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If You Try to Play Like Your (Bigger) Competitor, You'll Lose to Them

I just saw the movie "Moneyball" on my flight to NY.  I'd read the Michael Lewis book (please read the Wikipedia link if you have not read or seen Moneyball, for this post to make sense) and really liked it and was looking forward to the film.  I enjoyed the film as well.

In the film, there's a dialog between Billy Beane and his old-school scout Grady Fuson: 

Billy Beane: We are the last dog at the ball. You've seen what happens to the runt of the litter? He dies!
Grady Fuson: Billy, that's a very touching story and everything, but I think we're all very much aware of what we're facing here. You have a lot of experience and wisdom in this room, now you need to have a little bit of faith and let us do the job of replacing Giambi. 
Billy Beane: Is there another first base player like Giambi?
John Poloni: No, not really.
Billy Beane: And if there was, could we afford him?
Grady Fuson: No.
Billy Beane: Then what the fuck are you talkin' about, man? If we try to play like the Yankees in here, we will lose to the Yankees out there.
Grady Fuson: Boy, that sounds like fortune cookie wisdom to me, Billy.
Billy Beane: No, that's just logic.

I think the point here is very relevant to startups who are challenging large incumbents with far more resources.  You have to play a different game. If you attack your larger competitor replicating what they have, they always have a better chance of out-performing you.  You have to find your edge and make sure you are playing your game, not theirs.

Sequels and Startup Clones

I was just browsing Google Zeitgeist 2011, and noticed that 7 out of top 10 movie searches in Turkey were sequels.  I thought, "ah, shame on the Turks, for not rewarding originality".  Then I made my way to the list top grossing movies globally, and immediately apologized from my fellow Turks: All but two of the global list are sequels. In fact, the top seven are all sequels!

Thinking of this phenomenon reminded to a popular topic in internet ventures.  In our industry, adaptation of successful, proven business models, in new markets or verticals is often scorned.  Entrepreneurs are chastised for their lack of originality and innovation.

I think there's a key difference between sequels and internet clones.  Film is a creative industry.  Formulaic churning of unoriginal content in a creative industry may very well be a strategic business choice by content companies, and while it may make business sense, it certainly erodes value from the "creative" industry.

In my opinion, internet businesses have no obligation to be creative.  Their objective is value creation: preferably, defensible, sustainable, "thick" value.  There may be a thousand eBay clones around the world, but if each marketplace is reducing commercial friction among buyers and sellers, then each of the one thousand  clones is creating value.

Anyway, food for thought...

Here's the sappy Google Zeitgeist clip:

 

Apps - Not so Fast

The internets are abuzz with the reverb from the presentation by Forrester's George Colony at Le Web, with his three thunderstorms proclamation, one of which is that the apps universe has a lot more momentum than the network dependent internet/cloud model, primarily because processing and storage capacity growth outpaces network growth.

I agree with the premise, but really find the "internet's dead, long live the app" hype a bit exaggerated.  The app's are not a new phenomenon. In fact, the PC paradigm was based on the app model: executable code processing real time locally.  The apps of today are getting all the attention mainly thanks to Apple's phenomenal innovations on mobile computing interfaces: namely the iPhone and the iPad.  Apple's led the way to take the advantage of i/o and design innovations, and other tech co's are just following suit.  

And what makes the apps more than just updated desktop applications, is the seamless way they interact with the cloud and the data on other devices and the cloud.  In fact, I think the current app paradigm, which keeps data in tubes (i.e. not easily accessible like HTLM), has an achilles heel.

What has made the web the most powerful computing advent to date is its openness and neutrality.  The apps either have to find a way to make themselves permeable, or go the way of the dodo.  The apps have unfortunately broken the internet, while bringing us fantastic user experience.  Now disrupters need to find ways to open them up.  Whether Apple likes it or not.

Going back to Colony's death of internet meme, I found it to be a bit short-sighted, with smart analysis of a very short period of trends and data. I plan to write a bit more about his two other points soon:  social saturation and enterprise.

By the way, there are quite a few people who thing that HTML5 will bridge the app usability and internet network effects.  I have not got my arms aroudn HTML5 enough to opine on this, but quite excited to see the innovations on that front.

For those interested, there's a good debate in the comments on Fred Wilson's A VC.

UPDATE: I just got sent a link to a good post by Dave Winer on the same topic.

Here's Colony's presentation from Le Web:

 

Local Marketplaces and Network Effects

I am sensing a tipping point in the usage of LinkedIn among Turkish professionals.  My invitation volume from Turks has increased by at least an order of magnitude since the beginning of the year.  While I have historically been very promiscuous with my LinkedIn connection acceptances, I am now changing my behavior and have modified my privacy settings to make it more difficult to friend me.

