broadstuff

The first patent Trading Exchange - Economist:

On May 7th the first round of a three-part fight between Oracle and Google over patent and copyright claims relating to the Java programming language ended in a decision that denied outright victory to either firm. Apple, Samsung and others are fighting over smartphone patents. Facebook and Yahoo! are at loggerheads over internet patents. Accusations abound that innovation is taking a back seat to litigation. Only the lawyers are smiling.

All of which makes this a good time to launch a new approach to trading intellectual property, says Gerard Pannekoek, the boss of IPXI, a new financial exchange that lets companies buy, sell and hedge patent rights, just like any other asset. The idea is to offer a patent or group of patents as “unit licence rights” (ULRs), which can be bought and sold like shares. A ULR grants a one-time right to use a particular technology in a single product: a new type of airbag sensor in a car, say. If a company wants to use the technology in 100,000 cars, it buys 100,000 ULRs at the market price. ULRs are also expected to be traded on secondary markets.

This is simpler, faster and cheaper than the lawyer-intensive process of negotiating bilateral licences for intellectual property, the high cost of which discriminates against small companies, leaves patents unused on the shelf and hampers innovation.

As our Patent expert, Paul Lancefield predicted quite a few years ago, this would be a natural evolution - it reduces the transaction costs of trading in a valuable yet fungible good which up to now has been traded more like a medieval princess's chastity. Lets hope that this shows a way out of the game theory impasse that is the current patent morass - more trawling than trolling.

Gizmodo on Yahoo's long and lingering strangulation of Flickr, as a case study of what happens when you get Bought by a Behemoth - from:

three years ago, of course Flickr was the best photo sharing service in the world. Nothing else could touch it. If you cared about digital photography, or wanted to share photos with friends, you were on Flickr.

To...

The site that once had the best social tools, the most vibrant userbase, and toppest-notch storage is rapidly passing into the irrelevance of abandonment. Its once bustling community now feels like an exurban neighborhood rocked by a housing crisis. Yards gone to seed. Rusting bikes in the front yard. Tattered flags. At address, after address, after address, no one is home.

How? I found this quite interesting as I've done this role from both sides. Gizmodo argues there were 3 main mechanisms:

Firstly - the Incoming Conditions set the scene

When a big company gobbles up a smaller one, often only a fraction of the money is handed over up front. The rest comes later, based on the acquisition hitting a series of deliverables down the road. It's similar to how incentives are built into the contracts of professional athletes, except with engineering benchmarks instead of home runs. Corp dev sets these milestones. They reflect the reason for the acquisition, and how the company—in Flickr's case, Yahoo—can leverage them.

Secondly, Integration takes precedence over new features

An acquisition integration team begins working immediately to make sure they are met. Typically, they're very engineering-based, designed to integrate the smaller company's product into the enormous corporate machine. And because payment schedules are based on achieving those CorpDev terms, it means both companies have a vested (pun intended) interest in putting those milestones ahead of new features.

Thirdly, Big Companies don't feed the small growing businesses - its not in their DNA

"The money goes to the cash cows, not the cash calf," explains one former Flickr team member. If Flickr couldn't make bucks, it wouldn't get bucks (or talent, or resources).

Gizmodo argues that as a result of being resource-starved, "Flickr missed boats - on local, on real time, on mobile, and even ultimately on social—the field it pioneered. And so, it never became the Flickr of video; YouTube snagged that ring. It never became the Flickr of people, which was of course Facebook. It remained the Flickr of photos. At least, until Instagram came along. The Flickr team was forced to focus on integration, not innovation".

Same Old Same Old Tale. Google and Jaiku (remember that - Twitter's competitor once), Facebook and Instagram?

