Michael Arrington @ FOWA Feb 07

20
The Magic Formula Michael Arrington February 2007

description

Michael Arrington of TechCrunch speaking at Future of Web Apps in London, February 2007.

Transcript of Michael Arrington @ FOWA Feb 07

Page 1: Michael Arrington @ FOWA Feb 07

The Magic Formula

Michael Arrington

February 2007

Page 2: Michael Arrington @ FOWA Feb 07

Topics

• Market Timing

• Key Factors

• Areas of Opportunity

Page 3: Michael Arrington @ FOWA Feb 07

Looking Back At 2006

Was 2006 a “healthy” year for the web, orwas it the beginning of Bubble 2.0?

Page 4: Michael Arrington @ FOWA Feb 07

$600 million in venture capitalwas invested in “Web 2.0”

startups in 2006.

…Bubble?

Page 5: Michael Arrington @ FOWA Feb 07

However, a single acquisitionwas completed for $1.65 billion,

paid for in cold, hard Googlestock.

Nearly 3x the total amount invested by venture capitalists

Not Yet

Page 6: Michael Arrington @ FOWA Feb 07

Facebook was almost acquiredby Yahoo for $1.62 billion.

Page 7: Michael Arrington @ FOWA Feb 07

MySpace generates $25 millionper month in advertising

revenue.

Page 8: Michael Arrington @ FOWA Feb 07

My Point Is…

We’re just getting started.There is nobubble. And the best Internet apps arestill to come.

Page 9: Michael Arrington @ FOWA Feb 07

What To Focus On

1. Have a good idea!• Invent a market• Destroy a market• Remove Friction

2. Have a business plan3. Have a revenue model4. Build it cheap, test the waters5. Avoid high burn rate

Page 10: Michael Arrington @ FOWA Feb 07

However

1. Threw away their original businessplan and one founder bailed out.

2. Flaunted international copyright law.

3. Had no revenue stream.

4. Was spending $1m/month inbandwidth.

Page 11: Michael Arrington @ FOWA Feb 07

It worked because…

1. They removed friction by providing amuch needed service - IPTV (not usergenerated video clips).

2. First to market.

3. So much growth that money poured into cover burn rate.

Page 12: Michael Arrington @ FOWA Feb 07

Case Study: MyBlogLog

1. Launched October 19, 2006

2. Acquired January 8, 2007

3. Never raised a venture round

Page 13: Michael Arrington @ FOWA Feb 07

Case Study: Amie Street

1. Launched mid 2006

2. Three university students

3. No capital raised

4. Can do to music industry what Diggdid to news industry

Page 14: Michael Arrington @ FOWA Feb 07

Case Study: Jingle Networks

1. Free business information (411)

2. Has taken 3+% of U.S. market

3. Forced AT&T to compete

4. UK opportunity?

Page 15: Michael Arrington @ FOWA Feb 07

Shared Attributes of Winners

• Passion for what they are doing

• Doing Something Extraordinary

• Removing Serious Friction

• Great Founder Dynamics

• Never Raised Big Money, or Raised It After They Won

• Perfect Revenue Model Not Required

• Had a lot of buzz about their product early on (free marketing)

Page 16: Michael Arrington @ FOWA Feb 07

Shared Attributes of Losers

• Poor Founder/Team Choices

• Lifestyle/Ego Entrepreneurs

• Raised Too Much Money

• Spent Too Much Money

• Over Business-Planned

• Forgot About Scaling (Don’t be Friendster)

• Had to try too hard at marketing

Page 17: Michael Arrington @ FOWA Feb 07

The Buzz Factor

To be successful you must create buzz aboutyour product:

• Solve a real problem• Do not be the 200th video sharing platform

– Instead, be Aniboom

• If you don’t have a blog, start one now• If buzz isn’t happening, seriously rethink your

product (not your marketing)

Page 18: Michael Arrington @ FOWA Feb 07

Areas of Opportunity

1. Offline/Online• Apollo• Firefox 3.0• File system + html/flash/ajax

2. DRM and Music/Movies/TV3. Data and service portability (teqlo, ning,

pipes)4. Mobile

Page 19: Michael Arrington @ FOWA Feb 07
Page 20: Michael Arrington @ FOWA Feb 07

Discussion