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April 15 2012
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Growing under the rug and out of the sight of many is a gaming title that is rapidly spreading around the globe, and the larger competitive gaming scene. It has...
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When Instagram got acquired by Facebook this week, the scale of public outrage surprised me – what did people expect the startup to do long-term other than get acquired? I...
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Despite technology’s pervasive tendencies, farming and disruption were, until recently, completely unrelated concepts. Though popular in certain, well-informed circles, community supported agriculture was hardly competition for corporate farms, which are...
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Bilingual or multilingual friends can be quite annoying. Especially if you’re stuck at a social gathering with the ones who repeatedly mention their language skills and utter phrases such as...
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It is only fitting that the latest citizen journalist app, Signal, is coming right out of the Middle East, courtesy of Lebanese entrepreneur, Mark Malkoun. No area in the world has highlighted...
April 14 2012
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Crowdfunding site Kickstarter has allegedly banned transmedia artist Rachel ‘Haywire’ Marone after one of her projects received too much comment spam from what she describes as a ‘cyberstalker’ almost a...
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I never expected to pay to lunch with a bunch of strangers. I’m increasingly cynical about social media and the new social-local-mobile startups, which seem to emerge daily. The craze...
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For this month’s TNW iPad Magazine, we’ve focused on the sharing economy and the rise of collaborative consumption. Whether you’re sharing your living space on Airbnb, your time on TaskRabbit,...
Microsoft vs.Facebook – Who got the better bang for their billion?
April 9th, 2012 will go down in shopping history as the day the software gods emptied the coffers to preserve mobile market share with two very disparate strategies. While both companies were acting in large part to block competitors, their moves couldn’t have been further apart when it comes to valuing ideas over users. Facebook paid $1 billion for Instagram, a photo app with zero intellectual property, while Microsoft paid $1 billion for a portfolio of 800 patents related to email and IM. Why are these valuations so high and what do patents have to do with it? The answer, as so many answers do, begins with Google.
goo·gle·pho·bi·a noun ˈgü-gəlˈfōbēə
pathological fear or loathing of Google
Protection Money
Googlephobia reached a fevered pitch last week as both Microsoft and Facebook took desperate actions to slow the ascent of the Android empire. Weeks earlier at SXSW, Facebook took notice as Instagram innocently announced its Android version. Hm, Facebook must’ve thought, an extra 30 million users might be somewhat appealing to a lonely social network like Google Plus. In reaction to this, Instagram casually doubled its valuation a week before the Android release.
Meanwhile, Microsoft is in a hardware war with the Android manufacturing universe and pundits agreed that AOL’s legal cache might have given Google some protection from Seattle’s best lawyers. Google didn’t bid in the open auction, but chairs around the world probably slept better anyways knowing that Ballmer’s purchase may have calmed some nerves. Still, are these protective powers worth $1 billion?
Same Price – Very Different IP
Both Facebook and Microsoft were looking to spend their billion to increase their mobile market share, but the difference in approaches to intellectual capital couldn’t be more stark. In order to look at the comparative value, we’ll need to look at some recent developments in the fascinating world of software IP that shed some, if dim, light on the magnitude of last Tuesday’s spending spree.
A Nano-Primer On Software Patents: Machine, Transformation, and Half-Toning
Machine or Transformation
How do you know if your software process, say, for filtering a picture, is patentable? According to the 19th century definition still on the books today, your clever idea requires either a specified machine, or it must change something physically. This terminology was famously used in 1972 to prevent software algorithms from being patented (legal eaglets see Gottschalk v Benston). It was further invoked by the supreme court in 2010 when they famously denied a patent for a process (Bilski vs Kappos), while at the same time admitting that maybe some software algorithms (that didn’t refer to a specific machine or to change the state of physical objects) deserved some sort of patent.
Half the Tone, All of the IP
The latest chapter in software patents happened in 2010 as the Federal Circuit weighed in against our shopper Microsoft and found that software processes, even those without unique machines or state changes, were patentable if they were specific and provided “functional and palpable applications in the field of computer technology”.
In that instance the beautifully named “Research Corporation Technologies, Inc.” was able to successfully defend its patent for half-toning — using dot gradients to mimic colors — from Microsoft. A victory for the protection of ideas and a patent for an algorithm! Confusion resolved? Hardly. Since 1972 through last week every software and hardware player with half a million to spare has been gathering up patent after patent to try to bluff each other into not suing for ubiquitous processes like half-toning or email or instant messaging. Half-toning seems especially resonant here, isn’t Instagram built around a process for manipulating images?
