broadstuff

News today that Ning managed a $200m all-stock sale to Glam Media - AllThingsD:

Glam Media, a social content platform for sites primarily targeting women, said it’s buying Ning, the custom social-platform start-up co-founded by Marc Andreessen. The purchase price wasn’t disclosed, but sources close to the deal said the sale price was $200 million, mostly in stock. Glam has been eyeing an initial public offering, so shares being part of the deal is not a surprise. I had reported in August that Ning was on the block and had been talking to a number of companies, including Google and Groupon. The sale price is well below previous loftier valuations for Ning, which topped $750 million several years ago. Its venture funders have put close to $120 million into the company since it was founded in 2004.

Timing is everything, Ning was an early-generation SocNet that didn't sell at the time its contemporaries like Bebo, MySpace et al did, and has been superseded by next-generation ones. This is a face saving sale for the Ning founders and a part of Glam's "pump up the volume" of traffic pre IPO.

But this capitulation by the Ning founders also points to early signs of a deflation in The Bubble - Groupon has pulled its IPO (to be seen when it has another shot), and Facebook has now been pushed back for another year. Be interesting to see what Zynga does, given it is another of the recent Tech darlings that has recently filed a $1bn IPO.

If the last Tech Bubble is anything to go by, there will be a series of deflations like this followed by increased inflations in this one. Too early to all this deflation, but definitely a reduction in inflation.

Update - contra indications to a still infalting bubbleworld - an Incubator's Incubator! (hat tip @bobbiejohnson)

From TechCrunch itself - AOL has issued the following statement:

“The TechCrunch acquisition has been a success for AOL and for our shareholders, and we are very excited about its future. Michael Arrington, the founder of TechCrunch has decided to move on from TechCrunch and AOL to his newly formed venture fund. Michael is a world-class entrepreneur and we look forward to supporting his new endeavor through our investment in his venture fund. Erick Schonfeld has been named the editor of TechCrunch. TechCrunch will be expanding its editorial leadership in the coming months.”

But Mr Arrington is still hosting TecgCrunch Disrupt, it seems - interviewing Doug Leone from Sequoia among other activities. But as to the new Arrington vehicle, startup fund Crunchfund, even Seqoia is pointing out its a me too in the Bubbletimes - from PEHub:

Asked by Arrington if Sequoia would squeeze a new fund like his out of a round while it’s working to help shape a young entrepreneurial team, Leone said no, that if an entrepreneur thinks that “CrunchFund has a differentiated set of skills that will help you, then by all means” take its money. (It wasn’t exactly a ringing endorsement.)

Pointing out that too much money is already chasing startups, including from Europe, Russia, and the likes of Goldman Sachs, Leone then told Arrington, “You’re joining the abundant side of market, instead of the scarcity side of the market…Why you want to join [the world of venture capital] is beyond me.”

Mind you, Seqoia is itself not too pleased about the rise of the dumb money tide:

Leone tried to be diplomatic about all the cash sloshing around Silicon Valley these days, but it clearly irks Sequoia that the firm – along with all venture firms – has been painted as a later-stage investor by many seed and angel entrepreneurs, despite that it regularly makes seed investments.

Indeed, Leone said his advice to entrepreneurs is to “think of investors as your business partners” and not just in terms of “what you need over the coming months but over the next four to five years.

The role of the incubators, accelerators etc etc is to now manufacture enough startups for all the sloshing money to be thrown at. Maybe the next Arrington business should be a Y-Crunchinator?

Google has bought food review business Zagat - ZDNet:

Google on Thursday acquired Zagat in an effort to bolster its local products with the restaurant rating service. More notably is that Zagat is a content company.

In a blog post, Google said that Zagat will “be a cornerstone of our local offering.” Zagat is best known for its original reviews and rating service.

There are a few key elements to the Zagat purchase:

- Google will build out its local coverage and have reviews in more than 100 cities.
- Google is showing that it may actually have to own some content instead of merely aggregating it.
- As Robert Scoble noted, Zagat’s reviews are social friendly and play in with Google+.

