Numbers of the day: 9 years ago, there were 2 million pay phones throughout the US.

Today, mainly thanks to cell phones (though neglect is also a factor), there are only about 1 million working pay phones (source: Newsweek).

What’s the next industry ready to be disrupted? It’s already well underway in TV, real estate, and even ice cream…

• Startup Review. Nisan Gabbay of Sierra Ventures recently launched a new blog that features weekly case studies of successful internet startups. For each, he will interview members of the management team and/or investor group. His first case is on Craigslist–check it out here.
• OnStartups.com. Dharmesh Shah, CEO of HubSpot, writes about software startups. He has a great, readable writing style and tends to offer very practical advice (ie the top six questions you should ask before joining a startup).
• Ben Casnocha: the blog. Ben founded Comcate, a provider of CRM software for local governments, when he was 14–he recently graduated from high school. On his 18th birthday, he asked his blog readers to describe something they did that they regret or something they didn’t do that they wished they had. The responses helped Ben to decided to take time off before college to travel the world, which he’s now doing–and blogging. He has interesting insights and his blog is a fun read.
• TED Blog. TED is an annual conference in California focused on technology, entertainment, and design. Recently, they posted video clips of many of last year’s speakers (link here)–these are worth a look. Similarly, the TED blog highlights related ideas.
• Creating Passionate Users. This is a group blog (meaning it has multiple authors) focused on the brain and metacognition–in particular, “how the brain works and how to exploit it for better learning and memory. Oh yeah, and how to recognize when someone else (including one of us) is applying brain-based techniques to get you to do something.”
• Chartreuse (Beta). Prince Campbell covers internet media properties, including social software, blogging, podcasting, videocasting and related technologies. He’s a tremendously creative thinker; his latest project is to sponsor (with $1000 of his own money plus sponsorships) a team of two to travel to New Orleans to investigate the current situation there.

What are you reading?

Building a strong brand takes time and money. The payoff is that customers who correctly understand and appreciate a company’s brand proposition tend to be more loyal, less price sensitive, and more willing to serve as evangelists. Still, many companies repeat a set of common mistakes. In particular, here’s what I’ve seen:

