Did Joost Fail Because They Wanted to Work With Traditional Media Companies?

Seeing Niklas Zennstrom’s name on LeWeb’s list of speakers along with the news that Joost’s assets were being acquired by Adconion Media Group got me thinking about the dynamics of that specific startup. Joost was founded in 2006 to build a online video portal with the core idea that legal video streaming would be more efficient if it was built on peer-to-peer technology. The company signed content licensing agreements with major media companies, they had major funding ($45M), 150 software developers and experienced founders/entrepreneurs (Zennstrom and Janus Friis) who had had major successes with Kazaa and Skype. It seemed they would be successful once again.

It didn’t happen. Why? CNET explains that their technology choice of a downloadable application certainly impaired their chance of success. The arrival of Hulu, a big hit with users, also didn’t help  but I was specifically struck by this other reason: “Some of the big-name content partners seemed to be putting in a halfhearted effort with Joost, offering up reruns and esoteric programs instead of the new programming that people actually wanted to watch”. Hmmm…

Think about Kazaa and Skype. What did Zennstrom and Friis successfully achieve with these new initiatives? They directly attacked major players in large mature markets using industry weak points. Kazaa was an assault on the music industry, Skype took on telcos. They didn’t say “let’s work with these guys”. They just did it and leveraged the fact that these two industries were very profitable and slow to innovate. They foresaw the disruptive impact of technology and created a lot of value for their shareholders. Venture capital firms usually love these startups. When they created Joost, they changed their entrepreneur paradigm and it failed. Zennstrom and Friis’ new startup Rdio is in the online music space and it looks like they’re going to be working with the music industry. Will it impair their chance of success or has the music industry matured enough in the last 10 years to embrace innovation?

It got me thinking about newspapers, directory publishers, the movie industry, radio, magazines, and other traditional media companies. At one point or another, all these industries (who generate or used to generate fat profit margins) fought technology and we’re slow to innovate. I think it’s getting better (still not fast enough in my own opinion) but I was reminded it is still very slow in Canada by this blog post (in French) written by Yannick Manuri. He says that 40% of all online advertising spent in the country benefited foreign media companies and anecdotally he doesn’t see the sense of urgency in Canadian media companies. It’s a reality in other countries as well.

Why do we need industry disruptors to stimulate innovation in media? Couldn’t it happen by itself?

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Canpages Acquires Social Recommendation Site GigPark.com, Validates Praized's Model

[praized subtype=”small” pid=”58d245fd7e8f20800dee0ecd3af21f08″ type=”badge” dynamic=”true”], the second-largest directory publisher in Canada, announced Sunday night the acquisition of GigPark, a self-funded social recommendation site from Toronto, Canada. For Canpages, it’s the second local/social acquisition in two months. The first was Ziplocal in June. This acquisition is the latest in a series of “local media” technology/people acquisitions in the last few months. I noted five other ones in a blog post I wrote two weeks ago.

Interestingly enough, this is the kind of white-label enterprise technology Praized Media is proposing to directory publishers and other local media publishers worldwide. Yellow Pages Group, Canada’s largest directory publisher, is using our Answers module at answers.yellowpages.ca. We’re also currently deploying our real-time activity stream and real-time search technology within a major local portal and our technology stack has generated interest from about a dozen players in Canada, in the US and in Europe. Because of that, as co-founder of Praized Media, I was asked by a few people yesterday what I thought of this acquisition.

1) I am very happy for Pema Hegan and Noah Godfrey for this acquisition. Good work guys! I know how much work goes into building a startup. You’ll see, it’s actually fun working in the directory industry!

2) As a crystal-ball gazer, I am delighted to see directory companies fully embracing social media, even though it’s not our technology they end up using. As I’ve been writing about in the last three years, social media is key to the future of traditional local media firms. The “social” trend in the directory space is not a fad.

3) Reviews and recommendations are just the tip of the iceberg in social/local. The next evolution is “real-time”. Google is thinking about it, Twitter announced last week that they would support geo-location in their API which will allow developers to add latitude and longitude to any tweet and Facebook is bound to announce something very soon.

4) The acquisition of technology assets & people by local media publishers validate our core business model of working as technology providers to local media publishers. There is a clear need out there for our product offer and the Praized team is a world-class product & development team in the local/social technology space.

So, what to expect in the next 6 to 12 months?

1) Definitely expect more acquisitions and possibly some mergers. As Kelsey Group analyst Matt Booth said last week during a Kelsey webinar, local media publishers should try to put their hands on interesting companies and assets this year before the economy picks up again next year. The idea is to be ready with new, groundbreaking revenue-generating opportunities when good times come rolling again.

