates. Because while generally low is good, if one could manage to be an area where high or medium works — at least for a while — then why not start there and see what happens?

Or better yet, invest in tools that allow for dynamic pricing based on the user’s need or demographics. That’s something more easily done online and is utterly neglected in Gurley’s article. In a digital world, the cost of goods is lower, so the risk of playing with pricing is lower as well. I think we’re going to see a lot more of it.

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Snapchat allows users to send Snaps, which are photos or video clips, to other users who can then view the content for a few seconds before the content sort-of disappears from that person’s phone. The company noted in a blog post Thursday that building video for Android presented unique challenges due to the differences among different Android phones, and Snapchat will keep tweaking the product as it rolls out:

“Making Snapchat video for Android has been exciting, but has also had its fair share of challenges. The Android phones that many of us use were never designed with Snapchat in mind, and that can be tough when developing a hardware-based application. The video feeds and playback behavior can differ greatly – often with no guarantees or warnings.”

A jump to Android is especially interesting in this case, because Instagram, widely seen as the most successful in mobile photo-sharing apps, saw such a jump in usage (and a resulting interest from Facebook) after it went to Android in April 2012.

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The new funding is led by Greylock Partners and includes existing investors Benchmark and Shasta Ventures, as well as new investors Bezos Expeditions and Google Ventures. Greylock’s David Sze, who has invested in Facebook, Digg, and LinkedIn, is joining Nextdoor’s board. The company just raised $18.6 million in July 2012, which at the time put the startups valuation at over $100 million. The company did not disclose a valuation based on this funding round, but a spokeswoman said:

“It’s a healthy step up from the last round and reflects the optimism of our experienced investors.”

CEO Nirav Tolia said the company is now launching more than 30 neighborhoods a day, which is not an easy process when a minimum threshold of users need to verify their address to join, both ensuring security around the site and making sure no one experiences the “empty party” phenomenon that can kill a social network’s success:

“This is not a West Coast thing or affluent or tech savvy or young person thing,” he said. “Everyone wants to connect to their neighborhoods.”

In June the company partnered with National Night Out to promote neighborhood safety, and it has further plans for expansion. The new version of Nextdoor will include divided sections (including one for crime and safety), the ability for police officers in large metro areas to connect with residents and give safety tips, and the ability for users to send urgent alerts to fellow neighbors in case of emergency.

The new version of Nextdoor will also allow users to share information like a lost cat with nearby neighborhoods, rather than limiting them to their own location, and will divide up the types of posts into sections, like crime and safety and classifieds. The company launched in October 2011, and aims to capture a new market for social media outside of LinkedIn and Facebook and Twitter. The question is whether users will continue to flock to Nextdoor as the company’s competitors keep growing and moving into new territory as well.

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On Monday, New York-based Sailthru announced $19 million in Series B funding  from Benchmark Capital, the venture capital giant that backed firms like Twitter, Dropbox, Uber and Yelp.

Sailthru, which will use the new money to expand staff and infrastructure, built its business by distributing customized emails for content and shopping offers. Sites like Fab and the Huffington Post, for instance, will produce different versions of a daily email and use Sailthru to select which subscribers receive which version.

Sailthru pitches its tools as “Smart Data” that let clients measure the effectiveness of their marketing messages; clients can rely on metrics like how many people open a given email or the amount of time a subscriber spends on a website.

In a phone interview, Sailthru founder Neil Capel stressed that the company is now about much more than email. He says Sailthru simultaneously collects data from email responses, website visits and app use in order to drive sophisticated analytics for marketing.

Sailthru’s specific tracking techniques are something of a black box (and a bit unsettling) so it’s hard to say for certain how effective they are. But the company is obviously doing something right given the new investment, and its claim of 270 percent revenue growth in the last year. Sailthru also appears poised to join the increasingly competitive ranks of content recommendation engines that offer “suggested stories” in the hope of getting a user to spend more time on a website.

