Monday, April 18, 2011

Zynga’s Mark Pincus: The Ethical Founder?

This post was also published in VentureBeat.

The social era of computing has produced three multi-billion dollar companies: Facebook, Twitter and Zynga. As light is increasingly shed on the formation myths of Facebook and Twitter, a lot of new information casts doubt on the ethics and motivations of their respective founders. It is ironic that Zynga has had no such drama, since the company’s founder Mark Pincus has been lambasted for being unethical due to what TechCrunch dubbed “ScamVille”.

Was ScamVille really a scam? There is no question that the offer ad networks like OfferPal that Zynga was using were shlocking uninstallable toolbars and illicitly signing people up for mobile subscriptions. However, numerous major Fortune 500 companies were also using scammy offers at the time, which TechCrunch itself later noted. As I have written before, TechCrunch has a repeated inclination to quash people’s reputations with tabloid-style posts. For the technology audience, “Marc Pincus is running ScamVille” is a whole lot more interesting than “1-800-Flowers, Orbitz and Pizza Hut are running scammy offers.” Many are left with the impression that Pincus is a scam artist, and the entire saga is branded ScamVille as if it were a Zynga property such as FarmVille or CityVille.

Yes, Pincus did in fact say that “he did everything horrible in the book” to get revenue. By horrible, he did not mean backstabbing people, arbitrarily chucking cofounders, and such. In fact, what he did was hustle, and hustle through one of the biggest economic downturns in the history of business. He did indeed use offer networks at the same time that they were popular with large reputable companies. He copied competitor’s games. He stole talent out of established gaming companies like EA. He replaced or demoted several executives as the company grew quickly.

The type of hustling Pincus did is now considered de rigueur for startups, with Dave McClure now stating that the perfect startup has a hustler, a hacker, and a designer.

In sharp contrast to Pincus, the founders of Twitter and Facebook are facing a continuing barrage of ethical questions. Last week, Business Insider revealed that Twitter had a largely unacknowledged co-founder, Noah Glass. It’s become apparent that while Jack Dorsey may have invented Twitter, Glass and Florian Weber were also instrumental in its creation. They could have just as easily worked on the project in their off hours and started a company on their own. Instead, they took it to the management team at the failing Odeo which was desperately looking for something new to do. It’s now reported that Ev Williams took the idea and early product, told their existing investors it wasn’t showing much promise, spun it out, unceremoniously dumped Glass, and quickly pushed out Dorsey. After those reports, Williams himself acknowledged that Glass “never got enough credit for his early role at Twitter.”

Twitter clearly stagnated without its true founders, and years later still does not properly embed photos and videos like Facebook does, and following a conversation thread is so painful that it is not even worth doing. Currently, Twitter is a primarily a broadcasting platform with very few active users. Lest I get flamed by Twitterphiles, newly returned Jack Dorsey’s plan to reinvigorate Twitter is to make it usable by normal people.

The lawsuits around Facebook’s formation keep piling up and it such a drama that it led to an award winning movie about Zuckerberg's issues with the Winklevoss twins and Eduardo Saverin. Paul Ceglia is suing since he claims he funded the company in its early days but was cut out when it was reincorporated.

So why does Pincus get such a bad rap? There is no question that Zynga seriously annoys at least some members of the Silicon Valley digerati, myself included. Zynga is a Hollywood-style, hits-driven entertainment company whose target customer lives in the flyover states. So much so that Zynga has recently added Hollywood heavyweight Jeffrey Katzenberg to its board. There has long been a battle between Silicon Valley-based platform companies and Los Angeles-based entertainment companies, and Zynga is an LA-style company right in Silicon Valley’s backyard. Copying titles? Happens every day in Hollywood, as evidenced by the recent slew of vampire movies.

I am not saying that Zuckerberg and Williams are scam artists or unethical. Zuckerberg was very young and immature. Williams was under great duress through the collapse of Odeo. You can read the accounts and decide for yourself. However, I am questioning the taint that has followed Pincus. Given what we now know, which of the three would you rather be a cofounder with — Zuckerberg, Williams or Pincus? I know who I’d choose.

Saturday, April 09, 2011

The Next New YouTube: Google’s Opportunity to Own Media

This post was also published in VentureBeat.

There’s a reason Lady Gaga recently visited Google and snubbed Facebook. The music industry is on the precipice of another huge transition from downloads to streaming, and Google has the opportunity to own this transition. It can circumvent both Facebook’s growth as a media channel and Apple’s forthcoming streaming service.

There was a time when Myspace was people’s first stop after hearing about a new band. They would immediately go to the band’s Myspace page, where they could listen to tracks, see what people were commenting, and read what the artists were posting themselves.

Now people are going to YouTube first. As the Rebecca Black “Friday” video showed, YouTube is the hands down best platform for media to go viral. YouTube is definitely right up the artists’ alley; artists can add a fun background image on the channel, see how many video views they have, post a message to their fans, and also check out what all the comment trolls are up to. A YouTube “Like” is the ultimate +1. YouTube is even music label-friendly, with its fast-growing Vevo subsidiary (which is co-owned by music labels), as it provides a monetization avenue for music streaming.