Earlier this year, Google ran afoul of Yelp. Yelp argued that Google was importing its user reviews on the Google Places page and not providing any link love. Google later removed external links from its Places page. The Federal Trade Commission is also poking around Google’s actions and whether it favors its own sites over others.

That says it all about why Google may have done the deal really, but the reason I'm even writing about this post is a few years back we were asked to do a study of what Zagat could become in a social media setting and who it may be sold to, and for how much, but I never dreamed Google would be the one to buy them as it made no sense (at the time) that Google would be a content owner. (Our client was not Zagat, but wanted to interest Zagat in a potential transaction - and this was not them as far as I know). ZDNet asks the right questions:

- Will Google keep Zagat’s pay wall? Probably not.
- Will Google maintain Zagat’s guide publishing business?
- Is this Zagat purchase the beginning of a series of content moves for Google? Google’s timing is notable given the struggles of both AOL and Yahoo of late. Both AOL and Yahoo are building out content to differentiate themselves from Google. Now the search giant enters the content game via Zagat.

Even so, with opening up the reviews and sticking ads against them, this is not really going to move the Googleneedle. Zagat is not the quite Huffington Post, or even TechCrunch.

So despite the purchase and the above justifications and possble strategic plays, does it make sense that Google is a content owner now? I must say I'm still not clear why Google would want to be a content owner, it's a whole different culture and business model compared to being an aggregator, especially for a search based one. It ws very fashinable in teh Muiltimedited Mid 90's, everyone talked about being "Gatekeepers" to content and extracting "surplus value" - a bkit like medieval castles on large rivers. Ironically it was Google that broke this content/aggregation model by allowing neutral searches on the open web.

The argument clearly is the "Social" changes things, but we didn't see it at teh time we did the study, and don't see it now. Twitter and Facebook point to content outside themselves all the time, both can give me a restaurant review in a few seconds if I ask (or search them), and there are umpteen free startups out there already.

One to watch, but at the moment I am scratching my head.

I was about to write down my thoughts about what happens now that Mr Arrington is no longer with TechCrunch*, until I saw Fred Wilson had written down pretty much what I would say - and even stolen the title I would have used . So, why write anything myself when I can plagiarise use Fred's words:

The media has had a lot of fun over the past week watching AOL, Huffington Post, TechCrunch, and Mike Arrington figure out how to move on. I feel badly for the TechCrunch crew including MG, Erick, Sarah, and many others. They are awesome at what they do and I feel that they've been left dangling as this soap opera has played out.

I do not feel badly for Mike. He's a bigtime player in silicon valley and he will be fine. Contrary to what many in the media say, he does not need TechCrunch as a platform to be influential. He is influential becuase of who he is, not where he writes. His reputation is made and as long as he finds his next platform, be it a venture fund, a blog, or both (how can anyone have both a blog and a venture fund????), he will remain a hugely influential force in silicon valley and tech.

But TechCrunch is a big question mark. If AOL can keep the rest of the team together, then TechCrunch has a bright future. No company is so reliant on one person that they can't survive that person's departure. But if others move on, including the people I mentioned above, then TechCrunch could lose its swag, as my son would put it. Yes TechCrunch gets scoops. That happens because it has a huge audience of the right readers and people in tech choose to leak to TechCrunch to reach that audience. But TechCrunch also has a voice, a swagger, a "fuck you" attitude that comes from Mike. That can also live on without Mike if AOL allows it. They need to keep the remaining team, the voice, and that attitude if they want to remain at the top of the world of tech media.

I also wonder what will happen to the European assets in the business, I think TC UK has been a good force over here.

Fred also alludes to the thing I have always really liked about TechCrunch, and in my opinion is a real jewel in its crown - Crunchbase:

There's also a super awesome asset inside TechCrunch that doesn't get much attention. It is Crunchbase.....Crunchbase, which is free, almost open, almost peer produced like Wikipedia, is fantastic. Whatever happens to TechCrunch AOL, please don't mess up Crunchbase. It is the premier data asset on the tech/startup world and an incredible example of how free beats paid in the online world we live in.

