Bronte Media

SiliconBeat via VentureWire has news that Reply.com has raised a $17m round of venture capital.

Reply is a  focused version of ServiceMagic, concentrating on the Internet friendly categories of Auto, Mortgages and Insurance, and of course, Real Estate. The company is run by a Noveau-classifieds-set, led by Payam Zamani. He founded Autoweb.com before Reply.

They are extremely efficient acquirers of traffic that they then package for their customers. Venturewire estimates their revenue at $20m annually. I spoke with them last year and they had some very smart thoughts on the transition of the classifieds industry into a performance-based world.

The problem that I see is that they have little to differentiate themselves from the other ‘form-filler’ firms like Housevalues in real estate and Lendingtree in mortgages. There is only so much direct marketing optimizing you can do to lift your conversion rates on the said forms.

Actually, they are as close to online arbitrage as you will get to that poor analogy. Much more so than vertical search.

Then there are the fact there are forms at all. The ‘dark-curtain’ consumer experience involves the user filling in a detailed form and then being hassled by multiple people over the phone in a short amount of time after doing so. In housevalues’ case, the home owner who is looking to value his or her house is pressured into selling it by the realtors who are the ‘valuers’ that respond. In kind instances, only one person contacts the consumer who fills out a form.

That is one of the fundamental problems I am trying to solve with Homethinking.com. But that said, I have a very high opinion of Reply.com and think that they will make a lot of money in the years to come.

If you don’t know what Ajax is, then go to the travel search engine, Kayak.com, and begin typing in ‘New York’ into the from field and look at the suggestion pane that automagically appears. That’s one example. Behind the scenes it is Javascript that communicates with a server via XML.

You might also have seen it if you use Gmail, Flickr or the most famous example, Google Maps. The one application that doesn’t have it is eBay.

Instead people madly refresh pages and place bids as the auction runs out. Maybe it is because the technology is unproven (although from what I can tell the underlying technologies have been around for years), but it seems silly that eBay is not using Ajax. The two seem to be made for each other. Ajax and stock trading for that matter too.

API and open feeds are two Web 2.0 hype bingo words but behind them is a very simple concept: If you are too busy to do it yourself then at least have the courtesy to enable others to do it for you.

Typepad has long been lauded as a Web 2.0 stalwart but more and more I am convinced they are dead in the water. I use it for this blog but the service is excruciatingly slow. The interface is pretty and clean and simple but everything is strangely worded (what the hell is under a ‘configure’ tab? why call a custom section a Typelist? etc.).

As well as being strangely worded, the blog is just too hard to change and mash up. Like the servers being way too slow, so too is there feature development. It took about a year longer than it should have to support text ads via a partnership with Kanoodle in a deal that should have been signed in a week and gone live in January not November of 2004.

People want to integrate services but they have to go through the SixApart bureaucracy bottleneck (how many times can you apologize for being slow and state that you are growing too fast before you just look incompetent and stop growing at all?). Which brings me to Wordpress.

Wordpress is an open source blogging tool that is gaining a lot of traction. Besides one hiccup, they are doing extremely well. They are doing so because they enable and encourage people to extend their software. Insiderpages, a consumer-written yellow pages company, has come out with a plugin that allows bloggers to cross-post reviews to their blog and to their platform. I am sure Wordpress wasn’t their first choice but it is easy to do. Their emails and offers of help probably wait unanswered in the Six Apart inboxes. When folks like Google announce XML sitemap guides, hackers conjure up scripts to support them in Wordpress. Social bookmark sites make tagging easier with Wordpress. Again, I am sure they would love to make it easy for Sixapart products but they can’t.

Pierre Omidyar said in an interview, that I will vaguely allude to but not cite, that there was no grand scheme of community credibility when he introduced the feedback system for eBay, it was simply that he couldn’t answer and arbitrate on all the emails from buyers and sellers he was getting. He was too busy but at least he was courteous enough to allow others to do the work if they wanted to.

That seems pretty Common Sense 0.1 alpha, let alone Web 2.0. But I don’t have  a whole lot of faith that Typepad will integrate this basic form of common sense. After all, they are too busy and growing so fast. As for me, I will be stripping the post of irony and migrating the blog across to Wordpress in the near future, which because of my use of feedburner early and a few other things, shouldn’t be too hard.