Facebook is definitely hot and there are a lot of people there. On the other hand, the interface is not artist friendly, the apps are hard to deploy, and it’s just not fun anymore. It’s a utility – “Yes, mom, I am going to Lior’s bar mitzvah." And what gets the most traction on an artist's Facebook page? Posting a YouTube video. Although Facebook and Twitter now allow posters to attach media, there is an inclination to use those viral channels only to drive traffic to a YouTube video. Then you don’t have to deal with uploading a video multiple times and you know it will work on mobile devices, since they all support YouTube. And I am writing this as someone who has run numerous Facebook campaigns for A-list artists like Lady Gaga and Black Eyed Peas.

Although there aren’t specific statistics, I think that a significant portion of Facebook’s time-on-site is people watching posted YouTube videos. Facebook used to not allow embedded YouTube videos from going fullscreen, but recently had to allow this feature since people would double click the video, go to YouTube, and likely not come back.

YouTube has made some big moves lately, buying Next New Networks to help the next generation of YouTube stars make content, taking on Netflix by announcing that it will organize itself into channels and spend $100 million on original content, and buying the rights management technology behind Netflix.

As I posted last December and is now rumored, Myspace — declining as it is — is still a tremendous property for Google to acquire. It has a lot of uniques, every media property has a presence there, and has a perspective on what people like (aka their “interest graph”) that can heavily influence drive YouTube recommendations. Even simply redirecting all the traffic from pages Lady Gaga’s Myspace page to Lady Gaga’s YouTube page would give YouTube a huge boost as a media channel.

With the new Google reorganization, YouTube is now functioning as an independent unit. It’s time to make some aggressive moves. Yes, everyone is watching Google’s every “Desperately Seeking Social” move, and buying Myspace as a social strategy could blow up in their faces. But buying Myspace at a significant discount to grease YouTube’s growth makes a whole lot of sense.

Friday, April 01, 2011

Why TechCrunch is Over

Disclosure: I write a lot for VentureBeat, a TechCrunch competitor, and over the years I have also written for BusinessWeek, AdWeek, ReadWriteWeb, CNET and InfoWorld. I write for fun, and don’t get paid, and can submit articles anywhere I like. So I have no personal gain from diminishing TechCrunch. I am simply pointing out why I don’t ever send them my content. I am in a place in my life where I can speak truth to (supposed) power, and yesterday’s shenanigans at TechCrunch prompted me to write this post.

On a bimonthly cadence over the past six months, Michael Arrington has made increasingly inflammatory posts on TechCrunch. It is one thing to take on made guys like Jason Calacanis and Dave McClure, no matter how irrational the basis. Yesterday, however, Arrington - in a vain effort to save his eroding site - seriously crossed the line and attempted to destroy the reputation of Mike Brown, a decent, hardworking guy.

The facts:

Fact #1 - TechCrunch has lost over half of its readers in the past six months.

In the last six months, TechCrunch has declined from 2.6m to 1m monthly uniques.

Fact #2 – Arrington has made increasingly inflammatory posts on a bimonthly cadence since the sharp traffic decline last September

  • September 2010 – Arrington writes that a group of angel investors getting together to discuss the state of their industry is collusion. However, in order for there to be collusion you need to have a market monopoly, and these guys' buying power is not that strong, as DST showed when they jumped into the superangel game. Angels have banded together like this for years – the first such group was Band of Angels, which did not magically materialize. It started with a group of angels getting together to discuss how they could optimize their processes by agreeing on a common set of conditions for the startups in which they would invest. This post was coincidentally put out in the midst of the steep drop in traffic and during acquisition negotiations with Aol.
  • November 2010 – Arrington writes that Jason Calacanis is insane because he is mad that TechCrunch ripped off his conference idea. Indeed, Jason Calacanis may be insane. But so is Arrington. The exact grounds upon which Arrington complains about Calacanis suing him about, he sued JooJoo about. Compare and contrast:

    Calacanis has the idea to do a conference to launch startups. He contacts Arrington to do it with him. They collaborate and do a few successful conferences together. Arrington decides that Calacanis is a prick and doesn’t want to work with him. So he does his own conference, which looks like pretty much every other conference. Calacanis says they stole his idea and sues them. Calacanis eventually drops the case and Arrington gloats.

    Arrington has the idea to do a tablet computer. He contacts JooJoo to build him one. They collaborate on tablet ideas. JooJoo decides that Arrington is a prick and they don’t want to work with him. So they make their own tablet, which looks like pretty much every other tablet. Arrington says they stole his idea and sues them. A federal judge throws out the vast majority of the case and Arrington says nothing.

    Exact same thing, huh? Except Arrington posts big emotional outbursts arguing both sides of the same coin. And ironically, both Arrington and Calacanis copied Demo.
  • January 2011 – Arrington writes that it is unethical that Engadget buys ads to feed traffic to its site. The reality is that all large content sites buy cheap ads that drive traffic to the more expensive ads on their sites. It’s called business and making money. The real issue here is that compared to Engadget, TechCrunch is a podunk site. All of the Engadget editors end up quitting within a couple of months - who wouldn't after being treated like that by a coworker.
  • March 2011 – Arrington and Sarah Lacy write a completely slanderous article about Mike Brown saying he committed insider trading. They did not bother to do basic fact checking or even ask Mike what happened about whether actual insider trading had occurred. The article was soon amended with contradicting viewpoints, but they left the insider trading title up in order to drive traffic, and throughout the next day two days are promoting the article as a top exclusive with the same title. Seriously uncool.