Bill Gurley, a General Partner at Benchmark, will join Sailthru’s board of directors as part of the investment.

(Image by ra2studio via Shutterstock)

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Since launching in 2003, the service racked up more than 3 million users who helped each other travel, without ever pushing too hard or cashing in. It was a community effort, and the company’s non-profit status undoubtedly helped it project the image that it was part of a hands-around-the-world affair.

But earlier this week CouchSurfing announced a string of major changes. It turned itself into a for-profit corporation, raised $7.6 million in venture funding from Benchmark and Omidyar Network, and announced plans to start “aggressively hiring.” And that’s got some users spooked.

A protest group has formed on the site, questioning the decision to change the company and asking for more clarification on what’s going to happen. It’s even more galling, they say, because CouchSurfing community members have been donating money and contributing code to the project for years to help it stay afloat.

We had wonderful experiences with Couch Surfing, we absolutely LOVE CS and there will never be enough thanks to everyone: volunteers, CS employees, every member who worked on the idea during years and years.
CS was born as a community, built and strengthened by many volunteers spirited members and now turned into a corporation.

Joining that group means that you are supporting this initiative!

We want the source code written until now by volunteers and the database to be released!

The group is still small — a little more than a thousand protesters at last count — but they are angry. And while you can’t please all of the people all of the time, anyone who runs a community-based website knows that their business can live and die on the goodwill of superusers.

The CouchSurfing protesters have eleven demands, mostly focused on greater transparency and getting more information about how the site might be more heavily commercialized. Will they get what they want?

These situations can go either way. Communities can rise up and get changes made; just witness how many times privacy dramas at Facebook have forced the site to change its intended direction. Sometimes, though, communities fight back without much significant impact (as with those who were angered by the Huffington Post’s acquisition by AOL). Some of those squabbles are inconsequential, but you can understand why people who give their time and energy to a site get pissed off when they’re effectively used as collateral.

To be fair, the team at CouchSurfing is trying to explain the situation to those angry at the shift. In one thread, a user recounts a conversation with founder Casey Fenton about the reasons for going for-profit: essentially to allow the business to raise money to help keep the service alive.

“Becoming a B Corporation will now allow Casey to hire 10 more expert programmers and pay them a salary that is competitive with the Silicon Valley job market,” said the poster, Daniel Malafaia. “This will allow the website to work as a rock-solid engine from now on, no matter how much the number of members grow in the following years.”

It’s a fair point, but doesn’t really address everything that has happened in the past week — such as the need to raise venture money. After all, whatever the expense of bringing in a top developer, there’s no doubt $7.6 million buys an awful lot of programming talent. And while Omidyar Networks might be a philanthropic investment group, Benchmark — which has been involved in exits for businesses like Mint.com, MySQL and Friendfeed — most certainly is not. It wants a return somewhere along the line.

The real problem is that, despite Fenton’s best efforts to say otherwise, it looks like CouchSurfing simply found itself sitting on top of a potential goldmine. Watching the rest of the industry — an industry it pioneered — getting rich must be hard to bear. Of course there’s AirBnB, which scored $112 million from investors, but there are plenty of others too. At the high end of the market, Euroglam vacation rental site OneFineStay scored nearly $4 million and even a direct CouchSurfing competitor, Tripping.com, scored $1 million in funding.

But given that CouchSurfing is unlikely to capitulate to the demands of a small group of users — not least because it will have taken months to get to the point where it is now, and presumably some of the money is already being spent — what can it do?

Perhaps there’s a lesson in all this that Casey Fenton and his team can take from Craigslist. Craiglist is a profit-making company, and even has eBay as a significant shareholder (much to the chagrin of the site’s other owners). Yet it remains avowedly independent and low-key and very successful. Sure, there are arguments and spats and strife with the law from time to time. But it manages to feel authentic.

Does that mean Couchsurfing should adopt the we-haven’t-changed-since-1995 look? Should it avoid commercialization as much as possible? I don’t know — but you get the impression that the site’s owners will have to do something significant if they don’t want to upset the community that has given it this opportunity.