I also feel it is incredibly valuable, and if correctly used is (IMO) longer term worth more than TechCrunch the Blog - as many have pointed out, there are so many others doing what it does now.

*At the moment. The lady has yet to sing the death aria......

GigaOm notes that firing Carol Bartz is not nearly the whole problem, its goes deeper than that:

There is one place Yahoo can easily finish first: the company with the worst and most ineffectual board with the spine of a centipede. I have not been a fan of Yahoo’s board for a long time and nothing really has changed my mind. Even before the firing of Carol Bartz, Yahoo’s board has been taking actions befitting a coalition government. Yahoo’s stock performance only proves that fact. From a high of $33 a share in October 2007, Yahoo is now down to $13.50 a share.

I agree...I think Bartz has been made the scapegoat (sure, it comes wuth CEO territory) but getting a new CEO is not going to fix the problems of a company stuck in the peanut butter. There 's lots of talk about M&A, new businesses, back to basics etc etc - but only a mass transfusion of new blood at the head will work now.

In my opinion, of course....

Update - seems to be Carol Bartz's view as well

Ousted Yahoo CEO Carol Bartz has given an exit interview with Fortune magazine’s Patti Sellars, in which she says about Yahoo’s board of directors: “These people f*#&ed me over.” She also called them “doofuses.”

This has been an entertaining week....

In a post earlier today we noted that the problem with a blog like TechCrunch is that its Economics will conflict with Ethics, most specifically the Ethics* of being part of of a large corporate - "Fast and Loose" is great for a small independent organ, not so good for a slow and tightly run large media empire. When you are a small organ you can both write about, and invest in, the same companies. You can't as part of a large corporate media empire. Michael Arrington, TechCrunch founder, has pretty much laid this dilemma out in a post on TechCrunch in what looks a lot like an ultimatum to his acquirers:

We’ve proposed two options to AOL.

1. Reaffirmation of the editorial independence promised at the time of acquisition. Given the current circumstances, that means autonomy from Huffington Post, unfettered editorial independence and a blanket right to editorial self determination. To put it simply, TechCrunch would stay with Aol but would be independent of the Huffington Post.

or

2. Sell TechCrunch back to the original shareholders.

If Aol cannot accept either of these options, and no other creative solution can be found, I cannot be a part of TechCrunch going forward.

AOL are unlikely to be able to do (1), for 2 main reasons:

- They are a large corporate and a great, rich lawsuit/hate campaign target for any pressure group they upset, so allowing their Tech organ to effectively look like a DotCom style market analysis business for it's Editor's investment fund is a PR disaster and maybe a legal one. Remember Henry and Mary and all that from last time round - the resulting scandal made the SEC force banks to drop doing both analysis and sell side activities in the same unit and pay large fines ( Purely out of goodwill, of course ).

- Even worse, AOL are co-investors in this same startup investment fund run by Mr Arrington, doubling the conflict of interest complications

For these reasons the financial and legal risks are probably too large to give TechCrunch pure editorial independence, especially now.

Option (2) is quite hard as well - If they sold it back so soon after buying it, at a loss, they would looks like fools and no doubt prompt all sorts of questions about their management competence. Senior heads would roll. If they tried to sell it for more, who would buy?