And yet, and yet. I knew some of the Corp Dev people, at Yahoo at that time, I'd even worked with a few before - they knew their stuff, they knew how to structure deals that didn't strange the growth businesses they bought. And strategically the company was on board big time - as the article admits, in 2005 Yahoo made a number of innovative acquisitions, not just Flickr:

It's hard to remember, but back in 2005, Yahoo seemed like it had its game on. After losing out on search dominance to Google, it snapped up a bunch of small-but-cool socially oriented companies like Flickr (social photos), Delicious (social bookmarking), and Upcoming (social calendaring). There was a real sense that Yahoo was doing the right thing. It was, to some extent, out in front of what would come to be widely known as Web 2.0: the participatory Internet.

And looking back at Flickr stories on Broadstuff, Flickr was patenting "Interestingness" algorithms in 2006, and soon after that it limited the number of friends one could have, and tags per picture. These did not go down well at the time, we reported, so blaming errors on purely Yahoo Management only may be a bit simplistic.

Anyway the article then argues that Flickr failed in two ways:

Firstly, they didn't understand Community:

"By the time we were looking at Flickr, Yahoo was getting the shit kicked out of it by Google. The race was on to find other areas of search where we could build a commanding lead," says one high ranking Yahoo executive familiar with the deal. Flickr offered a way to do that. Because Flickr photos were tagged and labeled and categorized so efficiently by users, they were highly searchable.

"That is the reason we bought Flickr—not the community. We didn't give a shit about that. The theory behind buying Flickr was not to increase social connections, it was to monetize the image index. It was totally not about social communities or social networking. It was certainly nothing to do with the users."

I don't fully believe that fully, I saw some of the business cases soon after purchase, and spoke to some of the people. The Yahoo guys in Corp Dev understood all about Community. However, I am prepared to believe that - as in any large Corp - that not everyone else did. Questuon is how much influence did these people have?

The other problem, says Gizmodo, was when Yahoo moved Flickr to a single sign on - the idea was that signing onto Yahoo got access to all Yahoo's services plus all the other new sites thay had bought, and levearged Yahoos existing multi country sign on acpability, something that Flicktr would otherwise have had to build. But this upset the Flickr uber-users:

Although Flickr grew tremendously with the huge influx of Yahoo users, the existing community of highly influential early adopters was infuriated. It was an inelegant transition, and seemed to ignore what the community wanted (namely, a way to log in without having to sign up for a Yahoo account). This was the opposite of what people had come to expect from Flickr. It was anti-social. And it very much delivered a message, to both users and to the team at Flickr: You're part of Yahoo now.

So - simplify the product experience, integrate it with many other services, massively increase the user base - Good Result? No, this apparently is Not A Success because you have pissed off your small cadre of original users.

But in reality, all products have to go through that phase when they cross their own Chasms. I know it could have been done more sensitively (and was done in fact for other Yahoo acquistions), but I think the real problem Flickr had is noted further down in the article - Social 1.0 got blindsided by Social 2.0

By mid-2008, a year after the RegID debacle, it was clear to most everyone that Facebook was the big up-and-coming social network. What had been a plaything for college kids and high schoolers was suddenly the network your mom, your dad, your gym coach, and everyone else you'd ever met was sending you friend requests from. Microsoft was pumping money into it, and it was fast approaching 100 million users.

Inside Yahoo, which itself had a massive user base and multiple social products, some were already warning that it was going to be bypassed in social just as it had been bypassed in search.

Now, remember Yahoo tried to buy Facebook at about this time, so again its clear they knew how the land lay. They knew what was coming. But the Flickr community were 1.0 hippies, and Flickr had already had its Liquidity Event so was no longer the "cool place to go" for the hottest talent:

"Flickr wasn't a startup anymore," explains [a Yahoo] engineer, "people didn't really want to work that hard to turn the entire product around. Even if they had, Flickr [was] very techie hipster, many didn't use or like Facebook and considered it bland, boring, evil, poorly designed, etc., and were certainly not ready to fast follow it. Emphasis was put more on how things looked, and felt, rather than on metrics and on what worked.

But what finally killed their superiority was not following the Great Mobile switch:

"Flickr was not empowered to build its own iOS app—or any other mobile app for that matter," laments one former Flickr executive. "You had this external team with strong opinions as to what the app should do."