• Product messaging doesn’t match customer expectations. There are two main issues here: quality and readiness. The key in both cases is to deliver the level of service that the buyer expects. It isn’t necessary to offer the most functions or best performance–in fact, going for the lower-end of a given market may be a good move–but almost everyone has seen companies get into trouble when their product claims diverge from reality. Big companies have a few key disadvantages here. Think about Microsoft: almost any product they release is immediately scrutinized with significant press coverage. If that initial launch isn’t fully what they have proclaimed it to be, many potential customers will hear about it. Even if meaningful improvements are made later, the first impression can be hard to shake. Interestingly, Google has tried to retain a startup-like feel by leaving certain products in a nearly permanent beta stage, perhaps trying to condition customers to expect bugs and incomplete features; I don’t think it works, though, as the term has nearly lost its meaning and, in any case, even beta launches from Google receive tremendous coverage. Startups, simply because they have fewer customers to lose, can more easily launch incomplete products, get feedback, encourage community involvement, and then make rapid incremental fixes. Even if an initial launch is badly flawed, only a small number of customers will know–and such early-adopter customers will likely be forgiving. I think a generally sound approach, where possible, is to clearly and publicly state product release intentions and timetables. The folks at Automattic do a great job of this with Wordpress. For example, they (like many other open source companies) expose their product roadmap, including outstanding issues. Anyone can easily see exactly where the product is and make their plans accordingly.
• Unclear product or market positioning. Who is the target market, and how would you like customers to view your company? Too many companies try to be all things to all people; doing so is generally a recipe for failure. Unclear positioning is an especially important issue in crowded market categories, like online calendaring. For example, take a look at 30Boxes, Airset, CalendarHub, Kiko, and Google Calendar. Experts may appreciate the relatively small differences between the various alternatives, but will most mainstream customers? Given the number of alternatives, my guess is that most new users will look either for a particular feature (ie integration with a particular application) or a trusted brand. Without either, customer acquisition may be difficult.
• Over-reliance on one marketing channel. Sometimes companies depend too much on a single method of customer acquisition or interaction. In practice, it’s usually best to employ a mix of tools because the underlying drivers that determine each method’s effectiveness will change over time. For example, buying Google keywords may initially be a good customer acquisition tactic. If relevant keyword pricing increases, then it may make sense to increase efforts elsewhere, say in email.
• Unclear or confusing branding story. Startups have a huge advantage over large companies here because a startup’s story is generally relatively more simple. Compare Feedburner vs. AT&T. Feedburner’s mission is simple: they help bloggers, podcasters and commercial publishers get more value from the content they create. That in mind, their company name, goals, products, and messaging are all consistent and clear. AT&T, on the other hand, has a much bigger challenge, as they offer hundreds of unrelated products, all sold across the globe. Their slogan: “Your World. Delivered.” Can someone tell me what that means?
• Short-term investment mindset. Sometimes it may be appropriate to invest heavily in branding, even if doing so means sacrificing immediate profits. Vonage is an interesting case in point. As I’ve written about earlier, for the nine months ending 9/30/05, the company spent about $176 million on sales and marketing despite a net loss of $189 million. Clearly, if the team were concerned solely about short-term profits, they would slash marketing expense; instead, they’ve continued to spend in order to attract new customers in the hopes of a better long-term story (we’ll see how it works out; I think they need to fix their churn problem, which will likely demand solutions unrelated to marketing spend). Clearly, most startups can’t (and shouldn’t) raise capital like Vonage has. On a smaller scale, though, the point is the same: sometimes it makes sense to invest aggressively to build or expand a company’s foundation.
• Internal disagreements or mixed messages. It isn’t easy to reach a point where all employees share a common understanding of a company’s overall message and are willing to deliver it. It’s worth getting there, though, as hearing conflicting messages from people at the same company is incredibly annoying. Again, startups have a significant advantage. Compare 37 Signals vs the airline industry. 37 Signals delivers a relatively small number of products, and the message for each is clear: “join us and say goodbye to bloated software.” Indeed, their products generally have fewer features than competitive offerings, the team writes a blog about simplicity, and the team frequently speaks about doing less rather than more in software design. The airlines, on the other hand, are quite a different story. Despite a veneer of marketing friendliness (“fly the friendly skies of United”, “we’re American Airlines, something special in the air,” etc), the reality is that airline employees are generally terrible at actually delivering that message. In part, this is due to problems beyond their control: ticket pricing is opaque, frequent flier miles are difficult to redeem, etc (my sense is that many airlines rely more on route exclusivity than on product or brand advantage for their competitive advantage, but this is another story). But when airline employees send a signal other than the marketed message, there’s a problem. As a result, when a new competitor arrives (eg JetBlue), customers tend to be quick to leave–and there’s little incentive (beyond increasingly worthless frequent flier miles) to return.
• Other general inconsistencies. Clearly, it’s appropriate for a company to respond to changes in the marketplace by altering strategy. However, when a company makes a complete about-face, it takes more than words to build credibility. For example, consider Microsoft’s changing approach to open source. In 1998, Microsoft produced a series of so-called Halloween Documents identifying open source in general, and Linux in particular, as major threats to Microsoft’s market position. In 2001, Steve Ballmer famously described Linux as a “cancer” (he was making a questionable assertion about Linux’s GNU GPL license). So far, so good–companies are entitled to pick their enemies. However, in 2002, the company’s VP of the Windows Server Group, told reporters that “[Windows] can be open source. We love the concept of shared source” (emphasis mine). Yeah, right. Few people bought the idea that Microsoft started truly believing in open-source; rather, the statement was a transparent move to address customer concerns and respond to steady improvements in open source software packages. By starting at such an extreme position in the first place, and then doing a complete about-face without first demonstrating a true commitment to open source by its actions, Microsoft hasn’t succeeded in aligning itself with the open-source movement–in fact, some would say that they continue to have little credibility in that realm.

That in mind, I was excited about BarCampNYC, an “unconference” designed in a fundamentally different way than most traditional conferences. The utopian-sounding idea is for everyone to share and learn in an open environment. There are a few rules:

1. Anyone can attend (for free).
2. All attendees are expected to present a panel on a subject of their choosing. Presentations are scheduled on the day they happen.
3. After the event, attendees are asked to share their presentation (typically by posting it to a public wiki).

In practice, the event worked better than I expected. People showed up on a Saturday morning; an hour or two later, the presentation schedule was completely full. Session topics were timely: several attendees demoed new companies (ideashrub, Feed Pile, Simpy), others built or presented apps based on various technologies (Drupal, Flash, Lucene, Ruby, Wordpress), while some discussed interesting concepts (including how to subvert social networks–I may write a separate post about this). Most important, there was plenty of time for people to talk, share ideas, and make connections.

Of course, behind the scenes various people did a great deal of work to ensure that the event ran smoothly. Amit Gupta, who led the organizational efforts, posted a good recap on the event’s nuts and bolts.

You can find a calendar of upcoming BarCamps here. If you live in a location where a BarCamp hasn’t yet been scheduled, why not start one yourself?

