Next Gen Web 2.0 applications

(via Dion Hinchcliffe)

Microsoft: Every Dollar of Piracy Costs Small-Fries Five Bucks

Microsoft released a sponsored study this morning that aims to quantify the economic impact of piracy on related small businesses in the software ecosystem and identifies sales of software licenses to pirates as a key economic opportunity for small vendors.

Titled "The Impact of Software Piracy and License Misuse on the Channel," the paper was released in conjunction with the launch of a new Microsoft site for "proactive partners" interested in helping Microsoft fight piracy. We're generally skeptical of big company claims that piracy is a sin, but we can't deny that this study is quite interesting and raises some valid concerns.

How They Say it Works

The press release issued this morning spells out some of the ways that software piracy hurts players large and small:

The velocity of sales, the life cycle of a project and the ability to fulfill contracts as negotiated can all be affected. During the course of a deployment project, for instance, consultants and solution providers may have to stop work when illegal software is discovered, or may be unable to sell their product at all upon learning that the customer's underlying architecture is illegitimate. Worse, in many emerging markets where legally licensed software is difficult even to obtain, it can be next to impossible for a legitimate partner to operate.

All hope is not lost, however. Microsoft notes that rampant piracy also represents an opportunity for inconvenienced channel partners to sell licenses!

"The flip side of this is that within those hidden costs may lie hidden opportunities in helping these customers turn their licensing situation around," said John Gantz, senior vice president of IDC. "Much of the misuse, especially in developed countries, is inadvertent. A savvy vendor can realize an opportunity by helping customers to 'true up' their licensing, realizing that every dollar saved from software pirates can translate to over five times that amount for the channel."

Is Microsoft's new strategy for dealing with unlicensed software in developing countries to deputize the good customers to sell licenses for them to the "inadvertent" pirates? We assume that would-be customers in developing countries know exactly why they are using unlicensed Microsoft software.

How the Numbers Break Down

The company's study argues that "every dollar Microsoft loses to software piracy translates to $5.50 in lost opportunity for other companies in the partner ecosystem." Those numbers seem pretty shaky to us, including would-be sales and benefits from predicted market expansion.

...for every dollar Microsoft gains from a reduction in piracy in 2008, the ecosystem that sells, services and develops products on the Microsoft platform could gain $4.37 from faster delivery and sales cycles, enhanced cross-selling and upselling, and the natural market expansion of having more legally licensed customers. In addition, the ecosystem could also realize another $1.13 in efficiencies from each of those dollars, primarily from a lower cost of goods sold, as well as lower development and testing, sales and marketing, research and development, and training costs.

While this presumes, as the music industry often does, that the alternative to piracy is purchase (instead of, for example, open source alternatives), there is some undeniable logic here - especially when it comes to efficiency if all other things remain equal.

Legitimate Concerns

We asked micro-ISV consultant Bob Walsh how these claims played out on the ground and he confirmed that they had some validity.

While the numbers are more spin than science, desktop software piracy is a major issue for small developers because it adds something like 8% to development time, a good 15% of tech support effort and can catastrophically gut sales overnight.

Walsh didn't agree with Microsoft's proposed solutions, though. "If they're serious about this issue," Walsh asked, "why don't they sign on to Apple's open source password management system Keychain and do the channel a huge favor?"

We're not sure what the solutions are; we like to cheer for the little guy and for Open Source, but we recognize that there are big advantages to developing in the Microsoft environment as well. We're not excited about the "Proactive Partners" program turning small players into deputies and sales people, either.

We like Microsoft better when they are opening up documentation for interoperability more than when they're chasing around unlicensed software users.

None the less, we find the secondary economic and development consequences of software piracy to be an interesting problem to consider. Readers' perspectives are more than welcome in comments.

(via ReadWriteWeb)

Private Company Valuations: Kleiner Perkins Caufield & Byers

Analysts at PEDC took a look at some of the deals of Q1 2008 that Kleiner Perkins Caufield & Byers participated in.

Below are the findings:

• The first company many of you must be familiar with, LifeLock, Inc. I am sure you have probably heard or seen some of their advertisements, but did you know that they raised an additional $25 MM in Q1 of 2008? Kleiner Perkins Caufield & Byers contributed approximately $6.25 MM to this Series C round. Also participating in this round were Bessemer Venture Partners and Goldman, Sachs and Company. The preferred stock was Participating Preferred with a 1.5x cap on the participation. The shares also had a Senior liquidation preference to the other series preferred. The Post-Money valuation following this round was $221,756,075.