And so, after a bit more score settling in the article, Gizmodo concludes:

Flickr's mobile and social failures are ultimately both symptoms of the same problem: a big company trying to reinvent itself by gobbling up smaller ones, and then wasting what it has. The story of Flickr is not that dissimilar to the story of Google's buyout of Dodgeball, or Aol's purchase of Brizzly. Beloved Internet services with dedicated communities, dashed upon the rocks of unwieldy companies overrun with vice presidents.

As a result, Flickr today is a very different site than it was five years ago. It's an Internet backwater. It's not socially appealing

.

I don't buy this, in this case I think its uber user grumps distorting the reality-field. Lest we forget, Flickr si very much alive today, which us nore than can be said for most of the other 2005 "Web 2.0" darlings who wwre swept aside by later entrants. I reckon there was a different story going on:

1. In 2005 Yahoo knew what Social was all about, and went out of their way to buy leading "Web 2.0 v.1" companies.

2. They tried to integrate all their assets to simplify the UE and impact. It worked, but pissed off the early power users, and that on-blog whinging tends to cloud the issue and generates a lot of "Evil Yahoo" negative press even today.

3. The reality is that Flickr was a Web 2.0 v1 creation and got outmanouvred by the v 2.0 startups built on their shoulders, in the darwinian stew of any developing technology. Yahoo actually could see this. Most of the other v 1.0 companies haven't made it through the cut, not just Flickr (in fact thay have done a darn site better than many), so it is arguable they would not have made the cut if they were still independent. And virtually no pre-smartphone dotcom/web 2.0/m-commerce business has survived the New Mobile 2.0 game. Just ask Nokia. It was hit with a classic generational shift in developing technologies, like the move from propellor to jet in aircraft.

4. Yahoo by then had far bigger problems with the main business - management turmoil at the highest level, which - I know from my own experience - means decisions don't get made and Thing Grind To a Halt (the Peanut Butter of which we heard so much).

5. But despite all this, Flickr is still going strong. Its just not the 95% giant in a tiny market, its just a major player in a far huger market.

A comeback doesn't seem likely, says Gizmodo, unless its spun out.

Flickr is still very valuable. It has a massive database of geotagged, Creative Commons- and Getty-licensed, subject-tagged photos. But sadly, Yahoo's steady march of incompetence doesn't bode well for making use of these valuable properties. If the Internet really were a series of tubes, Yahoo would be the leaking sewage pipe, covering everything it comes in contact with in watered-down shit.

Flickr's last best hope is that Yahoo realizes its value and decides to spin it off for a few bucks before both drop down into a final death spiral. But even if that happens, Flickr has a long road ahead of it to relevance. People don't tend to come back to homes they've already abandoned.

Now I really don't buy this one. Facebook's IPO is going to create a Social Frenzy, and anyone with the assets Flickr has, is going to be valued pretty highly. Perish the thought that those who want Yahoo to sell it off for "a few bucks" know it full well too, and want to do a Del.icio.us play

Interesting article in the NYT "Bits" section about Facebook having an inside track on emerging trends:

When the company saw a staggering spike of Instagram photos flowing into Facebook, it knew it had to act quickly. It bought the photo service for $1 billion before Twitter or Google could make a move.

Facebook can also use its superpower to experiment with who wins and who loses online. This was evident on April 24 when Facebook started highlighting a number of apps, including Socialcam and Viddy, both new video-sharing services that had been growing modestly. Each had a few million users. Just one week after Facebook began highlighting these apps, Viddy and Socialcam had close to 20 million active users.

Now this looks partly like an "honest, it isn't a bubbletime thing" justification of the Instagram purchase, but it is true that Facebook will see emerging trends on its ecosystem first, and to an extent can drive success:

Facebook has so much power online that they have the ability to buy something at a low price and then make it go high by directing traffic accordingly,” said Jonathan Zittrain, a professor at Harvard Law School and a co-founder of the Berkman Center for Internet and Society. “Sociologically, this is called the Matthew effect, where the rich get richer and the poor get poorer.” (He notes that the term comes from a line in the Gospel of Matthew.) In other words, Facebook can create its future.

