SaaS

Facebook is EVIL Part II

November 21, 2010 By Bruce Cleveland

There were a number of responses to my post “Facebook is EVIL” that raised some legitimate issues that Facebook is…ahem…facing…that no other company on the planet has had to deal with due to its massive scale.

Several comments from people who are familiar with Facebok internally confirmed Patrick’s comments made in my original post that the email my wife received was mistakenly made in response to a bot issue.

That said, my wife would not have had nearly the strong reaction she had if Facebook had simply used a different tonality in its communications with her .

The language used in the email and the fact that it offered no recourse for resolution was, in my mind, inappropriate, irrespective of the massive scale problem. There is simply no excuse for treating customers poorly.

So, here are my suggestions that Facebook might incorporate into its business model, that may not solve the spammer/bot problem but it will at least make its customer base feel better about interacting with them:

Like Disney, remember that while Facebook is a serious business for the company and its investors, it is always supposed to be something fun for its legitimate customers/users. The fact there are some bad actors among millions of good ones is no reason to treat everyone poorly. Receiving hostile email isn’t fun. If Facebook is viewed as a bad company, competitors can and will arise and people will go there.
Simply change the tone of interaction from one of presumed guilt to one of presumed innocence. It costs nothing to do this.
Give people a chance to act/react before slamming the door on them. For example, provide a notification to the suspect account/user with words to the effect of: “We are sorry but based upon your Facebook account activity, we believe you have violated X,Y,Z of Facebook’s code of ethics..blah blah. As a result, unfortunately your account is subject to deactivation. Before we take this regrettable action, we want to ensure we give you an opportunity to respond. Please fill out the enclosed form and submit it to tell us your side of the story…blah blah”.
Build the cost of this process into the Facebook business model. Facebook isn’t public yet so this can be done with relative impunity at this point. Once it is public, it’s hard to add costs without a big hit to the stock. Providing great customer support is a cost of doing business.
Look at using crowdsourcing/low cost labor to review and escalate credible requests.

I realize it’s a big problem but given Facebook’s valuation, it should have enough financial and human capital resources to come up with unique solutions to identify the riff raff without taking its frustrations out on its legitimate users.

« Hide It

Filed Under: Cloud, On Demand, SaaS, Software, Software as a Service, venture capital

Facebook is EVIL

November 18, 2010 By Bruce Cleveland

Ok…that may be a little over the top but it got your attention. Truthfully, I’m confident that the vast majority of the folks who work at Facebook are good people but a recent exchange between my wife and Facebook gave me significant pause for thought.

On Tuesday of this week, my wife discovered that her Facebook account had been deactivated. Facebook didn’t send her an email or any sort of notification that they were deactivating her account — they just turned it off.

Now, my wife uses Facebook like the vast majority of its 500M members – to keep up with the lives/daily activities of her current and old friends as well as family members. She is not a hacker; she’s just a mom and my wife for more than 30 years.

After seeing that her account had been deactivated, she sent a request into Facebook Support certain it was some minor glitch and all would be restored and the universe would continue on as normal.

However, the next morning she looked in her inbox and to her surprise, she had received the following email:

From: info+tay1yt@support.facebook.com [mailto:info+tay1yt@support.facebook.com]

Sent: Wednesday, November 17, 2010 1:43 AM

To: XXXXXX

Subject: Re: My Personal Profile was Disabled

Hi,

Fake accounts are a violation of our Statement of Rights and Responsibilities. Facebook requires users to provide their real first and last names. Impersonating anyone or anything is prohibited, as is maintaining multiple profiles on the site. Unfortunately, we will not be able to reactivate this account for any reason. This decision is final.

Thanks for your understanding,

The Facebook Team

My wife uses her real first and last name on Facebook. Her email account is real, it is active, and she responds to messages sent to her. She is not impersonating anyone. She doesn’t have multiple accounts. She doesn’t have a name that is associated with any celebrity. She’s just a normal person, doing normal things on Facebook. She has friends, she makes comments and she posts photos (all normal photos — dogs, kids, you know… your basic family type stuff.)