A menu from 1972′s SuperPaint, an Instagram Precursor
Facebook’s Purchase (No Sales, No Patents, No Problem)
Instagram has no real protectable intellectual property at all. It uses a hodgepodge of open source to deliver its services and its filters have been around since Superpaint. What Facebook gets instead of IP is users, 30 million of them. How much are users worth? For a company with a valuation of over $100 per user, Instagrammers are a bargain at $30 each. With a turf war out there, Instagram doesn’t need sales, as its investors realized from the get go, nor does it need any protected IP. Despite Zuckerberg’s claim that Facebook doesn’t “plan on many more of” these deals for users, the deal’s magnitude exposes a Facebook strategy: will pay for users, no patents necessary.
SuperPaint ran on the Nova800 (16 Bit!)
Microsoft’s Purchase (No Product, No Problem)
Conversely, Microsoft, a company once known for its software prowess, wants patent weaponry to continue its assault on Apple, Google and the smartphone manufacturers. In August, Google purchased Motorola Mobility for its 17,000 patents in a deal that likely pushed Microsoft into its bidding for AOL’s stash of IP. As the Wall Street Journal’s Gordon Crovitz put it, “The value of patents in software and hardware such as smartphones has everything to do with litigation risk. It has almost nothing to do with technology.”
Mobile Users – The Patent Alternative
What’s wonderful about these two surprising uses of $1 billion, is that they auger a world of mobile tech that is still a wide-open playing field. Once the meal-ticket of the startup, patents have become arrows stockpiled by the thousands by the mega-corporations of the Internet to protect shares of the mobile market. The top dollar paid for these patent troves shows that the mobile world is still anyone’s game. Meanwhile, Facebook’s acquisition of Instagram unveils a vision of the future where users, not patents or products, are the best way to protect and expand mobile marketshare. We’ve already seen startups following the lead of Instagram’s precursor “Burbn” by shedding their product-oriented approaches in favor of a clean, simple, viral quest for users.
The Winner
Facebook wins this billion dollar bargain hunt by acquiring 30 million users and announcing a new strategy in one surprising move. Instagram’s users might not ultimately bring revenues of $30 each, but with the high public valuation for Facebook, the immediate value of maintaining the top social destination for mobility is arguably priceless. Microsoft’s patent grab helps it accelerate its strategy of demanding rents from every mobile manufacturer but their bargain is less sweet as this legal battle can’t last forever. Either way, the new holy grail for startups looking to get noticed is clear: get mobile users.
This article is dedicated to U.S. patent 6360693 which celebrated its ten year anniversary last week.
U.S. Patent 6360693: The patent for a stick.
Dollar bills by Brian P Gielczyk via shutterstock
April 13 2012
NYC designer draws attention for his unofficial Spotify app for iPad
A tweet from a NYC based designer caught our eye yesterday in which he posted a picture a beautiful looking iPad app for Spotify that he was working on. We immediately started asking each other here at TNW if this was an official effort from the company, which has an office in NYC.
It turns out that we weren’t the only confused ones, as Max Petriv explained Appdadvice today:
Spotify’s PR team called him yesterday to inquire whether he is designing the official app. It’s just an unofficial version, but the company should take note of his spectacular design skills.
What has everyone so excited? Well, first of all there is no official iPad app for Spotify, and the current iOS version has to be run in 2X mode to be even remotely usable on the device. Needless to say, it’s a crappy experience and we can’t figure out why Spotify hasn’t released an official iPad-only version yet, which it has promised for some time.
Here’s the sneak peek that Petriv shared yesterday:
I’m working on a new look and feel for @spotify iPad and iPhone App. Much more to come. This is just a sneak peek. twitter.com/talkaboutdesig…
— talkaboutdesign (@talkaboutdesign) April 11, 2012
Now you can see why we were all confused by the tweet, as it seemed like Petriv meant that he was working on the official Spotify app for iPad. Even though he’s not, the early sneak peak has caught our eye and have us salivating over the possibility of it being in our hands sometime soon.
Here’s why Petriv decided to put his focus on building the app:
I’ve started the project last week. It all began when I realized how much I love Spotify, and how there is no official app. I didn’t want to create something that looked like their regular app either. The idea here is to make it more fun to explore music and find something you didn’t even know you liked.
Not sold yet? Check this out:
Thought I would share more of @Spotify iPad app. This is what expanded album view looks like. twitter.com/talkaboutdesig…
— talkaboutdesign (@talkaboutdesign) April 12, 2012
Our own Alex Wilhelm points out that this looks a lot like Zune’s Metro desktop app, but since I don’t use a Microsoft OS, I wouldn’t know.
