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Nutanix launches and a new era for data center computing is born — No SAN or NAS required! August 16, 2011

Posted by ravimhatre in 2011, Cloud Computing, data, database, datacenter, enterprise infrastructure, Infrastructure, platforms, Portfolio Company blogs, startup, startups, Storage, Uncategorized.
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The Nutanix team (ex-Googlers, VMWare, and Asterdata alums) have been quietly working to create the world’s first high-performance appliance that enables IT to deploy a complete data center environment (compute, storage, network) from a single 2U appliance.

The platform also scales to much larger configurations with zero downtime or admin changes and users can run a broard array of mixed workloads from mail/print/file servers to databases to back-office applications without having to make upfront decisions about where or how to allocate their scare hardware resources.

For the first time an IT administrator in a small or mid-sized company or a branch office can plug in his or her virtual data center and be up/running in a matter of minutes.

Some of the most disruptive elements of Nutanix’s technology which enable the customer to avoid expensive SAN and NAS investments typically required for true data center computing are aptly described on company’s bloghttp://www.nutanix.com/blog/.

Take a look. We believe this represents the beginning of the next generation in data center computing.

Hi5 platform stats May 16, 2008

Posted by jeremyliew in facebook, hi5, platforms, social networks.
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Hi5 launched its developer platform at the end of March, opening up access to its 80m+ registered users. It is a top 20 traffic site globally, although not as popular in the US.

Unlike other platforms, Hi5 does not publish a ranked application directory, so it has been hard to get real data on how quickly apps have penetrated the user base. Because Hi5 launched with viral channels open, penetration has been as fast as Facebook’s platform launch in the first 45 days, if not faster. Inside Facebook reports on some stats as to just how quick penetration has been – stats I have not seen elsewhere:

Hi5 Platform Totals

* 617 applications
* 1 million total daily installs
* 14 apps have been installed on more than 1 million profiles
* 6.5 million total daily canvas page views
* 9 apps with more than 10 million total canvas page views so far

Amongst Active Users

* 3.7 apps on average
* 52% have at least one app
* Max apps installed by any one user is 23

Hi5’s user base is primarily international, and anecdotal evidence from Facebook developers suggests that international users are more willing to install apps than US users. This may have influenced Hi5’s fast start out of the gate, despite repeated instability in their platform. (Facebook’s platform was equally unstable at launch, and still suffers outages from time to time).

While it may prove to be harder to monetize the Hi5 international user base through advertising in the short term, we may well see alternative monetization models emerge. Note slide 48 in Ben Joffe’s excellent comparison of social network business models between the US and Asia.

Would love to hear any data from readers on how their apps have performed on Hi5.

Max Levchin on how social networks can build good developer platforms January 30, 2008

Posted by jeremyliew in facebook, game design, platforms, social networks.
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Max has a good post on what levers a social network can pull to attract and incent a “well behaved” base of app developers to their platform. Summarizing (my words) he says:

1. Let app developers make money, get famous or learn something
2. Have consistent and fairly applied rules
3. Provide some guidelines for “winning” and be thoughtful about what they are (basically what metrics do you make available and how do you rank apps as people will compete to be on the top of these lists)
4. Offer meaningful distribution (ie be big, and open the viral channels so that apps can spread)
5. “Reward” good and well behaved app developers

Max is a smart guy and I agree with his thoughts. Facebook has done a decent job against this list (although the consistency has been variable). Read the whole thing.

As an aside, it looks like Max is doing a lot of reading about game design. I wonder if this means that Slide will be launching Facebook games shortly, to compete with SocialGN and Zynga?

What games work best on Facebook? January 15, 2008

Posted by jeremyliew in asynchronous gaming, casual games, facebook, game design, game mechanics, games, games 2.0, gaming, platforms, social networks.
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Three good blog posts recently about games on Facebook.

Brian Green talks to a developer with two games, one casual and one hardcore, and based on that concludes that hardcore games do better:

I suspect the reason is because people still enjoy a good game, even if it has “hardcore” aspects like direct, zero-sum competition. Even though the party game was less confrontational, it probably didn’t include as many engaging elements as the first game. So, more people played and stuck with the game.

What he is really saying though seems to be that good games are better than bad games. Matt Mihaly checks the list of Facebook games with most daily users and finds that the top ten are all casual games, and notes that:

…good games on FB are as much about communication and/or self-expression as they are about gameplay.