This is a real sign of the Bubbletimes, this whole brouhaha wouldn't be happening without the silly money now being thrown at Silicon valley technology startups, and all who sail with them. In fact one wonders why TechCrunch sold to AOL when it did (Sep 2010) as the Bubble was already evident (we opened our Bubblewatch section in April 2010) but to be fair it was only visible to geeky trend watchers like us - the really obvious froth only started about February 2011 (this year) after AOL bought HuffPo. One imagines a certain amount of D'Oh at TCHQ soon after that

In our early post we pointed to the interesting insight into the economics of a Tech blog that the TechCrunch datasieve is opening up, but putting the backroom negotiations on the front page is a new one on us old M&A hands too. And given that that post has set the scene for this one, we do now turn a slightly quizzical eye at the alleged independence Messrs Siegler and Carr claimed they have

In that post, I also commented on Stowe Boyd's point that this was looking like a tragedy like Titus Andronicus and wondered it was not a tragedy or even comedy. I am wondering now if this is more the Theatre of the Absurd....and here we all are in the front row.

*Please note - When we talk about Ethics here, we are not talking about Morality - we are talking about What Gets You Flamed/Sued/Fined/Incarcerated.

There have been some interesting behind-the-screens revelations of TechCrunch's modus operandi as it implodes (or whatever its doing) - MG Siegler:

First and foremost, the concept of an “editor” at TechCrunch is essentially just a title and nothing more. Generally speaking, neither Mike nor Erick (TC’s two “co-editors”) are overlords that dictate what everyone else covers. With a few exceptions (mainly for newer writers), no one person even reads posts by any other author before they are posted.

Traditional journalists may be appalled to learn this. But this is a big key of why TechCrunch kicks their ass in tech coverage. We’re fast and furious in ways they can’t be, because they’re adhering to the old rules. Are there benefits to those old rules? Sure. But in my opinion, the benefits of the way we work far outweighs the benefits of the way they work.

If you want a more objective take, simply look at the number of tech stories we’ve broken over the years versus the number any old school publication has. Our system works.

And it works because instead of a reliance on top-down management and editing, the emphasis is on hiring the right people. TechCrunch works because we’re a bunch of driven reporters with great instincts that excel at working independently. Sometimes junior writers hone those instincts by watching senior writers and asking questions. And there is plenty of good, healthy collaboration. But for the most part, it’s very a much a trial by fire — only the strong survive.

.....

Mike certainly could have that power if he wanted it. Again, he is the creator and the driving force behind the site. But he’s smart enough to know that the site wouldn’t function as well that way.

Instead, he sits back and lets the rest of us do what we do. Again, he’s hired extremely well. He knows we’ll kick ass without any oversight from him. In fact — and I think he’d be the first to admit this — sometimes any guidance from him can be a distraction. “Hey did we hear about this?” “Yes, Mike, we covered that two weeks ago.” “Oh. Okay. Carry on.”

Then Paul Carr (apparently writing at the same time as MG above, apparently unknown to each other)

For one thing, TechCrunch writers edit and publish their own stories. We don’t have a morning editorial meeting in which Mike — or anyone else — signs off on stories; we don’t have an editorial work flow at all in fact. Generally speaking, Mike doesn’t see stories until they appear on the site and if he has any input on what’s written it’s given after the fact. I have never, ever known Mike to tell even the most junior writer what line to take on a story. A personal example: I once wrote an extremely negative post about a company in which one of Mike’s friends is a significant investor. I heard nothing from Mike when I posted the piece. It was only months — literally months — later that he mentioned to me in passing how many calls he’d received complaining about the piece and demanding that he “do something” about me. Mike had laughed them all off: he doesn’t interfere with his writers.

Low Overheads, Low Cost Management and Low Cost writers (I don't know how much the writers are paid, I'm assuming they are mainly on freelance rates) - a lesson in Economics for the serious News Organs if ever there was one.

But it doesn't come without risks, and I think they are around what Stowe Boyd calls Linelessness, in that the New Media does not accept the invisible lines of the Old....

Even at a old school bastion of journalism like the NY Times, editors and authors have to pick what stories to follow, out of the infinity of potential stories in the universe. There is no infallible, objective mechanism to pick stories, one that is fair and unbiased in some truly general and provable sense. The reality is that all organizations (and individuals) have to settle for extreme approximations of what a hypothetically unbiased approach to news coverage would produce, if such a thing actually existed.