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GreenRoad has developed a technology — including an embedded computer in the car, a GPS and cellular connection and a website to remotely check on driving progress — that can help corporate fleet drivers become safer and greener drivers. The IT tech monitors drivers and gives them consistent feedback (green light, yellow light, red light), and then rewards them for changing their driving behavior.

The company says its technology can help companies save significantly on fuel costs (10 percent less fuel), as well as fewer crashes (50 percent fewer accidents). GreenRoad says its technology is embedded in 60,000 corporate fleets.

Check out our Green Overdrive episode we did on GreenRoad in March, with then CEO Patrick Burtis.

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So has the recently released 4.1 update finally closed the door on the issue of iOS 4 running sluggishly on the iPhone 3G?

iOS 4.1 Update Tested

To test how the iOS 4.1 affected performance, I took a pair of iPhone 3Gs and ran them through a series of performance tests. I used GeekBench 2 ($1.99), Gauge Mathematical Tool ($1.99), BenchTest (99 cents), SunSpider (free) and V8 (free) to test the performance of each OS version on the 3G.

I started out with one iPhone 3G running 3.1.3, and the second running 4.0.2. I must admit that both 3Gs were dumbed down quite a bit, and were not being utilized as iPhones, but more like iPod touches. The iPhones used were purchased at the same time, shipped in the same shipment, and have very similar Serial, IMEI, Wi-Fi and Bluetooth numbers assigned to them. The following results are only a subset of the data collected, and focus on the data points that changed the most from version to version:

Results for iPhone 3G: 3.1.3 vs 4.0.2

It’s not what the primary results did say, it’s what they did not say. As I executed the tests side by side, I noticed that even when similar end results were returned by the benchmark tests, the UI of each iPhone would behave differently. The 3G running 3.1.3 would behave as expected, but the 3G running 4.0.2 did not. Progress bars wouldn’t update smoothly on 4.0.2, but would jump to 100 percent at the end of the test. As tests were executing, it was as if the user interface on 4.0.2 was somehow sporadically frozen during the tests. This behavior is consistent with other video reports online that iOS 4 is slow on 3G devices. It also explains why certain activities, namely games that don’t utilize Apple’s stock UI components, run pretty much the same on each OS version. If you now use your 3G primarily as a game device as I do, you may not have noticed all the differences in performance.

If, on the other hand, you’ve continued to use the device as a smart phone, you’ve most likely noticed the degradation in performance. What was surprising at first was that the JavaScript results were much faster on iOS 4. This makes some sense, since the version of Safari on iOS 4 most likely has the latest JavaScript engine under the hood. So while some UI elements may be slower, and most hardware-based benchmarks remained relatively constant, the JavaScript results actually improved from 3.1.3 to 4.0.2.

Results for iPhone 3G: The 4.1 Update

I then upgraded the 3G running iOS 4.0.2 to the new iOS 4.1. At this point, I had one iPhone 3G running iOS 3.1.3, and the other running iOS 4.1. This time around, the UI did appear to behave more as one would expect on 4.1, with smoother progress bars and a zippier response from the UI. It felt faster, but was it as fast as 3.1.3? No, not really.

While certain numbers did seem to bounce back, namely the performance of the  Stdlib Allocate test within the GeekBench test suite, most numbers remained the same as in 4.0.2. The BenchTest results for Drawing Into View and File to Filesystem did seem to bounce back a little as well. It was only the JavaScript results (as per the SunSpider test) that really seemed to improve even further. However, it’s important to note that the iPhone 3G (on both versions of the OS) never passed the V8 test. Safari always crashed before completing the test.