I completely agree. As Matt notes in his post, there have been two paths to success for Facebook games. One has been to build lightweight “proto-games” that spread virally on the back of self expression or communicaiton. The other has been to build true games with complex and engaging game dynamics. These games do not grow as rapidly, but they do draw much higher daily engagement rates.

Nabeel Hyatt extends the analysis to compare multiplayer games to singleplayer games on Facebook.

Facebook games vs apps engagement

He finds that:

Multiplayer social games such as Warbook and Scrabulous average 11.4% active daily users, a good 30% higher than the average top Facebook app (8.01%). I’m sure if we could actually get engagement, attention, and retention metrics we’d see the same trend. This combined with the relatively high percentage of games represented in the top 25 applications (7 games) would suggest that there is simply a lack of quality, socially-focused games on Facebook.

I wholeheartedly agree with Matt and Nabeel. I think that over the next few months there will be a number of exciting social, multiplayer casual games with good gameplay dynamics built on Facebook and the other social networks as they open up. Teams comprising of experienced game designers and experienced social media/viral marketing experts will be best positioned to create these games. I am actively interested in hearing from such teams.

Web 2.0 has been driven by variablization November 26, 2007

Posted by jeremyliew in advertising, business models, distribution, platforms, viral, viral marketing, web 2.0.
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The last couple of years have seen an explosion of innovation on the web that has broadly been labeled Web 2.0. There has been a lot of debate about what exactly constitutes web 2.0 but what hasn’t received as much attention has been what changes have enabled these Web 2.0 companies to arise – what is different now from the mid 90s and Web 1.0. I think the change can be summarized in one (somewhat clumsy) word: Variablization.

Variablized Development Costs

In the 90s we used software development models, primarily waterfall models, where a usable product wasn’t available until close to the end of the development period. Most code was written from scratch, with little reuse or public domain code, and large teams were necessary.

With the popularization of agile programming methodologies, widespread use of open source software, greater ability to use offshore development resources on a consulting basis, and a culture of “open beta”, the costs of developing a website or web service have become both lower and more variable. Ideas that look promising but fail to capture user interest in beta can be identified much earlier and at much lower cost, and resources can be shifted to more promising avenues.

Variablized Content Costs

In the 90s almost all content was created by professional editors and writers, employed by companies. To launch, they had to create a critical mass of content, which cost a certain amount.

Recently, with lower expectations out of beta products, the widespread adoption of user generated content and emerging best practices in how to use user generated content, the costs of content creation have dropped dramatically and become variable.

Variablized Marketing Costs

In the 90s, there were only two ways to get a large number of users. The first was offline marketing – the famous Pets.com superbowl ad approach. Expensive, and with a high minimum level of spend required to break through the clutter. We all know how that worked out.

Overture and Google have changed that landscape. Their CPC model means that you can spend as much as you choose to gain new users, and that your marketing spend can be completely variable.

Variablized Distribution Costs

The second way to get a large number of users in the 90s was to get a distribution deal with one of the big portals – AOL, Yahoo or MSN. In those days, this was the only way to reach a large number of internet users effectively, and you typically had to sign up for a multi year, multi million dollar deal to do it.

As social network platforms open up, and as the basic principles of viral marketing become better known, distribution has become variable, if not free.

Variablized Monetization

The vast majority of Web 2.0 companies rely on advertising as their business model. I think this is because advertising is the one business model that has become variable (relative to the 90s). Back then, to sell online advertising, you both needed to have substantial scale, and you needed to have your own sales force.

Today, thanks to ad networks and CPC contextual targeting (not just Google’s adsense, but also Quigo, Yahoo’s Publisher Network and others), even the smallest of websites can start earning advertising revenue.

There have not been equivalent innovations for subscription and ecommerce business models, and as a result, we’ve seen far fewer web 2.0 companies that use those models.

Conclusion

These changes in cost structure are a useful lens through which to view the current startup environment. It’s been said before that it is cheaper to build a company than ever before. While that is partially true, it is not the whole story. Digg has raised over $10m, Youtube over $12m, Photobucket and Rockyou (a Lightspeed company) over $15m, and Facebook has raised over $275m. (With the exception of Facebook) while these are lower than the amounts raised by companies in the 90s, they are still large numbers. Variablization of costs only makes costs go away when usage is low. In other words, while it still takes money to succeed, it is cheaper to fail than ever before.