But that is true of Google search as well, so no doubt we will soon have an army of white and black (and other colour) hatted Facebook Engine Optimisers. But, as Google found, with great power comes great legislative probing:

Facebook may need to worry that competitors don’t see evidence that it uses its power unfairly. Eric Talley, a law professor at the University of California, Berkeley, said that although Facebook could be accused of market manipulation or anticompetitive practices, the company could defend itself by saying that others monitored the same data and that Facebook simply did the job better.

He said that Facebook might also have to worry that if it highlights content from companies it owns, it could face antitrust claims with the Doctrine of Tying.

Also, I think there is something that the article didn't cover - by definition, Facebook sees the world through a Facebook coloured lens. And just as a google coloured lens didn't (and still can't) clearly see social networking, a Facebook coloured lens won't see the New new things that do not use a Facebook style ecosystem.

McKinsey Quarterly article on Crowdsourcing strategy, quoting a few case studies:

One example was HCL, who opened up the Business Planning cycle from a 300 managers to about 8000 employees - results were:

One HCL executive we spoke with credited the new process with a fivefold increase in sales to an important client over two years. The key, the executive explained, was the detailed comments—from more than 25 colleagues, ranging from junior finance professionals to software engineers— that together highlighted the need to reframe the business plan away from an emphasis on commoditized application support and toward a handful of new services where HCL had the edge over larger competitors. The employees provided more than good ideas: several even helped assemble the materials the executive needed to deliver the successful proposal.

The high degree of transparency increased the quality of insights, not just their volume. As Nayar notes, “Because the managers knew that the plans would be reviewed by a large number of people, including their own teams, the depth of their business analysis and the quality of their planned strategy improved. They were more honest in their assessment of current challenges and opportunities. They talked less about what they hoped to accomplish and more about the actions they intended to take to achieve specific results.”

The detailed comments point is interesting, as it suggests the process means the "voice of the customer" or at least the front line - was not moderated by the "In the Shit - to - All is Rosy" command chain

Red Hat similarly opened up the process to more employees, and apperntly:

This effort has reshaped the way Red Hat conducts strategic planning. Instead of refreshing strategy yearly on a fixed calendar, the company now updates and evaluates strategy on an ongoing basis. Initiative leaders use customized mailing lists and other tools to receive input continuously from employees and communicate back to them via town hall–style meetings, Internet chat sessions, and frequent blog posts. The company maintains its annual budget process, which is informed by the evolving funding needs of the initiatives.

The fresh perspectives generated by the new planning process have been instrumental in spurring value-creating shifts in the company’s direction. For example, a respected Red Hat engineer used the new process to make the case for a significant change in the way the company offers virtualization services for enterprise data centers and desktop computer applications. The changes led to the acquisition of an external technology provider—a move that would have been unlikely in the days when the company used its old, less inclusive planning process.

Red Hat’s vice president of strategy and corporate marketing, Jackie Yeaney, cites three key benefits of the company’s new approach:
- First, the process generated “more creativity, accountability, and commitment.”
- Second, “By not bubbling every decision up to the senior-executive level, we avoided the typical 50,000-foot oversimplification” of issues.
- Third, “We improved the flexibility and adaptability of the strategy.”

See point 2 - that "Voice Of The Customer" thing again

McKinsey's analysis is that:

"we’ve found that the actions companies can take that are most helpful in aligning individuals with the organization’s direction are moves like “making the vision meaningful to employees at a personal level” and “soliciting employee involvement in setting the company’s direction.” If that’s right, it suggests that making more employees part of the strategy process should be a powerful means of aligning them more closely with the company’s overall direction."