In particular, we’d like to find a chief architect (LAMP expertise important; knowledge of Ruby, Python or Drupal nice to have) and a lead designer (with strong CSS, UI and online graphic design skills). The right candidates will be knowledgeable and excited about emerging media platforms, social networks, syndication and web services–though what we’re doing doesn’t fit neatly into any of these categories.

NYC location preferred but not necessary.

If you’re interested or you know someone who might be, send me an email.

Watch the video; it’s hard to understand without seeing it…

For more, check out the inventor’s home page.
(via trap17)

Google, for example, is apparently hiring about 10 people a day. To do so, the company has increased the size of its recruiting team to about 300 (compared to the 355 recruiters working for Microsoft) and now doles out restricted stock units (which, unlike options, retain value even if stock price tanks). Since the beginning of 2005, according to the article, Google has awarded about 500,000 such shares with a total value of about $200 million.

My sense is that the talent wars will continue for some time. Market growth in many sectors is strong, and there are plenty of untapped opportunities.

Many people ask what the impact of all this will be for startups. While there are obvious challenges (how can a small company compete for a great engineer when she has a million dollar offer from Google?), I think the talent wars will be an eventual boon for startups for a few reasons.

First, GAMEY (Google, Amazon, Microsoft, eBay, Yahoo, etc) provides a great platform for learning how to build a successful technology company. Many current GAMEY employees will eventually leave and either join existing startups or launch their own; either way, these employees will bring valuable networks and lessons learned. Second, GAMEY’s tremendous and well-known success has, to a large degree, reduced the stigma of working for a technology startup. Immediately post-bubble, this was often no small problem. Many talented, but risk averse, people chose to find employment at “safe” (ie non-technology based) companies.

Also, I think the talent wars will be good for cities outside of the Valley, as companies look elsewhere to find smart people. It’s already possible to stay connected and contribute from almost anywhere in the world. On a small scale, this is already very clear in the blogging world–some of the best commentary comes from places far from California. For example, Andrew Carton’s Treonaut.com is based in London, Richard MacManus’s Read/Write Web is based in New Zealand, etc. Similarly, I think we’ll see an increasing number of important startups based outside of the Valley over the coming few years.

While most of us fully understand both the theory underlying investment bubbles and the potential for wealth-destruction, human behavior is such, it seems, that we often can’t avoid getting into bad situations. Of course, it’s hard to recognize a bubble until it’s too late–after all, perhaps it’s just a strong bull market!

Unfortunately, I think the speculation is justified: I can confidently confirm that there is a new bubble forming. As is often the case, it involves a creative entrepreneur who essentially invented a new category–making a bundle in the process–and then hoards of me-too followers.

I’m talking about the Pixel Wars.

Here’s the backdrop: on August 26, Alex Tew, a 21-year-old student, decided he needed some cash for college. As Jeremy Levine (I first learned about Alex on Jeremy’s blog) describes:

Imagine I told you that a college-bound kid put up a web page with a giant grid on it. Let’s say he offered to sell squares on the grid — each 10 pixels x 10 pixels — for $1 per pixel (or $100 per square). How many could he sell?

If you’re like me, you’d probably guess zero. Or maybe a handful to some friends as a gimmick. Well, you’d be wrong. Very wrong.

As of today, Alex has sold $453,600 worth of pixels on his site, The Million Dollar Homepage. That’s real money!

Encouraged by Alex’s quick success, would-be millionaire copycats were bound to emerge–and they have. Some of the latest entrants:

• Million Dollar Home Page in Ukraine
• $500,000 Home Page
• The Million Quarter Web Page
• 5 Cent Pixels
• Million Cent Home Page (not to be confused with the Million Penny Page)
• Free Million Pixels

There are actually 77 competing sites offering $1 pixels, 4 sites offering 75 cent pixels, 21 sites offering 50 cent pixels, 13 sites offering 20 cent pixels, 24 sites offering 10 cent pixels, 10 sites offering 5 cent pixels, 22 sites offering 1 cent pixels, and 21 sites offering free pixels. There are also 38 sites selling pixels in Euros, 2 selling pixels in Yen, 7 sites selling pixels in Rubels, and 3 selling pixels in Zloty (the Polish currency).

In total, there are 385 pixel sites. I didn’t count them all myself. Instead, a couple of interested observers created yet another site–The Pixel Wars–to track all the emerging pixel sites on the net (the Pixel Wars guys aren’t selling pixels, but they do have a few Google ads). Maybe they should sell “picks and shovels” (infrastructure) to other would-be pixel sites.

While the original site–The Million Dollar Home Page–still has good sales momentum, most of the upstarts have sold few, if any, pixels. And, while there isn’t much to lose here, I think we can all see how this ends. Isn’t capitalism great?