2) Also expect more rapid innovation in the space. Robert Scoble is quickly cluing in to the business potential of local recommendations in a post yesterday where he compared Facebook, Google, Twitter and Yelp. He says:

How will Facebook collect the cash? Well, go to Google and let’s do that sushi search for Boulder, Colorado again. Did you see how that list works? Facebook needs that list. Twitter isn’t even close. But what’s missing? PEOPLE! Imagine if this list, when it’s brought to you by Facebook, shows that #1 has been liked by 14 of your friends? Businesses get that for free. But what don’t they get for free? Yelp’s “offers.” Businesses PAY to “offer” things to customers to try to move up the list. So, if you’re the #3 business on the list, you might say “bring your iPhone in and you’ll get free beer.” Doing that will cost you money, both in the free beer and the advertising you’ll pay Facebook or Google or Yelp to try to move up the list. Google has the list. It doesn’t have the humans or the offers. Yelp has the offers but doesn’t have hundreds of millions of people. Facebook has hundreds of millions of people and the “like” system, but not the offers. So, who will get there first? Now you understand the battlefield. Who will win the war?

But he forgets that Yelp’s “offers” don’t scale. Yelp doesn’t have the “offers”. They don’t have a large enough sales force to make it a billion dollar business. It’s Yellow Pages, newspapers, coupon and other local media publishers that own the sales force. But then, like Google, local media publishers don’t have the social elements and interactions. It will be a natural one-two punch for any large company that assembles merchants (i.e. advertising) and consumers meshed in social interaction. I’m willing to bet this will come from directory companies if they move fast enough but I venture the window of opportunity is approximately 12 months before Facebook, Twitter or even Google crack the social local nut.

Update: Greg Sterling analyzes the transaction.

Canpages Acquires Social Recommendation Site GigPark.com, Validates Praized's Model

[praized subtype=”small” pid=”58d245fd7e8f20800dee0ecd3af21f08″ type=”badge” dynamic=”true”], the second-largest directory publisher in Canada, announced Sunday night the acquisition of GigPark, a self-funded social recommendation site from Toronto, Canada. For Canpages, it’s the second local/social acquisition in two months. The first was Ziplocal in June. This acquisition is the latest in a series of “local media” technology/people acquisitions in the last few months. I noted five other ones in a blog post I wrote two weeks ago.

Interestingly enough, this is the kind of white-label enterprise technology Praized Media is proposing to directory publishers and other local media publishers worldwide. Yellow Pages Group, Canada’s largest directory publisher, is using our Answers module at answers.yellowpages.ca. We’re also currently deploying our real-time activity stream and real-time search technology within a major local portal and our technology stack has generated interest from about a dozen players in Canada, in the US and in Europe. Because of that, as co-founder of Praized Media, I was asked by a few people yesterday what I thought of this acquisition.

1) I am very happy for Pema Hegan and Noah Godfrey for this acquisition. Good work guys! I know how much work goes into building a startup. You’ll see, it’s actually fun working in the directory industry!

2) As a crystal-ball gazer, I am delighted to see directory companies fully embracing social media, even though it’s not our technology they end up using. As I’ve been writing about in the last three years, social media is key to the future of traditional local media firms. The “social” trend in the directory space is not a fad.

3) Reviews and recommendations are just the tip of the iceberg in social/local. The next evolution is “real-time”. Google is thinking about it, Twitter announced last week that they would support geo-location in their API which will allow developers to add latitude and longitude to any tweet and Facebook is bound to announce something very soon.

4) The acquisition of technology assets & people by local media publishers validate our core business model of working as technology providers to local media publishers. There is a clear need out there for our product offer and the Praized team is a world-class product & development team in the local/social technology space.

So, what to expect in the next 6 to 12 months?

1) Definitely expect more acquisitions and possibly some mergers. As Kelsey Group analyst Matt Booth said last week during a Kelsey webinar, local media publishers should try to put their hands on interesting companies and assets this year before the economy picks up again next year. The idea is to be ready with new, groundbreaking revenue-generating opportunities when good times come rolling again.

2) Also expect more rapid innovation in the space. Robert Scoble is quickly cluing in to the business potential of local recommendations in a post yesterday where he compared Facebook, Google, Twitter and Yelp. He says:

How will Facebook collect the cash? Well, go to Google and let’s do that sushi search for Boulder, Colorado again. Did you see how that list works? Facebook needs that list. Twitter isn’t even close. But what’s missing? PEOPLE! Imagine if this list, when it’s brought to you by Facebook, shows that #1 has been liked by 14 of your friends? Businesses get that for free. But what don’t they get for free? Yelp’s “offers.” Businesses PAY to “offer” things to customers to try to move up the list. So, if you’re the #3 business on the list, you might say “bring your iPhone in and you’ll get free beer.” Doing that will cost you money, both in the free beer and the advertising you’ll pay Facebook or Google or Yelp to try to move up the list. Google has the list. It doesn’t have the humans or the offers. Yelp has the offers but doesn’t have hundreds of millions of people. Facebook has hundreds of millions of people and the “like” system, but not the offers. So, who will get there first? Now you understand the battlefield. Who will win the war?

But he forgets that Yelp’s “offers” don’t scale. Yelp doesn’t have the “offers”. They don’t have a large enough sales force to make it a billion dollar business. It’s Yellow Pages, newspapers, coupon and other local media publishers that own the sales force. But then, like Google, local media publishers don’t have the social elements and interactions. It will be a natural one-two punch for any large company that assembles merchants (i.e. advertising) and consumers meshed in social interaction. I’m willing to bet this will come from directory companies if they move fast enough but I venture the window of opportunity is approximately 12 months before Facebook, Twitter or even Google crack the social local nut.