I think this is misreading the lesson a bit - what is happening in the Case Studies is that the organisation is re-aligning its overall direction to what the employees are telling them about the customer base reality. I'd bet that meant some Uncomfortable Truths had to be faced in the thick carpet suite. As they note, this has big implications on who is in charge, and what Senior management looks like:

Taking these principles to their logical conclusion suggests a shift in the strategic-leadership role of the CEO and other members of the C-suite: from “all-knowing decision makers,” who are expected to know everything and tell others what to do, to “social architects,” who spend a lot of time thinking about how to create the processes and incentives that unearth the best thinking and unleash the full potential of all who work at a company.

And of course, there is always Not Listening:

Another important element of social-strategy leadership is honestly assessing the readiness of the organization to open up and, in light of that, determining the best way to stimulate engagement. This sounds simple, but overlooking it can be costly. As part of a new strategy dialogue, the leaders of one mutual insurance company enthusiastically called upon its workforce to share reflections on an innovative, soon-to-be-launched life insurance product. Despite the leaders’ expectation that the open call would generate a torrent of endorsements, it was met with a deafening silence. Closer inspection revealed that people were acutely aware of the strategic importance that senior management attached to this innovation. And nobody wanted to wreck the party by openly sharing the prevailing doubts, which were widespread. The doubts proved well founded: within a few months of being launched, the new product was declared a failure and shelved.

The Sounds of Silence.....

Fred Wilson on the changing nature of Venture Capitalism - GigaOm:

Firstly, it doesn't make money any more:

Wilson said that since the mid-1990s institutional investors have poured $30 billion into the venture capitalist business every year, but venture capitalists have only been able to figure out how to generate good returns on half of it. (Actually, venture capitalists haven’t seen that much money flowing in since 2007, according to the National Venture Capital Association, which notes the recession dramatically lowered investment.)

“There’s two times as much capital in the venture capital business today than we, the professional investors who make up the venture business, can actually put to work intelligently,” he said. As an asset class, venture capital has not beat the public markets on a consistent basis since the mid-1990s, he added.

Secondly, new money is coming in from new sources (I suspect this may be the cause of the above problem):

In the past five years, the amount of angel investment has grown fivefold and more international funding is also entering the startup sector, particularly from Russia and the Middle East, Wilson said. The growth of crowdfunding (made possible by the recently-passed JOBS Act) will further flood the startup market with new capital. If every American family gave just one percent of their investable assets to crowdfunding, he said, $300 billion – or ten times the current amount invested in the sector – would come barreling into venture capital. (That seems to be a pretty big assumption but, regardless, the point is well taken: crowdfunding stands to dump a huge amount of new money into startups.)

Fred's view of where VC is going are:

(i) Given all the new pools of funding, he said, it doesn’t make sense for VCs to continue aggregating capital. And considering the industry’s inability to generate returns on more than half of the current investment in venture capital, he added that the allocation aspect is another area ripe for rethinking.

(ii) Still, he continued, VCs, can keep on adding value as board members, advisors and resources on exits and governance.

(iii) Going forward, VCs have a few options on the table, including becoming more selective, shrinking, halting investment of instutional capital or taking more equity for the governance and advisor services they provide, Wilson said.

(iv) But one of the more compelling ideas he floated was building a business on top of crowdfunding.

“If these crowdfunding markets really do develop into these vibrant markets… maybe the answer is to leverage that capital and do something interesting there as opposed to going out and raising money from the institutions,” he said....And, as a last resort? Quipped Wilson, “We can just retire.”

Only those that were in it before 2000 can retire comfortably by the looks of it though

In his own blog, Fred notes his talk was picked up wrongly as the "death of VC"

I can assure you I never said anything about the "death of the venture capital business" in my talk. The venture capital business is not dying.

My talk was a rumination on the forces at work on the venture capital business today and the changes that may be required to remain relevant and profitable in this new world. The talk was provocative and "out there" but it was not a eulogy.

Defitely not the death. More the circle of life....seems to me that rather than a paradigm shift in VC, another very plausible explanation is that too much new money is flooding in chasing too few opportunities - in other words what we are seeing is good old Bubble behaviour as people start to become irrationaly exuberant again. Then we will have a bubble, then a burst, then it will all flood out again.