Suddenly, she is cut off from her friends/family/photos, she’s been accused of something she hasn’t done, and, apparently she has no recourse. The only communication she is sent is a sterile boilerplate email from Facebook saying that they will not “be able to reactivate this account for any reason. This decision is final.”

Holy #$%^. Is this any way for any one/person/company to treat a mom/wife/good person?

Then, just as sudden as it was deactivated, her account was mysteriously reactivated. No explanation why. No reason. No apology. Nothing.

This all got me thinking.

Facebook just launched its supposed “gmail killer” - Facebook email accounts. What if someone were to start using a Facebook email account and suddenly it was turned off for any reason or no reason? Without recourse. Poof…gone. And, no human to interact with to rectify the problem.

Email is a “mission critical” application for me and for most people who use it. Not having access to your email account to be able to send/receive email and review old email as needed could be extremely disruptive; at the very least it would be highly annoying.

If Facebook makes a mistake with email, as they did with my wife and her regular Facebook account, and uses the same non-communicative “it’s final” approach to resolving the issue, how would I, or anyone else, feel about that?

I realize that people are using Facebook for more and more online activities (e.g. video, chat, etc.). However, has Facebook really earned the right – our trust – to provide these services?

Yes, I know that Facebook is “free” — sort of…if you don’t pay attention to the ads/games/etc. that all enable Facebook to make money instead of you/me paying a subscription fee. The question I have is: how free is it, really?

I’ve decided that based upon this little incident with my wife that I’m not giving Facebook any more access to my life until it proves it can handle what it currently has – appropriately and effectively. It may be convenient to put our entire digital/online lives into Facebook but I would strongly suggest we avoid that temptation.

That’s too much power and as history has shown “absolute power corrupts absolutely.”

BREAKING NEWS: Facebook just sent my wife a sterile boilerplate email apology for deactivating her account. Still no explanation. My comments stand.

« Hide It

Filed Under: marketing, On Demand, SaaS, Software, Software as a Service

Raising Money From Venture Capital – Size Does Matter….(So Does Time)

November 1, 2010 By Bruce Cleveland

There are a multitude of venture capital firms (although not as many as there were a few years ago and more than there will be a few years from now) with different business models.

Some firms prefer to invest in early stage v late stage companies. Some must be assured at least 20% ownership before they will invest. Some want to lead an investment. Some only want to follow another lead investor. Some only want to follow Sequoia.

Some have large funds where they must put to work a lot of capital. Others have smaller funds where a modest success in the portolio can deliver reasonable multiples for their Limited Partners.

As an entrepreneur, you would be best served by identifying up front what type of firm you’re meeting with and the fund they are investing from or you could be wasting your time. For example, firms investing out of a larger fund and focused on early stage deals must find and invest in startups that have a reasonable chance of becoming larger companies so they can “move the needle” with respect to generating large returns.

You may have a great idea that addresses a legitimate market but if that idea is more of a single product idea or more of a “feature” v. a “company”, then a firm investing out of a large fund may elect to pass. It doesn’t mean you don’t have a great idea and a viable business opportunity but each investing partner only has a limited amount of time to devote to investing/managing their portfolio. They have to weigh the risk of making an investment of their time and money in a company that is more likely to generate a smaller return v a larger return.

What’s a large return? Well, again it depends upon the size of the firm/fund. For the larger brand name firms, we’re talking $100′s M/$1B’s. Big hits. For smaller funds, more modest returns are acceptable. If a firm investing out of a $100M+ fund can generate a 10x+ return from a $5M investment that will return half the fund. For a firm investing out of a $1B fund this return wouldn’t even begin to move the needle.

And, as a recent Silicon Valley Bank report stated, the data for the past 15 years shows that only 2 out of 10 VC-backed software start ups have been successful with a median multiple of 4x. There have been very, very few $1B+ outcomes over the past 10 years.