Update: Greg Sterling analyzes the transaction.

Why Montreal is a Great Place for Your Tech Company

I’ve been wanting to write this post for a while now. After having been an “intrapreneur” at Yellow Pages Group until 2007, I’ve had the chance in the last two years to live the full-time life of a Web entrepreneur. Developing a vision and concepts, hiring a team, developing prototypes, raising capital, launching a product, marketing a product, selling a product, managing VCs, executing, executing, executing, working long hours and drinking lots of caffeinated drinks are now part of my body of experience and daily life. We like to say the Praized team’s mind is in Silicon Valley where we measure ourselves with the best but we’re physically located in one of the best cities in North America to do it: Montreal.

Here’s why (all stats I quote are from Montreal International’s amazing brochure (.pdf) on investing in Montreal):

  1. Talented developers. With its network of universities and technical schools, Montreal produces world-class technical resources. Did you know Montreal is #1 in North America in the per capita number of university students? Montreal also ranks 5th in North America in concentration (%) of high tech jobs in proportion to the total number of jobs, ahead of San Francisco!
  2. Relatively-low cost of operating and living. Greater Montreal has the most competitive cost structure of any North American metro area. Salaries are competitively-priced (and lower than major tech hubs like Boston, Seattle and San Francisco) and office space leasing costs are the lowest in North America.
  3. Superior R&D tax credits. The kind of development we do at Praized greatly benefits from provincial and federal tax credits and drastically extends the value of an investment.
  4. Multilingual population. 52% of greater Montreal residents are bilingual (with English and French being the most prevalent). 18% are fluent in three languages or more. Montreal is often seen as the perfect bridge between North America and Europe.
  5. Quality of life. Joie de vivre (i.e. restaurants, bars, culture, etc.), lowest cost of housing, lowest tuition and childcare fees and lowest homicide rate in North America makes Montreal a fun place to live.

No wonder Monocle magazine puts Montreal in their top list of most liveable cities. The videogame industry understands Montreal’s strengths with major companies like Ubisoft, Eidos and Electronic Arts having established large offices here. Google also opened an office in Montreal last year. Agendize, a French software company with many customers in the local media space just opened their office here.

Is it a perfect city? No, obviously not. Access to seed capital is sorely lacking for budding entrepreneurs, the ecosystem is not a robust as what you find in Silicon Valley for example and winters are quite rigorous but if you’re thinking of launching a tech company or expanding in North America, Montreal should be a serious option!

UpdateDaniel Drouet reminds me (on Facebook) that, ever since Praized got funded, Montreal Start Up arrived on the scene to fill some of the “seed” gap I identify above.  He also mentioned Anges Québec, a network of local angel investors.

Nine Business Lessons From TreeHugger.com’s Founder

During the first edition of StartupCamp Montreal on Wednesday night, keynote speaker Graham Hill of TreeHugger.com fame offered 9 lessons web entrepreneurs should take heed of.

StartupCamp Montreal Graham Hill Treehugger

  1. The best predictor of future behavior is past behavior. Humans don’t really change. If something feels wrong, it probably is.
  2. Incentives drive the world. For employees, for business development, etc.
  3. Truth is told at cash registers and not in focus groups. Look to the data and test a product by selling it.
  4. Listen to Fred Wilson.
  5. The network is the computer. It has to be open and all about online applications. Think Gmail, Last.fm, Mint.com.
  6. Think product first, marketing later. This new connected world takes care of a good portion of marketing if you have a great product.
  7. Barely enough money is a good thing. It keeps you hungry and makes you focussed. Helps you find what’s the core of your business.
  8. Companies are bought not sold. It might be a cliché but it’s true. Play hard to get.
  9. Good guys win in a connected world. Media has been democratized and spin control does not exist anymore.

Announcing StartupCamp Montreal

StartupCamp Montreal logo

The first StartupCamp Montreal is officially announced! Happening January 23rd, 2008 from 6pm to 10pm at the SAT – Société des arts technologiques (where else?), “Startup Camp Montreal is an event dedicated to everything Startup. A great event for Startups, investors and on-lookers alike. Montreal has a vibrant business community, that is worth celebrating. Come meet and learn from each other on the ins and outs of starting up. This event is not just for Montrealers, all are welcome”.

You can get more information on the web site and a first series of free tickets is now available. You can reserve your place here.

Montreal-Based StandoutJobs.com Raises $1.5M

Montreal-based StandoutJobs, which is building a site to provide video job classifieds, has raised $1.5-million of venture capital in a deal lead by Garage Ventures in Montreal.

(via MapleLeaf 2.0)

What it means: congrats to the StandoutJobs guys! There is a lot of start-up activity right now in Montreal, Canada (see this list) and I’m sure this is just the beginning of many small companies being funded here.