That new startups do not need the same funding as the olde style ones is a truism - but all that has done in the last few years is increase the number of boot-strapping startups in the primordial soup. You can't seem to move these days without tripping over another newly set up incubator (more shades of 1997....).

Update - just saw this from Fred Destin on Kernel - Europe is playing out differently:

European venture capital is out of favour with LPs. Even the word seems toxic: I know of one fund who dropped “venture” entirely from its pitch, focusing its messaging on “growth capital for technology companies”. Struggling venture capitalists have to first convince hesitant investors that Europe is a good place to put their cash before they can talk about the relative merits of their particular fund. It’s tough when you have to evangelise your region before you can even get into your own story.

Ironically, the best new initiatives end up relying on public money. The wonderful Passion Capital initiative is one such example. The European Investment Fund (EIF) is seen as the great white hope anchor investor you need to get. (I used the word “ironically” because during the Great Internet Bubble the EIF stood behind a gazillion regional fund alternatives, most of which produced disastrous results.)

In this case it's governments rushing in while Angels fear to tread

The Berlin TV Tower, centre of old East Berlin, harbinger of the new Metropolis


I was in Berlin to give a talk at the O'Reilly/Web 2.0 2008 Web Seminar on the risks of Freeconomics (see here) and at the time felt that it was a vibrant place for art, culture - and technology startups. So much so I spent the weekend there mooching around.

This trope came back again a few weeka go at the FT conference when the Soundcloud team (Swedes) found Berlin to be the most happening place in Europe, a mix of Silicaon Valley and Punk culture. And now here is another interesting article on the subject - Bloomberg:

Things began changing as several Berlin startups scored funding from international sources. In 2010, SoundCloud, among the scene’s biggest success stories so far, received funding that included a $10 million infusion from New York’s Union Square Ventures and Switzerland’s Index Ventures. The service now boasts over 12 million members. Other hits include Wooga, Europe’s largest developer of online social games, which last May announced a $24 million investment led by a Massachusetts VC firm. In November, Atomico, the London-based VC firm of Skype co-founder Niklas Zennström, invested $4.2 million in 6Wunderkinder, a maker of productivity apps.

Encouraged by all the interest—and the money—many Berliners have gotten startup fever. The Berlin Chamber of Commerce reports that 1,300 Internet startups have been founded in the city since 2008, 500 of them last year alone.

Vorsprung durch Technik, as they say...

So, a technology springtime in Berlin. One thing is for sure, it is a hell of a lot prettier than London's Silicon Roundabout. And cheaper.....

There is a very interesting situation developing developing with eBooks in the USA - Matthew Ingram at GigaOm sums it up well:

As expected, the Department of Justice launched an antitrust lawsuit against Apple and several of the major book publishers on Wednesday, alleging collusion and price-fixing behavior on e-books as a result of the “agency pricing” model. As my colleagues Jeff Roberts and Laura Owen have reported, three of the publishers named in the suit have decided to settle while two have chosen to fight the charges, and the states have jumped into the fray as well. The argument from publishers is that they need to be able to set prices on e-books, because otherwise Amazon will increase its monopoly and decimate the book industry. So who should we be rooting for, the giant electronic retailer or the giant publishing houses?:

This echoes an interesting debate at the FT Digital media Conference a few weeks ago, where a panel discussion was held on just this topic, Tim Hely-Hutchison, the CEO of Hachette made the following points:

- Hachette's eBooks went from 1% of sales in 2009 to 10% in 2010, 30% set for end 2012. Mainly substitution, mainly driven by black and white eReaders, kids and young adults are most vibrant market. eBook readers continue to buy print books.

- Agency model pricing (as it is called) was introduced by publishers to stop giant corporations with deep pockets giving away books as a freebie (aka Amazon et al) to sell their other stuff - the aim is to keep competing distribution channels viable.

- Alternative is wholesale model where one large player (ie Amazon) often sells at below cost, will mean one or few dominant players and the whole industry bing "pwned" by it.