  TherOX, Inc. based in Irvine, California, raised just under $30 MM. Kleiner Perkins Caufield & Byers participated in this Later Stage round with approximately $6 MM. Some of the other investors in this round were Integral Capital Partners, New Science Ventures, LLC, and Cross Creek Capital. The shares were Participating Preferred and included non-cumulative dividends of 8%. The team found the Post-Money valuation to be $124,912,408.

• Corventis, Inc. (formerly Amigo Therapy, Inc.) closed a series B round of $20 MM. Kleiner Perkins Caufield & Byers helped out by contributing approximately $5 MM. The preferred shares were Conventional Convertible with Pari Passu liquidation preference to the other series preferred. Other participants in this round were Mohr Davidow Ventures and Duff Ackerman & Goodrich LLC. The Post-Money valuation was $52,654,125.

  
  

After inputting the data into the Cost of Capital Benchmark tool it is seen that Corventis, Inc. came out with more "company-friendly" capital than LifeLock, Inc. or TherOX, Inc.

Keeping in mind, the lower you are on the chart, the more company-friendly the money, the higher you go on the chart, the more investor-friendly the money. If you are a company raising money, you want be lower on the chart. This is a time when it is not best to be on top if you are the company raising money.

(via PEDC)

Torrents watch out : French Government Seeks To Disconnect Pirates From All Of EU

It was in late 2007 that the French government first signed a pact with ISPs and content owners to combat piracy. Now the Sarkozy administration has proposed a continental expansion of such a system. The idea is based on the president’s conviction that the Internet should not be a “lawless zone.”

As Jan Libbenga of The Register describes the effort, the powers that be in France have put forth a concept to amend the EU’s Telecoms Package to deter illegal downloads in a way similar to the three-strike legislation introduced for the French citizenry itself. Both the national and international laws would have offending parties incur technical repercussions after having transgressed a few times. ISPs would typically have to cut access for offenders for up to a year’s time.

It’s not likely that France’s proposition will be greeted particularly warmly by all union members. Bureaucratic wrangling in the EU is also somewhat notorious for impinging on smooth passage of controversial measures. And the French government has already encountered strong opposition to its France-specific penalty legislation by the French ISP Association AFA. A panoply of anti-monitoring and anti-filtration entities, among which include the Open Rights Group claim France’s proposal “Orwellian.”

(viaMashable)

YouTube Loses to Viacom : Is this fair play

Viacom, Inc. (NYSE:VIA.B) has won a court case against Google Inc. (NASDAQ:GOOG) in the United States District Court for the Southern District of New York. Senior Judge, Louis L. Stanton ruled that Google must give Viacom private user data. This will include the IP addresses, the videos watched, and the videos uploaded by every YouTube user.

Viacom plans on using this data to prove that copyright infringement is more popular on YouTube than user-generated content. The lawsuit began in 2007 when Viacom decided to sue Google for $1 billion shortly after the search engine company acquired YouTube.

Viacom also requested for YouTube’s source code, but fortunately the judge said no to that request. The judge ruled that providing YouTube’s source code to Viacom could “cause catastrophic competitive harm to Google by sharing them with others who might create their own programs without making the same investment.”

“The court’s order grants Viacom’s request and erroneously ignores the protections of the federal Video Privacy Protection Act (VPPA), and threatens to expose deeply private information about what videos are watched by YouTube users,” stated Kurt Opsahl of the Electronic Frontier Foundation. ”The VPPA passed after a newspaper disclosed Supreme Court nominee Robert Bork’s video rental records. As Congress recognized, your selection of videos to watch is deeply personal and deserves the strongest protection.”

If Google decides to comply with this decision and not appeal to a higher court, then the privacy of all 80 million+ YouTube users are compromised. TechCrunch also pointed out that the decision made in the New York court could be in violation of federal law. What will happen next?

(via Pulse 2.0)

Firefox 3 Sets a Guinness World Record: What do you feel

I looove the Firefox. I have used it ever since its first version came out and believe strongly in its potential. I had participated in the Firefox Guiness Record to make it the highest downloaded software in a day and I have no regrets upgrading to the Firefox 3.

The browser is gr8 but i do feel the hick-up's once in while esp. when it comes to loading Gmail or some graphic sites (I guess with eventual patchups it will be THE perfect browser to use). But nevertheless, I am still fascinated to use the Firefox 3 and have only thing to say to the Firefox team "way to go guys..."

Mozilla has announced that they’ve officially been added to the Guinness World Records for most downloads in a 24-hour period. The final tally: 8,002,530 downloads of Firefox 3 on June 18th.