One More Test: iPhone 4 on 4.0.2 vs. 4.1

So before drawing any conclusions, I wanted to see if the subtle performance increases noticed between 4.0.2 and 4.1 on the 3G were the same performance increases noticed on the new iPhone 4. Finding the same performance increases on the iPhone 4 as compared to the iPhone 3G would point to an overall performance boost based on OS updates that weren’t specific to any one hardware platform. Luckily, I happen to have two iPhone 4s in the house as well. This time, I performed benchmarks on the exact same hardware before and after the upgrade. I was very surprised with the results of the performance tests on 4.0.2 compared to 4.1 on the iPhone 4.

Conclusions

It’s still very likely that Apple did focus on performance issues related to each one of its own internal apps that are distributed only via OS updates. Apart from the JavaScript benchmark results — which prove that Safari on iOS 4 outperforms Safari on iPhone OS 3 — the boost to overall performance based solely on the test results listed above is marginal.

These tests, however, are looking at the OS itself, not individual app performance improvements. Surprisingly, there does appear to be a platform-specific focus on performance issues related to the iPhone 3G, as performance does appear to have degraded on the iPhone 4 with the 4.1 update. I’d been focusing heavily on the iPhone 3G, and had run several iterations of tests comparing 3.1.3 to 4.0.2, and was prepared to collect the same amount of data following the 4.1 update on the iPhone 3G. I was much more meticulous with the details on executing the tests.

The tests against the iPhone 4 were an afterthought, and would require a more through examination before claiming that the iOS 4.1 update did indeed degrade the performance of the iPhone 4. Just as we struggled through the iPhone OS 3 updates on the iPhone 3G last year, there will likely be more updates to iOS 4 in the months to come. While I still don’t feel iOS 4.1 is back to the same performance levels of iPhone OS 3.1.3, there do appear to be performance gains in 4.1 that prove that Apple is serious about supporting the iPhone 3G on the iOS 4 platform.

Online BenchMark Results

• GeekBench 2 – iPhone 3G running iPhone OS 3.1.3
• GeekBench 2 – iPhone 3G running iOS 4.0.2
• GeekBench 2 – iPhone 3G running iOS 4.1
• SunSpider – iPhone 3G running iPhone OS 3.1.3
• SunSpider – iPhone 3G running iOS 4.0.2
• SunSpider – iPhone 3G running iOS 4.1

We love Apple. We love its style. We love its vision. We love its marketing and PR. A generation of the world’s best designers cut their teeth on Apple computers, much as they might dislike admitting their sense of taste was shaped by a consumer electronics company.

In business, too, Apple has proven to be a visionary. Entrepreneurs often look to Apple for inspiration. Software startups the world-over are compelled to study Apple so as to learn how best to “do it” — whatever “it” may be.

I don’t know — do entrepreneurs look to Microsoft for inspiration? Arguably one of the greatest speakers on entrepreneurship and startups, Guy Kawasaki, was Apple’s first Macintosh evangelist and still praises the company today. Kawasaki picks winners — after all, that’s his job — and he chooses Apple every time.

In the bad old days, back when Microsoft was “The Borg” and Apple hadn’t released an iPod yet, a big part of the reason for loving Apple was our affinity with the underdog. After all, people root for the underdog, and, back in the nineties, a waning Apple couldn’t hope to compete with Wintel dominance.

Today, despite Microsoft’s monopoly continuing to grow in the last decade, Apple has risen from the proverbial ashes. It might be in Microsoft’s shadow (where all software companies can be found) but this Apple shines. (Sorry — terrible pun, I know.)

This is a company that sweeps in to well-established markets (MP3 players, online music, mobile phones) and fundamentally changes them. It establishes itself as the Porsche of a laptop market otherwise saturated with Fords; it launches an operating system so advanced that, eight years and (nearly) six updates later, makes Microsoft’s latest-and-greatest efforts still look like Redmond is playing catch-up. And don’t forget the stores. Every expert, analyst and critic said they wouldn’t work. Yet in the midst of a global recession, Apple’s retail stores are seeing increased profits.