- In early days consumers can't understand open v closed options, so Hachette et al have to act to save market.

- eBook prices initially went up, but are coming down now - steady decline across all countries and genre, also in UK for eg there is 20% VAT on eBooks, but not on paper books.

So you can see this as anti-trust, or as anti-anti-trust, just as easily (Adam Tinworth liveblogged the panel session over here).

Clearly the book industry is determined to avoid music's fate, and determined not to be screwed by one dominant supply chain. Now I think these disruptive technologies must be left to disrupt in part, but I hope the US DoJ looks at the "anti-anti trust" issues of handing supply to one or two dominant players, and ensures that it doesnt inadvertently tip us from Publisher oligopoly to Amazon/Apple monopoly.

But eBooks still have a bigger strategic problem in my view, around DRM and the restrictions in usage. As one panelist demonstrrted by showing a paper book with a big padlock on it (as in the picture above) and pointing out you don't own the Ebook you buy, you rent it - and you can't read it and can't share it if its owner doesn't want you to. That is going to continue to drive piracy no matter who wins.

Facebook has bought Instagram for $1bn, not bad for an iPhone mobile photo site with c 30 million users. Is it worth the money? Hell no, its not worth a tenth of it, so what is interesting therefore is why Facebook bought it, and why now. GigaOm's view is that it's to knock out a potential competitor, I think this is part of the truth but not the whole truth, as it were. But it points to the reason - the Facebook IPO.

Facebook has about 1 bn users, that is about 50% of all the current PC using internet population globally, so, into and after the IPO, where will growth come from? The other billion? Maybe, but in general those in the countries where it already exists have got it if they want it, and those who do want it but can't afford it are too economically uninteresting from an Ad-serving point of view. So the Great Leap Forward will come from mobile, and no doubt its baked into the business plan for IPO and onwards.

But, we also hear the rumours that Facebook's own mobile picture sharing service has not been setting the world alight, so they needed something better, and Instagram was that Something Better. They had to do a deal, or else the IPO Biz Plan Story was at risk, and in the Bubbletime, the timing and pricing of the IPO is all. $1bn is shocking for such a small company, but not if its seen as a core of a $100bn story, and if it can be done mainly in stock (I still don't Know the % of stock but would assume its the majority of the deal consideration)

That is the Demand side logic. Even so, $1bn?

So we need to look at the Supply side - is there anything else? Apart from a (limited) choice there is a fascinating funding story, as GigaOm reports:

A few days ago it was rumored to be valued at $500 million. A few months ago it was $300 million. Its last round — just a year ago – valued the company at $100 million. The rising valuation of the company was reflective of the growing audience it has been garnering, despite being just on the iPhone. It had reached nearly 30 million registered users before it launched an Android app, a turbo-charging event for the company.

Sounds to me there were some very savvy investors in this company, a view which is reinforced by the rumours that the last round was closed just before the sale:

Because the rumors are true, right before its billion dollar acquisition from Facebook, Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capital, Greylock and Benchmark at a $500 million valuation. The round was led by Sequoia, as first reported by AllThingsD’s Liz Gannes.

This is Silicon Valley remember, so you have to assume the people in the know (and I class most of Instagram's investors in that group), knew that Facebook needed to buy (or at least was able to make some shrewd guesses) and priced - and timed - a rare asset investment (and sale) accordingly. Facebook then has to top that new valuation, and then some to make it interesting - and Voila! - $1bn

So Facebook overpays, but gets its 100x more valuable IPO underwritten. As to the Founders staying with the company, I wonder how long their earnout period is. As an old boss of mine once observed, when you have several hundred million dollars in your pocket, Miami starts to beckon...

This Olympic's logo was an object lesson is paying vaunted professionals a lot of money for a very mediocre product, and the UK olympic strip is coming up much the same - it seems to have left out the red in the Irish, Welsh and English colours. (It is mainly blue, leading wags to point out its the only way Scotland will ever be seen to win anything. Well,the designer was called McCartney....)