From Gareth Deaves, Records Manager for Guinness World Records:

“As the arbiter and recorder of the world’s amazing facts, Guinness World Records is pleased to add Mozilla’s achievement to our archives. Mobilizing over 8 million internet users within 24 hours is an extremely impressive accomplishment and we would like to congratulate the Mozilla community for their hard work and dedication.”

After ONLY TWO WEEKS the total number of downloads tops 28 million. Mozilla has published this map showing penetration around the globe:

What Microsoft/Yahoo!'s breakdown means for Internet M&A

Throughout the current Web 2.0 boom, Microsoft and Yahoo! – joined by Google, TimeWarner’s AOL and News Corp - have driven the Internet M&A market and provided exits for numerous VCs and entrepreneurs. This weekend, however, Microsoft withdrew its largest-ever acquisition bid - for Yahoo! itself.

The saga may not yet be finished, since Microsoft could renew its bid after Yahoo!’s share price deteriorates and after disgruntled investors pressure the company’s management (Yahoo!’s top two institutional shareholders are already publicly fuming about the botched deal). Whether the Microsoft/Yahoo! merger is realised or not, one thing is clear: the discussion has sidelined two major acquirers of Internet startups.

Microsoft has been an extremely active acquirer on both sides of the Atlantic, purchasing European Internet startups such as Israel’s Kidaro, Norwegian enterprise search company FAST, The UK’s Multimap, and French mobile search company MotionBridge. Yahoo! has played an insignificant role in European Internet M&A to date, but is a key player in the US.

A platform business at heart

There is now press and analyst speculation that the nearly $50 billion (€32.2 billion) which Microsoft was prepared to pay for Yahoo! will go instead towards other acquisitions. The most commonly cited target is AOL, which TimeWarner appears willing to offload and which would provide the nearest approximation of the scale in the online advertising business that a merger with Yahoo! would have achieved. Yet smaller businesses have also seen their names thrown into the discussion: PaidContent suggests that online services like Facebook, Twitter or Digg are now possible acquisition targets for Microsoft.

These latter options are unlikely, because at its heart Microsoft is a platform business, not a content business. Like other technology platform businesses, from Oracle to Qualcomm, Microsoft’s business model is to ensure the dominance of its own software by making that software an essential part of other developers’ business models. This holds true not only for Microsoft’s Windows and Xbox platforms, but also for the company’s online advertising network, which is only as successful as the money publishers make using it.

Microsoft has clear ambitions to challenge Google as an online advertising network, and though Yahoo! would also have given Microsoft the US’s most popular web portal - Yahoo! web properties are more visited than Google’s in that country - the main driver for the proposed acquisition was for Microsoft to quickly build substantial scale in the online advertising business. Microsoft’s largest acquisition to date, the $6 billion (€3.9 billion) purchase of online advertising firm aQuantive in May 2007, provided Microsoft with a foothold but left the company with nowhere near the market share of Google, Yahoo! or AOL in either search or display advertising.

Furthermore, Microsoft has already tried smaller acquisitions in the space. Besides aQuantive, Microsoft acquired a slate of advertising companies over the past two years, including Israel’s YaData; the US’s AdECN, Massive and DeepMetrix; and France’s ScreenTonic. Yet what Microsoft needs now is scale, and Yahoo! and AOL are the only two players who can provide it.

Yahoo! preoccupied

As for Yahoo!, the potential merger has imperiled the company’s status as a major Internet acquirer. Firstly, Yahoo!’s engineering culture, reinvigorated 3 years ago through a series of critical acquisitions including del.icio.us and Flickr, has been crucial to the success of its more recent acquisitions. That culture is now at risk; as Om Malik points out, morale is undoubtedly low at Yahoo!, which will make retention of key employees a problem. Despite holding $2.61 billion (€1.68 billion) in the bank, Yahoo! will face inevitable challenges and potentially lawsuits from investors over the handling of the Microsoft offer, making immediate acquisitions difficult.

The silver lining is that neither a combined Microsoft/Yahoo!, a combined Microsoft/AOL or an independent Yahoo! are truly a match for Google’s online advertising business, particularly in search advertising. Any of those combinations would still necessitate the roll-up of additional online advertising networks, such as Germany’s Adconion Media Group, as well as the acquisition of innovative providers of advertising technology, such as Israel’s Kontera Technologies or Luxembourg’s wunderLOOP. Though neither Microsoft nor Yahoo! are likely to pursue smaller acquisitions in the short term, given time either could re-emerge as a buyer for European Internet startups.

(via Library House)