Luckily for VCs like me, that means that successful companies will still need to raise money!

Business models for apps and widgets November 16, 2007

Posted by jeremyliew in ad networks, advertising, business models, facebook, myspace, open social, platforms, self espression, social media, social networks, user generated content, widgets.
9 comments

This afternoon I spoke to the Stanford class on Creating Engaging Facebook Apps.

As I said at Web 2.0 expo, building big businesses online is hard work. While it isn’t hard to start an app company, especially as a single developer ($250k in revenue) or even to support a small team ($2.5m in revenue), it gets quite hard to scale revenues to $25m/yr.

Assuming a 5% daily active rate and 3 pageviews per visit, an app developer with a $0.50 RPM would need to get to 926m installs to get to $25m run rate. Compare that to the app with the most installs on Facebook – Slide’s Superwall which has around 20-21m installs. Clearly, broad reach app developers need to develop (i) multiple (ii) high engagement apps [ie higher active rates and pageviews/visit than these assumptions] (iii) across multiple social networks to be able to get close to this revenue target. (RPMs will likely be higher for companies with a direct sales force as well, so the target isn’t quite as high, but you get the point).

Under the same activity and pageview assumptions, an app developer with a $10 RPM would need 46m installs to get to $25m in revenue. Apps with endemic advertising opportunities can easily realize this level of RPM but will still need to be in multiple social networks to get to those levels of installs. It doesn’t make sense to limit your world to being a Facebook app. Social network platforms are avenues for distribution, and app developers should be taking advantage of all of them.

One of Lightspeed‘s portfolio companies, Rockyou, is taking the former approach. Another, Flixster, is taking the latter. Both seem to be working so far.

I also did a similar analysis for digital goods business models in the presentation. Here is a link: Stanford Facebook Class presentation

Why did Myspace join OpenSocial? November 2, 2007

Posted by jeremyliew in business models, distribution, facebook, myspace, open social, platforms, social media, social networks, startup, strategy.
6 comments

Yesterday was a very good day for app developers with the official launch of Open Social. A particularly good day for Flixster (a Lightspeed company) which was on stage with MySpace, Google, Ning and others for the launch, and was the sample app used in many of the demos.

With so many platforms opening up, resource constraints are the key problem for many app developers. There are plenty of great opportunities, but they don’t have enough people to pursue them all. They are forced to make choices and prioritize.

Open Social helps a lot in that you can “learn once, run anywhere”. While it isn’t “write once, run anywhere”, the resource commitments required to support multiple social networks are much lower. As Andreessen notes:

As an app developer, you have three options:

* You can write purely to the Open Social API. If you do this cleanly enough, your app will run unchanged in any compliant Open Social container. (Google is actually not making this claim — they’re calling Open Social “learn once, write anywhere”, which is not the same as “write once, run anywhere”. But in practice, the API is simple enough that “write once, run anywhere” should work just fine.)

* You can write an app that is specific to one container. For example, there may be some apps that make sense only in LinkedIn — business-related apps, say. There may be other apps that make sense only in Ning — apps that presume that users are creating their own social networks, say. And there may be yet other apps that only make sense in Salesforce.com, which will also be an Open Social container. In those cases, you are targeting your app to one specific container, and so using whatever additional APIs that particular container provides, in addition to the Open Social APIs, is a no-brainer.

* Finally, you can write an app that behaves differently depending on which of several containers it’s running in. Your app just discovers which container it’s running in, and then does whatever it wants on a per-container basis.

No standard can possibly anticipate all of the different use cases and scenarios people will think up. Standards that try to anticipate all of the different use cases fail, because they are too complex and generally impossible to implement. Standards that standardize behavior that is clearly standard, while leaving open the ability to innovate on top, succeed. The history of this kind of thing is quite clear, and Open Social is on the right side.

For smaller social networks, joining Open Social is a no brainer. But MySpace is big enough that app developers would have written for its platform regardless of whether or not it was part of Open Social. So why did they join?

It comes down to the competition for app developer’s time and resources. In the few months since Facebook opened up its platform, Myspace has seen its lead eroded from being 3x as big to just 2x as big. Facebook was winning more users, and more share of user time, because app developers were adding new features to the Facebook experience much faster than Myspace could do on its own.