Which could be bad news for the UK, because it appears that teams that wear red win more games than ones that don't - Economist:

Russell Hill and Robert Barton, two scientists from the University of Durham, who have researched the effect that wearing a particular colour can have on an athlete’s results. In a paper written in 2005, Mr Hill and Mr Barton argued that competitors garbed predominantly in red do better than rivals in other colours. After the British outfit was revealed to the general public, Mr Barton was quoted in Britain’s Guardian newspaper saying that Stella McCartney, the designer, had made a mistake in using too much blue.

In their 2005 paper, Mr Hill and Mr Barton studied four combat sports (boxing, tae kwon do, Greco-Roman wrestling and freestyle wrestling) that featured in the 2004 Olympic Games, for which contestants were randomly assigned red or blue outfits. After stripping out the effects of asymmetry, when one fighter was deemed superior to his opponent, the scientists found that contestants wearing red won significantly more fights than those in blue. If colour has no influence on the outcome of contests, reds should have won a similar number of fights to blues.

The research also looked to a lesser extent at the Euro 2004 football tournament, in which teams participated in national colours unless these conflicted with those of their opponents. Mr Hill and Mr Barton examined five teams that each used two kits throughout the competition—one red and one either white or blue—and found that all five had better results when they played in red. Although a less rigorous part of the overall analysis, this suggests the advantages conferred by red are not confined to combat sports.

And why is this - some hints from another piece of research:

In 2009, a team of German scientists working at the University of Munster found that combat sportsmen were more likely to win dressed in red than blue because of the effect on judges. During their experiment, referees watched clips of fights in which contestants’ outfits could be digitally manipulated. When shown in red, the same fighters scored better than when clothed in blue.

As the Economist points out, this stuff should be fairly well known in sporting circles so it is a missed opportunity for the UK. But thre is something depressing about the inevitability of "designers" putting form over function.

If the British do not bag a lot of medals there will be some very angry Londoners, as it wil be adding insult to the various injuries done already from wildly underestimated budgets, shutting off the transport system to commuters and more (and don't mention the limited ticketing to citizens).

And next time round, how about crowdsourcing the designs (and a lot more in fact) - costs less, involves the nation, and you will very likely also get better designs. Coming to think of it, why not this time round, its not too late to change the strip.

As with Ads and popup killers, now comes the social network privacyscrape killer - TechCrunch:

In the age of endless sharing, super cookies, social search results, and that ever-present social graph, it’s comforting to know that there are some who are still prioritizing privacy. (And a few of them are former Googlers no less!) In October 2010, Google engineer Brian Kennish created Facebook Disconnect, a Chrome extension that disables all traffic from third-party sites to Facebook servers but still allows you to access Facebook itself. The extension was an immediate hit, racking up 50K active users in two weeks (it now has 200K+), prompting Kennish to leave his job at Google to focus full-time on helping the average web user take back control of their data.

Shortly thereafter the former Google engineer launched Disconnect, applying the same method behind Facebook Disconnect to other major third-party sites, like Digg, Google, Twitter, and Yahoo, enabling you to disable data tracking while you browse.

Now collectively attracting over 400K weekly active users, Kennish tells us his privacy-protection tools ended up being much more popular than he ever expected. As a result, he decided to turn the side project into a real company, co-founding Disconnect with another ex-Google engineer, Austin Chau and consumer rights advocate Casey Oppenheim.

Doing well by doing good - it's fascinating that the company has ex Googlers and Facebookers in it. These are the sort of tools that every self respecting self-hacker should have. They have a simple "Mission Statement" too:

Personal data should belong to people, not corporations.

What is most interesting is the takeup rate - the pundits tell us Privacy is So Ovah, but the people seem to be behaving very differently. (I always thought those pundits were drunk on Kool Aid, but nice to see the evidence).

There is also something marvellous about disrupting the Big Data-mining business models of "disruptive" companies

Props to @Janetparkinson for the link