Google and Open Source software have a lot in common. They take an innovative technology segment with proven demand and try to do it better.

Similar to what Linux did to Solaris, HP-UX and every other random flavor of Unix in server operating systems, Google did to Overture in search marketing. Gmail to Hotmail in web email and now Google Talk to AOL IM in instant messenging.

That works in "better mouse trap" markets but in something like email, where the switching costs are somewhat high with your email address, and more so in IM, where the networks are quasi-closed, the approach will not work as well.

There is not a lot of core innovation in what Google does  but they overlay everything they do with incredibly clean, simple and fast user interfaces and invariably a higher quality of product. That’s enough for the Firefox set, but not for the mass market (AOL still has 20m+ dial-up subscribers!).

It is also peculiar that Google is the first to mind when people think of innovative companies. I don’t disagree that they have the smartest technology minds working for them but I just find it difficult to come up with concrete examples where they have been truly innovative (the one example maybe is Maps, but even then they acquired a few small companies to get to that stage and Maps are well just Maps after all). They are just incredibly efficient followers who invariably come up with the best products, even if they are a few years after the market establisher.

More Open Source examples:

Apache to Netscape Web Server (biggest strategic error of Netscape not that they lost the browser wars).

Firefox to IE.

PHP/Perl to ASP and Cold Fusion (a little bit tenuous I know).

Lucene to Autonomy and Verity.

Feel free to add more in the comments.

Did you know that behind the Tobacco industry, the National Association of Realtors is the largest lobbying organization in Washington? That may seem strange at first glance but the stakes are high. Americans spend roughly $70bn in broker fees each year. As house prices rise ever further, the broker commission of 6% stays relatively fixed. That means the $70bn is essentially linked to the price of housing, and will rise in tandem with it. The bigger the number gets, the bigger the lobbying efforts to protect it will too.

There have been some alarming momentum behind the outlawing of discount commissions and the ability of home sellers and buyers to de-bundle certain services and only have to pay for the ones they need. The Wall Street Journal had a thought provoking editorial in recent times.

What do you care about real estate commissions? Well, in thinking about my new venture it was an important consideration (answer: it’s about me people! me!). It would seem that the Internet’s role should be to lower the commission spending to an efficient level. It probably is, but for homethinking.com I’d actually like it to stay as it is.

If the broker fee is tied to the price of housing, the decision about which realtor to engage for a homeseller will become a larger and larger financial decision. That hopefully means that more homesellers will take the decision more seriously and try to make it in a logical way (through homethinking.com of course).

I have no doubt that the situation with commission rebates, minimum service levels and openness of listings will be crushed by the power of technology and the Internet in time, it’s just that I am not going to be the one to try and do it. I have heard that Zillow, a startup founded by the Expedia team and based in Seattle, originally thought about attacking the over-priced industry and to bring commissions back into line with market demand and supply. But they gave up on it. At least that’s what I heard. Probably because the National Association of Realtors has a lot of money and a lot of influence in Washington. If you don’t think you can change the Tobacco industry with what you have, you probably shouldn’t think that you can change the real estate industry from what it is today too. Sad but true.

Sometimes he gets it wrong but this time he is spot on with something that I have never understood: individuals mistaking urgency for importance.

Investment bankers and corporate lawyers beam with pride when they say they work 20 hours a day. To them it is a veritable rite of passage. In reality it is just a gross mismanagement of resources.

Google today announced that it was seeking to raise $4.2bn in a follow on offering. The $4.2bn would add to the roughly $3bn it has on hand at the present time.

In addition to the capital raising, Google has been quietly doubling its corporate development department in recent months. Although their acquisitions thus far have looked more like executive recruitment than corporate strategy, things are about to change. The prized China assets have mainly been taken - although they could look closely at the publicly listed portals, who have disappointed of late. There was a Tivo rumor but I highly doubt that would come about; no matter how hard you try to dress it up as TV search they are a consumer electronics manufacturer. The size of the raising has a telco feel about it, and Google has been about the only company that *hasn’t* been mentioned in association with Skype. Who knows. It’s just hard to think of Google as an acquirer of companies. Their engineering pride seems to run too deep to admit the value of buying instead of building.