Since this guy is based in NYC, Spotify should reach out to him and get him on the mobile team to work on its iPad app. Whether it’s official or not, I’ll be downloading this as soon as it comes out. The iPad is just screaming for huge album art and buttons from Spotify, so hopefully it comes soon.
In case you didn’t know, Uber drivers see how many stars you gave them
You’ve probably heard about the wonderful driving service that is spreading all over the world called Uber. It’s an amazingly simple solution for those of us who hate the inconvenience of riding in cabs. You simply open up the app and ask for a pickup, and a slick black car comes to pick you up.
What’s really fascinating about the service is how you can rate the drivers based on how nice they are, how tidy the car is, and how your ride went. It’s a basic five star rating system, and drivers can even rate you as a passenger. If you were to say, vomit in one of the cars, you might get 1 star and drivers might opt not to pick you up the next time you use the service.
Similarly, as a passenger you can choose to not accept a ride from a driver who has a subpar rating. When your ride is all said and done, you simply choose how many stars to give and write out some feedback if you wish.
What we didn’t know was that drivers see the rating you gave them when the ride is over. They don’t see the written review, but do get to see how you rated the ride. This concerns me for a few reasons, which I’ll get to in a few. Here’s the confirmation of the practice here:
@Zee Drivers do see the number you give, but never the text feedback you leave.
— Uber San Francisco (@Uber_SF) April 13, 2012
We’re not the only ones that aren’t a fan of this “feature” as you can tell:
@Uber_SF @zee you guys should change that. I’ve had a driver before questioning me as to why I gave them a 4, and not a 5. Not so fun.
— James Proud (@jamesproud) April 13, 2012
The way the service was always explained to me was that neither the driver nor the passenger received any personally identifiable information when it comes to ratings. This keeps everyone happy and limits the possibility of an uncomfortable situation like the one mentioned above.
Not only that, but if I had a bad experience and rated the driver with one star, I’d be worried that there might be some type of recourse, be it a shouting match or worse. The service says that their drivers are professional and we need not worry about that, but this is something that hasn’t been discussed openly until now.
I’ve reached out to the company for comment and to see if the rating is viewable immediately after you submit it and will let you know what I hear back.
UPDATE: The Uber SF team sent me the following, and I’ve asked for further clarification on whether this is shown in real-time:
Per my tweet before: drivers see star ratings for each trip, but not the text feedback you leave.
UPDATE 2: Uber’s SF team tells me that there is no pop-up to alert the driver of a rating, but they can check their dashboard to see star ratings on a per-trip basis, just not written reviews:
Drivers can login to their dashboard whenever they have time and see star ratings they’ve received but not the text feedback you leave.
There’s no prompt or popup or otherwise that says “so-and-so just rated you 5-stars”. Just a dashboard drivers can check in on.
As I mentioned before, that’s never been clear to me, so you can draw your own conclusions about this. Needless to say, I’ll be waiting for quite a while to submit my ratings, if I submit them at all now. San Francisco is a small town.
What Instagram’s crazy Facebook buyout tells us about the value of Foursquare
If Instagram is ‘worth’ $1,000,000,000, what is Foursquare itself worth? It’s not too idle a question; Instagram set in motion a pricing-recap in the market, effectively putting a marker in the sand as to what a high-growth startup might command in terms of ‘value’ to a scared giant, such as Facebook.
Here’s a fact that you might have forgotten: Foursquare’s last round was $50 million in capital at a $600 million valuation. Sound familiar? It should. Instagram’s last round, days before Zuck snapped it up, was about $50 million at a valuation of $500 million.
There are more parallels. Foursquare was also briefly once the hottest company in tech (in our estimation). I recall blogging about the service entering new territory, and being greeted by readers as if I had led them to the promised land. Everywhere you looked, there was Foursquare. Now, it’s Instagram.
What is interesting, though, is what Foursquare has become. A deal with Amex, and a merchant setup that could be monetized overnight give Foursquare exceptional revenue potential, especially given the density of its userbase in certain locales; in those place, it is part of the fabric of life.
However, Foursquare has a problem: user growth. While Instagram is adding 10 million users in 10 days, Foursquare had a total of 15 million users as of Janurary of this year. It was at 10 million in June of 2011. That’s 50% growth in about half a year. Not bad, but nothing crazy, especially as smartphones have become even more common; the pool of potential Foursquare users is only growing.
There have been endless numbers of the value Facebook paid for each Instagram user bandied over the past few days. Certainly, that per user cost has dropped, as Instagram has exploded since the sale. However, numbers around $30 have been the most common, so we’ll employ that figure.