Another key concern for venture firms is liquidity — how long will it take for a company to grow to a reasonable size so it can IPO and/or becomes interesting acquisition candidate?

With few exceptions, Limited Partners have seen little liquidity from the venture asset class over the past 10 years and are therefore putting tremendous pressure on the GPs of venture firms to deliver liquidity. Delivering liquidity sooner v later is critical to whether or not a venture firm can raise its next fund.

So, in addition to wanting to know how big a company you think you can create, entrepreneurs need to be prepared to discuss how they will grow their company as quickly as possible.

Here’s a good example of how this plays out. SaaS is currently an extremely hot business model. The top public SaaS companies get up to an 8x multiple (e.g. CRM, SFSF) v the top traditional software business model incumbents who get about a 3x multiple (e.g. ORCL, SAP, MSFT).

However, the data suggests that successful SaaS companies take at least 7 years - with 10 years not being unrealistic - before they are large enough to consider a liquidity event (e.g. IPO). A venture firm needs to raise a new fund every 4-5 years. If a venture firm can’t show “realized liquidity” from its companies until after 7 years from initial investment, it may be tough to raise its next fund.

Also, a venture fund is typically formed and designed to wind down after 10 years. The GPs of the firm typically need to request permission to extend the fund (and to collect management fees from the fund) to manage portfolio companies beyond 10 years. If your company will be funded toward the end of a current fund and it’s going to take 7-10 years before you can expect liquidity (a typical SaaS company) then there could be pressure to liquidate earlier rather than later by your investors. So, you need to know whether or not your investor is going to hang in there with you to maximize the return of your hard work.

In summary, when you’re presenting your company to a venture firm, make sure in advance that you’re aligned with them in the following ways:

1. Your business opportunity (e.g size of market/potential size of company) fits with the investment profile of the venture firm.

2. You understand which fund the firm is investing out of; how big it is and how old it is.

As I have said before, raising money from a venture firm is an enterprise sales process. Know who you are selling to in advance of your meeting(s) and gain an understanding of what their motivations are. Don’t waste your time with firms whose funds don’t align with the goals/objectives of your company.

« Hide It

Filed Under: investment, SaaS, Software, Software as a Service, venture capital

These Aren’t Your Mother’s Cookies….

September 25, 2010 By Bruce Cleveland

There is increasing scrutiny over the use of browser cookies to track end user web behavior. The Wall Street Journal recently published an article titled, “Cookies Cause Bitter Backlash” as well as a series titled, “What They Know” which describes how companies are tracking individuals across the web in order to develop individual profiles that enable better ad targeting. In response, the more sophisticated web users erase cookies from their browsers but the vast majority of web users either don’t know how or don’t bother to erase cookies retained in their browsers.

Given it’s been possible for consumers to erase virtually all unwanted cookies, advertisers have argued to regulators that the public can easily decide to opt out of being tracked by simply taking the overt action to erase cookies between sessions. Now, however, a new type of cookie has emerged called the “Evercookie”. According to Jim Rapoza in his article titled, “The Cookies You Can’t Remove“, the Evercookie works by “…placing cookie data in several places within the browser, including the standard cookie cache, browser history, even within a specialized image file. Evercookie also utilizes new data storage features in HTML 5.” The evercookie ignores all browser requests by the end user to delete thereby eliminating consumer opt out options. You opt in simply by choosing to use the web. This has the public and regulators extremely concerned over privacy issues.

In my opinion, here is the quandary that companies and consumers are faced with: as web users we have grown to expect web content (and our consumer-based applications) to essentially be ”free”. However, companies that produce content and consumer applications have to make a profit. To date, this quandary has been resolved primarily through the advertising business model. Over time, though, we have learned how to increasingly ignore web-based advertising. Consequently, web-based advertisers are demanding increasingly better results from their ad network spend.

In response, ad networks have had to become better and better at providing demonstrable results. They are doing this by capturing more and better data about the individual and serving up ads that are targeted towards that individual based upon their behavior as captured over time.