Arrington’s heresy in all this is the simple fact of owning stock in the companies that he and others at Techcrunch are covering. This was old news years ago, when Mike was a small entrepreneurial blogger, and even later as the head of a go-go tech blogging company. But now that AOL has purchased TechCrunch, and then invests in CrunchFund, old school media takes another look and cries foul.

They cry foul for good reason, as in the past you can quote examples ad infinitum where if the analyst and the investor are on the same side of the Chinese Walls*, you get very biassed advice ( Dot Com coverage anyone?) and over time, this destroys reputations and businesses. That is one sort of risk for an independent fast and loose blog to take (TechCrunch), but not for a slow and tightly managed wannabee major media (aka sue-able) empire (AOL/Hugffington/etc). As Stowe points out though, this brouhaha is all the product of the Machiavellian cocktail of greed, power...and fear of missing out on the Bubbletime.

it wasn’t journalists that created Arrington, but the tech scene: a tight-knit, self-absorbed community of investors, entrepreneurs, and wannabes, all desperate for ink, share-of-mind, and a chance for the brass ring. So many hanging on every word printed in TechCrunch, trying to get written up, hoping for a leg up in the steeplechase that is the central animating goal of the tech scene.

Maybe the deep libertarianism of the West Coast tech scene is a factor here, also. The ideology that the elite should be allowed to do whatever, and that there is no need for regulation or lines.

So - some predictions from the lessons of TechCrunch - the New Economics clearly are the future, but the Lineless New Ethics may not prove to be quite so stable. Stowe again:

But in the current TechCrunchgate, the lines aren’t about illegality: this is a story about identities, and the communities that create them. An identity conflict, a culture conflict, and one that might end with a truly Shakespearean close, like Titus Andronicus, with nearly all the dramatis personae lying in a heap on the stage.

All the world is a stage, but whether this is just another drama, an unfolding tragedy or a bit of comedy remains to be seen.....

*Update - please note When we talk about Ethics here, we are not talking about Morality - we are talking about What Gets You Flamed/Sued/Fined/Incarcerated.

One of the things we write about every so often on here (and were therefore sufficienly motivated to co-write the Big Potatoes Innovation Manifesto) is that Innovation has been morphed in the current corporate climate to mean "continuous improvement" at best, and "don't-rock-the-boatism" all too often (see Innovation - What innovation for starters). Now, some research from Cornell (The Bias Against Creativity: Why People Desire But Reject Creative Ideas) shows that as a species we may be culturally adapted against Innovation and creativity it seems.

The next time your great idea at work elicits silence or eye rolls, you might just pity those co-workers. Fresh research indicates they don't even know what a creative idea looks like and that creativity, hailed as a positive change agent, actually makes people squirm.

"How is it that people say they want creativity but in reality often reject it?" said Jack Goncalo, ILR School assistant professor of organizational behavior and co-author of research to be published in an upcoming issue of the journal Psychological Science. The paper reports on two 2010 experiments at the University of Pennsylvania involving more than 200 people.

The studies' findings include:

- Creative ideas are by definition novel, and novelty can trigger feelings of uncertainty that make most people uncomfortable.
- People dismiss creative ideas in favor of ideas that are purely practical -- tried and true.
- Objective evidence shoring up the validity of a creative proposal does not motivate people to accept it.
- Anti-creativity bias is so subtle that people are unaware of it, which can interfere with their ability to recognize a creative idea.

For example, subjects had a negative reaction to a running shoe equipped with nanotechnology that adjusted fabric thickness to cool the foot and reduce blisters.

To uncover bias against creativity, the researchers used a subtle technique to measure unconscious bias -- the kind to which people may not want to admit, such as racism. Results revealed that while people explicitly claimed to desire creative ideas, they actually associated creative ideas with negative words such as "vomit," "poison" and "agony."

The lesson for companies that want to take advantage of creativity and real innovation is that teh problem not fostering it, but making sure it isn't strangled at birth.