• From a panel with Jeff Jarvis: centralized control over brand and community identity is no longer possible. This is an interesting, scary, and empowering idea. Think about it: until recently, companies (especially large ones) could generally define and control their own corporate identity through advertising and marketing. Today, with a thoughtful blog, a single individual can create a global media platform; with common search technologies, like-minded individuals can find each other and move markets. Scary time to be a company with a misleading message or bad product. Empowering time to be someone with ideas who wants to be heard. Case in point: Kryptonite, the company that claims to “make tough locks for a tough world.” If you Google “kryptonite locks”, you’ll see that the second result shows a year-old Engadget article that explains how to pick a Kryptonite lock with a common bic pen. Basically, an enterprising individual figured out how to pick the lock, Engadget posted an article complete with a how-to video, and, from there, the message was out.
• Another noteworthy development is the practice of spontaneous, collaborative tagging, popularized in part by sites such as Del.icio.us and Flickr. The idea is that if enough people (working individually) are given a platform that enables users to freely label items of interest (web sites, photos, etc), an organic model will eventually emerge that meaningfully organizes the information in question. This is important because it allows people with common interests to easily find each other. For example, I can quickly find photos of today’s BlogOn conference by checking the “blogon” tag on Flickr. Clearly, I could find such photos in other ways, but tags work well, especially considering that no one decided beforehand that conference photos should be stored in this manner. For another example, check out the “popular tags” on del.icio.us/popular. You can easily skim a list of sites that interest others (today’s most popular site is a list of the top 20 free fonts)–and quickly find related, relevant sites, as well (by clicking on the design tag, you can find similar sites, such as this one showing web design mistakes).
• Finally, consider internet privacy. The difference in behavior between certain (generally older) users and others (generally younger) is astonishing. For examples, take a look at any number of random MySpace profiles–you can find mostly trival information like a person’s favorite band or book, but also more sensitive identifiers such as income, sexual orientation, religion, drug history, etc. It’s hard to know whether those who have relatively revealing MySpace profiles will eventually come to regret what they’ve chosen to disclose, or if increasing openness is just a part of today’s digital life. Either way, the amount of personal information easily found on MySpace (among other sites) is somewhat terrifying, especially considering that certain services, like the Internet Archive, intend to make a permanent archive of publicly available web sites.

• Google’s influence was almost everywhere. On the positive side, as Mary Meeker pointed out, Google has given many startups an advertising-based business model: while the company generated $1.4B in Q2 revenue, Google also paid out $494M in the same time period to thousands of partners (though programs like AdSense, which lets publishers easily serve ads; Google and the publisher split the proceeds)–more than enough, in many cases, to pay the bills. On the negative side, Joe Kraus noted that Google’s habit of leaving products in “beta” may work for them, but it’s often a dangerous example for others to copy. Basically, thanks to Google’s core advertising business, the company has sufficient surplus cash flow to finance dozens of internal quasi-startups, even if all are eventually shut down. Typical startups, on the other hand, don’t have the luxury of a padded bank account. Therefore, they need to immediately think hard about measuring the right metrics and quickly getting to market with revenue-generating products–startups can’t stay in beta forever.
• Google also released an RSS reader. It’s pretty, but I won’t use it as my regular reader until it’s usable when I’m offline. For now, then, I’m sticking with NewsGator.
• Yahoo had a few intriguing developments, also. I liked their Tech Buzz Game–”a fantasy prediction market for high-tech products, concepts, and trends.” I doubt I’ll actively participate, but it’s interesting to see what others are betting on. For example, the Rumor Mill says the (hopefully) smart money is betting that Apple will soon release a video iPod. Separately, Yahoo also demonstrated a novel search system that sorts based on whether you are looking for commercial or informational results. Give it a try.
• I had a very favorable impression of Macromedia’s new Flex 2 development platform (click here to find out about the pending alpha release). While there was a lot of talk about Ajax’s potential to enable web applications, Flash is still useful and, in any case, the two aren’t mutually exclusive. Certain applications, like MeasureMap, use both to very good effect.
• On the startup front, I had two favorites. First, Zimbra, a messaging and collaboration platform I wrote about earlier. Nice functionality (mouse over an address and a corresponding Google Map pops up, mouse over a date and Zimbra pulls up your calendar appointments for that day, etc), and looks like the team thoughtfully architected the server, as well (one small example: only one copy of a particular attachment gets stored per server; certain other email servers store one copy per user). It’s being marketed as a Microsoft Exchange competitor. Second, I liked Zvents, a local events search and events web service. For now, though, Zvents only covers the San Francisco area.

More Web 2.0 info via Richard McManus here and at TechCrunch here.

Update (10/12): Looks like the iPod Video bets at Yahoo paid off…