Fact #3 – The days of TechCrunch and Arrington being a kingmaker are over.

Yes, there was a time when if a small startup was written about in TechCrunch it would get a lot of attention and probably get funding. Those days are behind us. For example, Arrington keeps pumping up Wavii and talks about how investors are "flocking" to see the startup. Did it get funded? No. VCs are investing in companies that are actually interesting and viable, not just companies that are promoted in TechCrunch. [An edit in homage to HN] A startup is much better off getting a thumbs up from Paul Graham than Arrington.

Fact #4 – The writing on TechCrunch has gotten incredibly stale.

If not for MG Siegler (Apple fanboyism aside) and Erick Schonfeld, TechCrunch would be a content-free environment. The rest of the writing has become incredibly self-referential and stale. Paul Carr has the magical ability to consistently write articles that say nothing other than what he did yesterday. Sarah Lacy keeps writing about startups in Indonesia that no one cares about, because even startups in first world countries like France can’t seem to make it. Alexia Tsotsis has no clue about underlying technology or any context but continually injects her opinions and should instead write for PopSugar. Steve Gillmor occasionally adds a rambling grandpa perspective. Robin Wauters, Leena Rao and Jason Kincaid are all competent at summarizing the news, and even add a bit of context, but their content is no different than what you can read elsewhere.

Folks like Vivek Wadhwa, Mark Suster and Ben Horowitz contribute incredibly insightful, interesting articles to TechCrunch. Like myself, they are uncompensated and writing for fun. I think at some point these guys are no longer going to want to be affiliated with what is going on at TechCrunch and will transition their content to VentureBeat or BusinessInsider.

Fact #5 – Arrington is that special kind of prick and everyone is starting to clue in.

There are people in this world that expect to be treated one way, and treat others the exact opposite way. I have met Arrington a few times, and every time he has been unpleasant for no reason whatsoever. But if anyone slights him in even the smallest way, he flips out. The parallels between the JooJoo lawsuit and the Calacanis lawsuit perfectly illustrate this cognitive dissonance.

I hope that the Mike Brown incident, which I think will result in a libel lawsuit that Aol will have to settle pronto, will finally make this fact about Arrington known to all. Yes, it must be hard to live amidst a rapidly declining site, in the shadow of Arianna Huffington, who in comparison is a media genius that is all about making the world a better place. But why drag innocent folks like Mike Brown with you on the way down?

Update 4/2 10:50am: Yes, I have a scathing wit. I usually make fun of multi-billion dollar companies like Google and the occasional multi-billionaire, because it really doesn't matter. I feel that TechCrunch is fair game since they have been writing intensely defamatory, unfounded stuff and are now pointing their guns at rank-and-file folks. In essence, this is a taste of their own medicine. I know that Compete has sketchy numbers but it is usually right about big overall trends, and TechCrunch regularly uses Compete graphs to point out how sites are in decline. :)

Update 4/3 10:30am: TechCrunch has substantially changed their article and have made it much more balanced. However, they continue to maintain that Mike Brown violated Facebook's insider trading policies and have kept "Insider Trading Scandal" in the title. Insider trading is illegal, and what is described is not illegal. TechCrunch should replace every instance of the word "insider trading" with "internal stock trading policies." For an example of real reporting, check out this Financial Times article, which does not use the word "insider" a single time, because (1) they know how damaging the word is, and (2) they are not trying to get pageviews at the expense of someone's reputation. In other news, it was commented that I shouldn't plug my own site in this article so I removed that sentence.

Update 4/4 12:30am: And they're still at it. TechCrunch is defending the use of the phrase "insider trading" by now scoping it to the "internal rule at Facebook he broke" - I assume on advice of counsel. Then in doublespeak they acknowledge that it was perhaps a "naive mistake" and not the equivalent of "insider trading at a public company", but that the SEC will still "come down on secondary markets" because of trades like this. Huh? How about some context? It should be noted that virtually all public and private companies have no such rules for rank-and-file employees, the SEC could care less, and Arrington and Lacy can go buy Aol stock tomorrow morning if they like. When people read about the "Facebook Insider Trading Scandal," what comes to mind, an employee breaking an internal rule against buying stock, or Gordon Gecko? What gets more page views, "Facebook employee breaks internal rule" or "Facebook Insider Trading Scandal"? There is a huge difference between breaking an internal rule and breaking the law, as the Financial Times well understands, and clearly TechCrunch does not. Shame.

Update 4/22 4:00pm: Today BusinessWeek is reporting that "TechCrunch...incorrectly reported Brown...was fired for insider trading." Thank you BusinessWeek for setting the record straight. Ironic considering that Sarah Lacy got her Silicon Valley start at BusinessWeek and it is a publication with very high journalistic standards.