As a result, the lowly browser cookie – which according to Wikipedia was “originally created by Lou Montulli at Netscape…as a solution to the problem of reliably implementing a virtual shopping cart” – has become the main protaganist in the nefarious plot. And, the evercookie promises to be its mega-steroid amp’d up ”super villain” cousin.

Where this all ends, it’s unclear. One thing is for certain though, advertisers are getting better and better at targeted advertising (not just via the web — look at what companies such as Invidi are doing with TV). And, as long as consumers continue to expect something for “nothing”, they can expect the hidden costs of “nothing” (e.g. privacy erosion) to increase.

« Hide It

Filed Under: marketing, On Demand, SaaS, Software, Software as a Service

Cloud Computing — You Say it Your Way, I’ll Say it Mine

August 30, 2010 By Bruce Cleveland

It’s not hard to find online commentary declaring that a particular piece of technology jargon has gone out of fashion. All too often the folks writing these posts seem more interested in being provocative rather than accurate - trying to make themselves appear to be ’ahead of the curve’.

That said, terms do go out of use, sometimes even when they still accurately describe an existing technology. For instance, every person I work with has a “personal digital assistant” – but no one uses that term.

Is it ‘Software as a Service’, ‘SaaS’, or ‘Cloud Computing’?

Recently, I’ve seen some a few posts declaring Software-as-a-Service and SaaS to be outdated terms. At the same time, the replacement and all encompassing term that seems to be the trend — Cloud Computing– is being contested. Is it a superset of SaaS (or DaaS, IaaS and PaaS for that matter)? Is it something different altogether as Joel York discusses in a recent blog titled “Hey SaaS Experts — What’s Your Cloud Computing IQ?” or Ray Wang in his post titled “Understanding The Many Flavors of Cloud Computing and SaaS“.

So I decided to look for some data to see what popular terms people are using to gain a sense of the trends. In an era when selecting the right SEO keywords can be critical to getting visibility, this isn’t just an exercise it is being au courant.

What the Numbers Say — ‘Cloud Computing’ in the Lead

Here are a few statistics, based on frequency of use over the last month:

Media (Google News)

2,164 – SaaS*
2,163 – “Software as a Service”
4,974 – “Cloud Computing”

Blogs (Google Blog Search)

18,752 – SaaS*
7,617 – “Software as a Service”
70,000 – “Cloud Computing”

Twitter (Topsy)

12,531 – SaaS**
2,632 – “Software as a Service”
23,612 – “Cloud Computing”

Searches (Google – monthly searches based on average of past 12 months)

550,000 – SaaS
246,000 – Software as a Service
550,000 – Cloud Computing

Keyword Cost Per Click (Google Adwords estimate)

$2.36 – SaaS
$7.26 – Software as a Service
$0.05 – Cloud Computing

(That last CPC figure for Cloud Computing looks suspiciously low to me.)

Conclusion

While it looks like the industry is coalescing around Cloud Computing as an umbrella term – even though there is ambiguity about its specific meaning - other terms are still in regular use, especially SaaS, which leaves people 136 characters for tweeting!

For now, I plan to use Cloud Computing as the umbrella term to include all of the following: SaaS, DaaS, IaaS and PaaS. As the industry settles on specific nomenclature, I’ll adapt. That said, whether you call it “Cloud Computing” or I call it SaaS, it all represents disruptive innovation.

Which terms are you using?

*Since this term has alternate uses, I excluded articles that didn’t also include “software” somewhere in the copy.

**See note above. There may be some “noise” in this number, since I couldn’t sensibly exclude “software” in a 140 character tweet.

« Hide It

Filed Under: On Demand, SaaS, Software, Software as a Service

Facebook is EVIL Part II

Facebook is EVIL

Raising Money From Venture Capital – Size Does Matter….(So Does Time)

These Aren’t Your Mother’s Cookies….

Cloud Computing — You Say it Your Way, I’ll Say it Mine

Is it ‘Software as a Service’, ‘SaaS’, or ‘Cloud Computing’?