I have been watching the ratio of Facebook and LinkedIn users closely.  Today Facebook stands at 800m users and Linkedin at 116m.  That ratio suggests that with ~30m Turkish users on Facebook, Linkedin should enjoy a crowd of 4m.  I don't know what that number is but Google AdPlanner suggests traffic numbers at less than 1% of global traffic.  That tells me the traffic and attention upside on LinkedIn for Turkey remains enormous.  

Combine that with the facts that LinkedIn is enjoying the recent growth I mentioned (albeit anecdotally) in the first paragraph and it is already ranked 61 on Alexa Turkey, and one would expect LinkedIn to break into the top 25 properties by Turkish traffic fairly soon. Game over. LinkedIn has won.

Cember.net was the first company to try to capture the Turkish professional networking opportunity.  After the Xing acquisition, the mindshare that it enjoys has all but disappeared.  That was followed with a few attempts to provide similar utility to Turkish professionals, but no one was able to reach critical mass.  Now LinkedIn has arrived and the window of opportunity has been shut.

This should be a lesson to ventures in areas with significant global network effect.  In local markets, there will exist a window of opportunity to build a marketplace and get to critical mass, at which point you can exit the local venture before the global players prioritize your market.  If you are too slow, you will not be able to realize value before the global network effect kicks in.

I'm a VC

Great, fun video from the team at Foundry Group.

 

Turkey's Bright Internet Future

Last week Sina Afra had a good post on why Turkey has turned into a hot internet market, as a follow on to Robin Wauters's post on Trendyol's new round in Techcrunch.

All of this attention is obviously triggered by the tremendous year Turkish internet industry has had.  We have enjoyed a landmark period where we've seen two large exits in the $200m range to global strategic buyrs (GittiGidiyor-eBay and Markafoni-Naspers), and numerous investment rounds from top VCs like Tiger Global, Kleiner Perkins, Intel Capital, ePlanet, Earlybird and Hummingbird.

The interest is certainly not limited to the names mentioned above.  I have probably had more conversations with global VCs about Turkey in the last 6 months than the last 6 years combined.

Sina does a good job going through some of the reasons why Turkey is so hot.  He focuses on:

• Large internet population: estimated at 35m, 5th in Europe
• High growth e-commerce penetration, with huge upside remaining
• High engagement, evidenced by the huge Turkish population on Facebook
• Favorable demographics - 70% of online population <34 years of age
• Strong payments and logistics infrastructure, critical for e-commerce

I fully agree with all of Sina's points, and I won't spend more time on these.  Turkey's getting all kinds of investor attention in every asset class and I think the country's merits on the macro level are evident to most.

However, I do want to point out some additional key actors who have contributed to the growth of the internet sector in Turkey.

First is talent.  There is an increasing number of young, smart, well-educated entrepreneurs launching technology ventures in Turkey.  For the best and the brightest,with plenty options in traditional careers, launching or joining a startup is much more of a viable career path today.  SocialWire (aka Iletken), Peak Games, Gezlong, and KonutKredisi.com.tr are a few examples that quickly come to mind.

Second is the growing diaspora of Turkish entrepreneurs, investors and professionals around the world, interested in and supporting the Turkish internet sector.  They understand the dynamics and the promise of theTurkish market and their influence, experiences and conections have been helpful to many Turkish ventures.

Third is the Turkish interent user. When you observe the meteoric growth of Turkish ventures like Grupanya, Markafoni, Trendyol, YemekSepeti and Nokta, you realize that the Turkish internet user is hungry for high-quality offerings, both in media and services. If a venture is able to offer first rate service, the uptake is extremely fast.  Sometimes the recipients of this attention are global players, but local ventures almost always get a first shot at attention.

I continue to believe we are in the early chapters of the Turkish internet story.  I look forward to helping build the next generation of Turkish internet winners.

UPDATE: With this post, I realized I'd missed Ari's post on the same topic last week.

Ignore the Noise - Keep the Focus

The financial world seems to be in shambles again.

Pictures of 2008 are flashing back in my mind.  I spent the bulk of 2008 to execute a fairly hairy deal in an effort to raise $50m to invest in my vision of Turkish internet back then.  Had it not fallen apart at the nth hour in December 2008, it now looks like it would have created monumental returns.

So forgive me if I get a bit upset when the headlines are screaming apocalypse again.  I get upset because barely 2 years after the apocalypse cries, and RIP: Good Times memos, we were watching our trading screens looking at LNKD's $10b market cap and 2,400 PE ratio.  And then, apocalypse again.  