If Myspace had stayed out of Open Social, there would have been three platforms competing for developer time. By joining, there are now only two, and one (Open Social) provides potential access to far more users than the other. More developer time would be spent on Open Social, and MySpace would benefit more from the improved rate of innovation.

MySpace also knows that it can win more developer mindshare relative to other participants in Open Social if they help the developers make more money. It has a better developed sales force and ad network than many of the other participants, and if it opens up access to that salesforce to app developers, then you’ll see even more developers focusing even more of their time on Myspace (at the expense of Facebook and the other Open Social participants). If they were to go so far as to guarantee a minimum CPM for “canvas pages” on Myspace, then they’d see a surge of developer interest.

This will require a significant mindshift for Myspace which has traditionally not wanted other companies to monetize pageviews within Myspace, let alone helping them monetize. If they make the shift, MySpace will not have given anything up by joining Open Social. Rather, they will have gained something. They will be the place that app developers can make the most money, and hence be their first priority. The increased stickiness and loyalty to Myspace will accrue to Myspace alone.

Google’s OpenSocial benefits smaller social networks October 31, 2007

Posted by jeremyliew in facebook, myspace, platforms, social media, social networks, widgets.
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Breaking news tonight about Google teaming up with several social networks to create a set of standards for application developers. The NY Times says:

On Thursday, an alliance of companies led by Google plans to begin introducing a common set of standards to allow software developers to write programs for Google’s social network, Orkut, as well as others, including LinkedIn, hi5, Friendster, Plaxo and Ning.

According to Techcrunch:

OpenSocial is a set of three common APIs, defined by Google with input from partners, that allow developers to access core functions and information at social networks:

* Profile Information (user data)
* Friends Information (social graph)
* Activities (things that happen, News Feed type stuff)

Lots of discussion on the web about it.

This is great news for widget and app developers like Flixster and Rockyou (both Lightspeed companies) as the burden of building apps for multiple platforms can quickly get overwhelming for the resources of a small company. It’s also great news for the largely “second tier” social networks (in terms of US users) that are members of the network.

According to Venturebeat, Facebook was invited but declined to join. Not a big surprise.

Open networks like this benefit smaller players. It’s simple math. Lets say you’re a social network with N members. You’re looking to join a coalition of other social networks to create an open standard; in aggregate they have M unique users. Your benefit is proportional to M and your cost is proportional to N. So the cost is greatest when N is large (big social networks will have app developers jumping at the opportunity to develop for their users anyway) and smallest when N is small (as they probably would not get a lot of apps developed for them on a standalone basis otherwise).

This same scenario has played out whenever there have been dominant closed platforms. Windows remain relatively closed (with dominant market share) while Linux embraced openness. AOL tried to stay closed (using its proprietary Rainman programming language) while small web sites embraced the openness of the web. Anil Dash had a good post covering this history earlier

Historically, openness has taken share against (even large) closed networks because M keeps getting bigger and bigger and more developers get encouraged to write for the platform.

Also historically the biggest owners of closed platforms have been slow to embrace openness, if they ever did at all.

The other variable in this case is how friendly each social network is to app developers making money. It isn’t enough to get a lot of users on a platform if you can’t get paid. Rockyou and Slide both shifted their efforts from the larger Myspace to the smaller Facebook when Facebook opened up because they could make money from Facebook but not from Myspace.

We’ll see if past is prologue!

Facebook App users have 5 apps installed on average. June 27, 2007

Posted by jeremyliew in facebook, platforms, social media, social networks, viral, widgets.
2 comments

Facebook apps continue to proliferate, but there is a strong “long tail” effect to their adoption. Below is a graph of the number of users of the top 100 apps as of 4pm on June 26th according to appsaholic.

Facebook Apps

While much attention has been focused on top apps like iLike and Top Friends, there are only 20 apps over 1 million users in the directory, 53 over 100k users and and 145 over 10k users.

In aggregate, the top 100 apps have 63.5m users. Given that the 100th app, LOLcats, has 22k users, and even accounting for apps not yet in the directory, its likely that no more than 70m apps have been installed so far.

A recent WSJ article says:

Already all the activity has helped Facebook grow to 27 million active users from 24 million before the platform launch, with more than half using at least one of the new services, Facebook says.