Now, 15 million users in January is our most recent data point. Let’s be very generous, and assume that Foursquare has accelerated its growth rates, and has, as of today, hit the 20 million user mark. With me? Alright. At Instagram’s $30 per user metric, Foursquare is now worth $600 million! But wait, that’s what it was valued at during its last round of funding.
What’s going on here? It’s difficult to say. Foursquare appears to be trying to become a real, functional business, and is not positioning itself as flipmeat. But the company does have troves of data. That is worth plenty, I would presume.
Here are the thoughts from our very own Drew Olanoff and Alex Wilhem:
Drew’s Conclusion
The types of data that Foursquare possesses is more valuable than anything Instagram can come up with, by a longshot. If you’ve used Foursquare over the past few years, like some of us have, there is no current service that knows more about your likes and tendencies, especially when it comes to spending money. The last time we checked, Instagram users weren’t buying anything.
Since Foursquare launched its “Explore” service, it’s even giving Google and Yelp a run for their money when it comes to helping you find a new place to eat or grab a drink. Currently, I turn to Foursquare Explore in a new location before I fire up Yelp. Why? Because Foursquare has a vast amount of historical data that when put together can tell a story of whether a location is popular, whether your friends have been there, and what people think about the place.
Much like Instagram, Foursquare is a completely autonomous social network that has interactive features of its own, but is similarly propelled by posting your activities to Twitter and Facebook. With that same social fabric as well as the infinite amount of personal data that it has, Foursquare has to be an acquisition target at this point. At what price though is what we’re trying to figure out.
If Instagram is worth 1 billion dollars, then surely Foursquare could command a similar sum, if it’s on the market at all. The service is one of the rare companies that has an actual business model and an engaging social hook that keeps users coming back. If there was ever a time to sell, that time is now. We know one thing, Foursquare’s suitors are surely lining up to find out what that asking price is.
Alex’s Take
It’s been essentially established that Zuck was scared off his gourd about Instagram. Fear has a smell all of its own, and the Instagram deal reeks of it. That means that Zuck wasn’t buying something for its inherent ‘worth,’ but was instead buying off a potential threat. I’ve written more on that here, if you are curious.
That’s why Foursquare’s valuation is so interesting – no one is really too scared of it. If Facebook had been, they would have bought it, instead of Gowalla. Google? Not really, they don’t have that big a hand in the location pot, although they could integrate Foursquare into Android which would be neat. Oh, and they bought Dodgeball. How did that work out? Moving on: Microsoft? Too busy with Windows Phone, I think, to do this, and they probably don’t want Foursquare, as they own part of Facebook, which competes with it.
The $600 million figure is deadly, because it implies that for investors to be content with the sale of the company, and therefore sign off on it, they will require a multiple. Which puts Foursquare in to the, perhaps, billions range. Who wants to swing that cash for a firm that hasn’t shown its ability to rocket its user count in some time? If there is no explosive growth is there no threat? And if there is no threat, why buy it?
From the investor perspective, so long as they believe in Foursquare, that $600 million figure is a base. If, however, they begin to run scared, they might take a down purchase to get out. But again, to who?
So, where would I place Foursquare’s value? Given that I would value the firm on its financial realities and potentials, as a suitor doesn’t appear to be rising, it’s impossible to say with any real accuracy. How many tens of millions of dollars in profits can it generate? Any? What’s its burn rate? Can it shed headcount to conserve cash? Will merchants come on board en masse to pay?
I can say this, from a business perspective, and not from the view of a speculative acquirer: I certainly wouldn’t go higher than, in terms of a valuation, what was dictated by its last round.
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Microsoft this morning announced that it is replacing both the chief executive officer and chief operating officer of Microsoft Greater China Region (GCR). Microsoft GCR basically comprises all of the...
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There is only one logical reason that Facebook, the world’s largest social networking site, would set it sights only a mobile app with 13 employees. The main driver for Monday’s...
April 12 2012
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It has been widely reported that Amazon Prime has a vast catalog of movies and TV series available, with the company claiming 17,000 titles. But after some digging, new reports...
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The big tech players are making financial news of late, with Apple declaring a dividend and stock buyback program, Google splitting 2:1, and now, Adobe announcing that it intends to...
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Just two days ago we told about an app called Everyme, which solves some communication problems that we’re currently trying to tackle on social sites like Facebook and Google+. How...
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While we might finally be at the point where we have video everywhere, we’ve been pretty far from having good audio to go along with it. Today, Dolby Labs and...
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Today Google reported its first quarter earnings. It had revenues of $10.65 billion, profits of $2.89 billion, earnings per share of $10.08, and diluted earnings per share of $8.75. That...
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Popular companies who have set up a page on professional networking site LinkedIn know how powerful it is to be able to share updates to all of its followers, which...
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