If I have learned anything in the last two years it's that it is mostly noise.  As humans, we are in constant need of narrating the world around us.  The explosive growth of media and the proliferation of channels that deliver us that narrative has exponentially grown the amount of noise.

To an entrepreneur, the noise can be paralyzing. Best entrepreneurs I know have taught themselves to tune it out, except maybe a few trusted sources to keep an eye on macro factors, while maintaining an intense focus on the work at hand: the KPIs, strategic imperatives and the general landscape in which their venture operates.

I just thought it may be the right time to remind my readers (myself?) of this.

BTW, regarding the current financial mess we are seeing around the world, Umair Haque has been calling this out forever.  

Google+: The Anti-Twitter

We have all seen Google Wave and Google Buzz, and probably have concluded that Google won't be able to leverage its email-driven social graph through features.  They need to come up with thicker value and attempt to solve a problem, which neither Wave nor Buzz really did.

Enter Google+. At first glance, it looks like Google decided that the soft belly of Facebook is its rapidly diminishing context: bundling your college buddies, collagues, family and acquaintances together.  Add to that the very different usage of the platform in non-US geographies (read: primarily dating and mating), it seems very sensible to build a publishing platform to let you narrowcast content and online social interaction to carefully crafted buckets of relationships.  That's my read on Google+.

To me, this decision is very distinctive by the fact that it is exactly the opposite path of Twitter.  There must have been countless meetings at the Google Corporate Development group about Twitter.  For a while, Twitter looked like a fairly low-price ticket for Google to bolster its own social graph. However, Twitter's one-way, follow model must have not fit Google's strategy, seeing they are going in the opposite direction. Deep vs. broad.

I have not had a chance to use Google+.  I think the premise it holds out is interesting and valuable.  I do think there will be big pressure on the user experience for it to deliver its promise.  The smart grouping of relationships and the implicit extraction of context will ve critical.  I noticed that Gmail rolled out a people feature next to email messages that seems to work very well.  This is a technology challenge and that is not an area Google is weak in.

I am keen to see if Google will be able to turn its deep UX assets and talent into a seamlessly usable social sharing tool with Google+, or if it will join the list in the first sentece of this post.

UPDATE: Liz Gannes's post today is not too promising on Google's initial UX attempt.  Now I am more curious.

The Filter Bubble

I have been thinking about personalization for the last few months as it has become a common theme among all of my investments.  On the one hand it is the idea to jump at you when you start thinking of the disruption possibilities when you have powerful computers ubiquitously available and constantly connected.  The holy grail of the implicit web put personalization as a convenient first step immediately ahead of any product team at any internet venture.

On the other hand, you have the danger what my friend Eli Pariser is talking about at this great TED talk.  Too much personalization definitely carries the price tag of losing context, getting trapped echo-chambers and missing the greater perspective.  Our worlds are not entirely personalized and the danger of over-personalization is a bit difficult to define.  Eli looks at it from the content side and defines his "filter bubble" very well, taking into consideration ethics, tact, civic responsibility and missions.

Eli warns us against a "web of one". I agree with his call and continue to have faith in the connected world's ability to design around the danger he points out. Product design is both an art and a science.  Decisions around personalization will differentiate the best artists and the scientists.

eBay Takes Majority at GittiGidiyor

eBay announced today that it has increased its stake in GittiGidiyor, Turkey's leading ecommerce company to 93%.  This is a landmark transaction for Turkish internet.  Congratulations to Serkan, Burak, Tolga, Aydonat, and the team at iLab!  This is the fruit of a lot of hard work.

The real winner in the deal is the Turkish internet, ecommerce and VC industries.  This is the first  internet exit of a magnitude that creates real wealth for the entrepreneurs.  That means the case for internet entrepreneurship as a viable career path for the best and the brightest coming out of the best schools in Turkey has gotten stronger.  The bottleneck of high quality talent for web startups might just get a bit eased.

I bet there are tens of LP presentation decks being updated today, as this transaction gets added to the top of the page dealing with the tough question of internet exits in Turkey.  A similar update will take place in corporate development departments of any global internet companies, as Turkey becomes more and more visible on the international M&A roadmap.

Finally, this is also a personal landmark for me and my career as an entrepreneur and investor in Turkey.  I'd met the GG team back in 2005 and had the chance to work on the deal alongside the iLab team in 2006.  Back then, I had felt that this was the greatest Turkish internet company to invest in. It's nice to see that after 6 years, eBay agreed.