So if there are 13.5m Facebook users with at least one app, then a Facebook user with at least one app has around 5 (~70m/13.5m) apps installed on average. There is likely a long tail distribution to this statistic as well, with many users with just one app installed (likely Top Friends given that it has 7m users) and some “application sluts” with 12 or more.

This suggests that there is still a lot of room for growth for apps on the Facebook platform.

Social networks don’t threaten Portals, they threaten Home Pages June 25, 2007

Posted by jeremyliew in Consumer internet, facebook, media, myspace, platforms, portals, social media, social networks, web 2.0.
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On Friday, Christopher Beam at Slate takes a stab at How Facebook could crush MySpace, Yahoo!, and Google, saying about the site:

Facebook will turn into a do-everything site with the potential to devour the whole Internet…

But a Facebook homepage would have a huge intrinsic advantage: The social network is already built in. Sure, the other portals incorporate Gmail and BBC headlines and YouTube searches and podcast directories. By adding a social context to all of this content, however, Facebook would immediately trump its main competition…

If Facebook adds e-mail, IM, and RSS, it’s one step closer to becoming as comprehensive as Yahoo! and as popular as MySpace. The rest of the Internet might as well surrender.

Of course, he is far from the first to suggest that Facebook could become a portal. David Sacks, the founder and CEO of Geni, suggested the same thing in a guest post on Techcrunch in late May:

For the last several years, Yahoo, MSN and AOL have all suffered a declining share of pageviews, but that does not mean the portal is going out of style. Rather it has been redefined, first by Google, and now by Facebook in potentially even more profound ways.

The core question a portal needs to answer for a user is “How do I find the information I need?”…

Facebook has a new answer to the portal question. The “social graph,” or your network of relationships, will push information to you. You’ll learn from your friends. Thanks to Facebook’s new developer platform, the types of information being disseminated now include not just news, photos, events, and groups but also music, videos, books, movies, causes, political campaigns — and the list is rapidly growing into almost every conceivable category.

Others put their money on Myspace as the new portal. As Safa Rashtchy said at the Piper Jaffray Global Internet Summit last year:

Social networks such as MySpace.com are already challenging traditional portals. MySpace, for example, has surpassed MSN and AOL by measure of monthly page views, Rashtchy said, and its traffic equals roughly 75 percent of Yahoo’s, the No. 1 site on the Web.

Despite the digerati’s preference for Facebook over Myspace, Myspace has been a lot more aggressive about adding channels that mirror the traditional portal experience, including news, weather, music, movies, jobs and many more.

These are all folks much smart than me, and I agree that AOL, Yahoo, MSN and yes, even Google, have something to fear from the social networks. But it’s not because they’re becoming more portal-like. Wikipedia defines a portal as:

… a site created to function as a single point of access to information on the web, internally and externally. Portals present information from diverse sources in a unified way. … Aside from the search engine standard, web portals offer other services such as news, stock prices, infotainment and various other features.

What the portals need to worry about is not the social networks adding content and functionality to match this criteria. It’s something much nearer term because its already happening. It’s that social networks are becoming the home page for many users.

According to Comscore’s May data, the portals still have more of their traffic coming from “Logon” than the social networks do.

WEBSITE: LOGON %
Yahoo: 20.0%
MSN: 17.9%
AOL: 11.8%
Google: 10.5%
Facebook: 5.1%
Myspace: 4.1%

But the social networks are gaining a toehold, and there can be only one “homepage” for any user. Because of the power of the default, capturing the “homepage” centrality is an incredibly significant position; it offers the ability to direct a user elsewhere on the internet. Comscore does not let me cut the “traffic sources” data by age as it would be interesting to see if the “homepage” behavior is more widespread among the younger demographics that have adopted social networks more fully; this would be more troubling for the portals as demographics are destiny.

I’ve previously analyzed the websites most frequently visited by their users; here is how the portals and social nets stacked up then:

SITE: VISITS/MONTH
Yahoo: 29.2
MSN: 24.7
AOL: 21.4
Facebook: 20.9
Google: 19.2
Myspace: 19.1

If Myspace and Facebook’s numbers continue to trend upwards, there is a very real chance that more users will switch to using them as their home page, and that is the REAL challenge to the centrality of portals.

REMINDER: If you’re reading this through an RSS reader, please switch your feed to feeds.feedburner.com/lightspeedblog to help me with my stats analysis

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