Apple today is a different company to the limping, broken one in which Microsoft invested $150 million 12 years ago. At Boston’s Macworld in 1997, Steve Jobs said that Apple had to change its (then) dominant mentality; that is, “…for Apple to win, Microsoft must lose. We have to embrace the notion that, for Apple to win, Apple has to do a really good job.”

And what a fine job it has done despite what it was up against. So when it starts behaving unscrupulously (or if that’s too strong a word for you, try “questionably”) we get concerned, even angry. Pundits like Calacanis publish diatribes on everything they think is wrong with the company. The Arrington’s of this world declare they are “quitting” the iPhone in protest (but really, does anyone care all that much if Arrington uses an iPhone?)

Apple has, for a long time, apparently subscribed to the “treat ‘em mean, keep ‘em keen” school of thought, doling out products and services that are just what we need, just when we need them. Jobs has referenced Henry Ford’s statement about customers’ desire for a “faster horse.” In short, Jobs is saying we have no imagination, no inspired vision of what we really need to improve our lives. Oh yeah, and we have absolutely no style.

It seems we agree, judging by how eagerly we embrace the solution — buying what Apple tells us we want, when we want it because, if we own the latest iMac, iPhone and plastic white earbuds, we’re automatically imbued with impeccable taste, right? Well, I don’t know about you, but I know I am. I have two Apple Cinema displays, several Macs and an iPhone 3GS and I feel positively groovy, thank you very much. (Of course, I also live in fear, anticipating the time Apple updates its hardware, at which point I will automatically be not quite so groovy.)

We don’t want to see Apple turn into the Borg we used to despise but, for all its sexy unibody curves, funny commercials and Simpsons episodes, that’s precisely what has happened. Apple is today the megalithic entity it once derided. But even that would be tolerable if only it didn’t do stupid things, like inconsistently approve/reject/pull apps from the store and then deliver wishy-washy statements when taken to task for it. (I say wishy-washy, some people would call them lies.)

Absolute power corrupts absolutely, as Baron Acton so eloquently put it. Apple might not be as big as the Microsoft’s of this world, but it arguably has power. An awful lot of power. Apple sells more digital music than anyone else by a wide margin. It has arguably the most important (and fastest selling) mobile platform in the world. It’s deeply-established inroads into the education and entertainment industries establishes it firmly in the minds of countless young and creative minds in the western world.

So Apple must tread carefully. It’s bigger now than it has ever been, with fingers in more pies than ever before. It’s growing and, paradoxically, proving profitable in markets where far-cheaper alternatives are widely available.

Let’s hope Google Voicegate teaches Apple a sobering, but not too damaging, lesson about the importance of transparency and honesty. We don’t expect to know Apple’s deepest darkest secrets (I’d rather not), but these days a degree of openness is not only preferred by customers, it’s expected.

Even if Apple approved Google Voice in the coming weeks, would it make practical, useful and obvious changes to its app store approval process as a result? I like that Apple doesn’t have its collective minds fixed unimaginatively, like the rest of us, on faster horses — but just because we don’t share its vision doesn’t mean we are owed anything less than respect and honesty.

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I’ve been using the beta for some time now as my everyday browser. In my experience, the beta of 3.5 has been far more stable than 3.0, particularly when I have large numbers of web apps open, so I would recommend switching to 3.5 RC1 if you’re not using it already, even though it’s not the final version.

I ran the new RC1 through the Sunspider JavaScript benchmarks. It appears to be about 12 percent faster than beta 4, scoring a time of 2200 ms compared with beta 4′s 2500 ms, but as I didn’t run the tests in parallel you should take that with a large pinch of salt. While it’s not quite as snappy as Google Chrome (by far the quickest browser available, which scores 1500 ms, according to my benchmarks), this new version of Firefox is still a very fast browser. This improved performance, coupled with the ever-increasing bandwidth available to users, should give developers much more scope to create powerful web apps with desktop app-like capabilities — leading to many more useful web apps becoming available for web workers.

Have you switched to Firefox 3.5 yet?

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