"uncertainty also makes us less able to recognize creativity, perhaps when we need it most," the researchers wrote. "Revealing the existence and nature of a bias against creativity can help explain why people might reject creative ideas and stifle scientific advancements, even in the face of strong intentions to the contrary. ... The field of creativity may need to shift its current focus from identifying how to generate more creative ideas to identify how to help innovative institutions recognize and accept creativity."

Now, I always felt this was the actual case. I think that too often, fighting this problem is too hard as it is institutionalised in most heirarchies, and is a classic "ekephant in the room" - so Creativity Consultants find it easier to sell a comfortable project on "fostering creativity" than a hearts and minds change program based on culling their clients' ability to stop the dangerous mavericks in the business.I never saw companies where there were no creative people - but I don't think I'm the only one who has observed in their corporate careers that the Power of No is an endemic problem - here's Machiavelli on the subject in the 1500's pre-saging a host of 20th century Business Sages:

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries … and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it.

QED as they say. Nice of Cornell to put the academic verification in 500 years later

Something is in the air at TechCrunch:

TechCrunch is on the precipice. As soon as tomorrow, Mike [Arrington] may be thrown out of the company he founded. Or he may not. No one knows. And if he is, he will be replaced by — well, again, no one knows. No one knows much of anything. Certainly no one at TechCrunch. This site is about to change forever and we’re in the total fucking dark. I’ve been able to piece together little bits of information here and there, and it’s not looking good. Hence, this post.

By now, if you read TechCrunch, you likely know about the nuclear situation that has exploded over the past several days. Mike unveiled an investing entity known as the “CrunchFund” with full AOL support — so much support, mind you, that they’re the largest backers of the fund — only to have his legs kicked out from under him due to what can only be described as nonsensical political infighting and really poor communication. To make matters worse, some Journalists (with a big “J” and even bigger senses of entitlement) have proceeded to pile on, despite having no real knowledge — at all — of the way TechCrunch actually works. And now here we are.

The only thing that surprises me is that anyone thinks you can (i) sell to AOL and then (ii) "pivot" from writing about, to investing in, startups without major changes.

It's a Bubbleworld brouhaha, as it means the money flooding into funding flimsy startups is higher than the money going into talking about them. The old Gartner Hype Curve says it all - when a market moves from talking about some new new thing at conferences to actually investing serious money in it, its getting to the top - the "Peak of Unrealistic Expectations" - of the hype curve.

Its business as usual on BubbleWatch, as AOL/TechCrunch's Michael Arrington starts a startup fund:

Mr. Arrington is starting a venture capital fund to invest in the start-ups that TechCrunch covers.

The $20 million CrunchFund is financed by AOL, Mr. Arrington’s employer, and by many of the top firms in venture capital — including Sequoia Capital, Kleiner Perkins Caufield & Byers and Greylock Partners — which Mr. Arrington also covers on TechCrunch.

Nothing like a conflict of interest there......but so far, so predictably bubbly (In fact he's a bit late to the startup fund party, see our Bubble-O-Meter above - but the more the merrier in Bubbletimes)

And yet, there is also this interesting aberration - Analysts are calling Groupon overvalued, the bounders - PE Hub:

In one of the nicer reports to be published about the daily deals company in recent weeks, Benchmark Co. analyst Fred Moran told Reuters that he considers the company’s oft-cited valuation of $25 billion “very high.”

This morning Henry Blodget of Business Insider jumped into the fray, defending Groupon from the many slings and arrows it’s been taking by writing that the company “can make money – but it won’t be easy.”

Well, that's Henry for you, ever the optimist...but it is interesting that a DotCom II darling is actually being called OverValued. Sarah Lacy thinks its because essentially they Werent Invented In the Valley. I think its because they are overvalued.

What will be interesting is to see if this new crop of analysts have a pop at some other overvalued IPO's in waiting......We have a sniff that step 6 is starting, but Step 7 in the Bubble-O-Meter may be delayed a bit!