Or maybe we are all thinking too hard; it is simply about having a bigger number than Yahoo! The raising wont go close to out chest-beating Microsoft, who has $60bn in cash and short term investments but it will comprehensively beat that annoying little Yahoo, who has about $3.5bn on hand. Shove that up your 19 billion document index!

They say you only hurt the ones you love. Well, there is only one publication I love: The Economist. And so it was disappointing to see their ‘profile’ of Yahoo in this week’s edition. 

The story breaks down as:

1. Some moron MBA students entered a competition by a strategy consulting firm and Google won. They made fun of Yahoo.
2. Google’s stock price has done spectacularly well.
3. Bill Gates and Steve Balmer only talk about Google. Therefore in the end it will be MSN and Google (No note of how MSN has made *zero* inroads into either Yahoo or Google since Bill said that Google kicked their ass in Davos).
4. MSN and Google hire engineers and Yahoo hire ‘media’ people. This is bullshit. Even excluding the premise that engineers are better than the mysterious ‘media people, the majority of Google’s employment growth has come in their sales and marketing team. Read the 10K’s people! MSN similarly are hiring hundreds of marketing and sales people ahead of their AdCenter launch. Not to mention Yahoo making some big engineering hires of late.
5. What of Google’s ‘focused’ product strategy? Gmail is the most fantastic email app ever written but it has made little inroads into Yahoo mail and Hotmail. There are high switching costs for most users. Aside from this, we have groovy maps, voyeuristic satellite photos and a Brazilian drug dealing network. Extremely cohesive!
6. Yahoo has lost the plot and is unfocused because they struck the Alibaba deal. I am not saying the transaction will work out as anything to do with China has a ridiculous valuation but the core assets - auctions (whether b2c or b2b) - are one of the two tenets of online business (advertising and commerce). Further, auctions are a media version of retailing - you don’t need any inventory but you make great money putting people in touch to transact. Nothing unfocused about that.

The one underlying premise I found to be fundamentally irritating is that Yahoo is about to enter into a decline. In a secular sense, everyone is going to enjoy fabulous growth (as the article had to begrudgingly admit when referencing Yahoo’s financials). Second is the overestimation of MSN. They have smart people and they are making the right movements but they have not done anything yet. That is the unproven, not Yahoo’s trajectory.

But I still love you, The Economist.

Very good to see that Judy’s Book getting solid press coverage in recent days. First here in today’s NY Times and also here. Judy’s Book is a consumer-written yellow pages based in Seattle.

Especially interesting to read was this: " By
early 2006, Sack said, Seattle-based Judy’s Book should be generating
revenue from small- to medium-sized companies taking advantage of
services that will allow businesses to track telephone calls based on
exposure from Judy’s Book."

When I caught up with Andy Sack, the firm’s CEO, late last year he was a little vague on the firm’s advertising strategy saying initially that he was focusing on the consumer (very good answer) and then when pressed that they would monetize the pages through Google AdSense (very bad answer). Excellent to see the change of heart towards pay-per-call.

As an aside, if you want to follow my culinary journey through Manhattan, I have been posting a few reviews of late on the site that you can see here. If you like them, join up and add me as a friend because at the moment I don’t have any. Err on the site that is.

Yahoo has begun launching pay-per-call advertising across its UK properties. First up are Cars and Kelkoo, its European shopping comparison engine. The rates are to be fixed initially but it will be only a matter of time before they are dynamically priced.

This is huge news. Even though AOL has added Ingenio’s pay-per-call listings to its search results and even though it displays them at the very top, there is only one listing and AOL is very much in the second tier. Pay-per-call will really only matter if Yahoo or Google adopts it. As both have displayed a voracious appetite for keeping up with each other, Google adding it will only be a matter of time.

Cars are a great first choice. Pay-per-call more accurately measures the response of classifieds advertising. Although the industry is growing very strongly, the current fixed listing pricing model does not accurately articulate the value of advertising and puts an artificial burden on growth. For instance, Autotrader, which uses call tracking (basically the same technology but only for measurement of response not the pricing of advertising), sees 80-90% of response go through the phone numbers as opposed to online contact.

I can’t wait for Yahoo to launch the advertising in the US and then roll out an ad network to help small publishers (that’s me) monetize inventory via pay-per-call rather than the less-relevant pay-per-click pricing for service-based advertisers.