How Can The Startup Visa Be Improved Upon?

from the fixing-it-bit-by-bit dept

When the startup visa was first put forth by Paul Graham, I was a big supporter. When Brad Feld took the idea and got political support for it, I was still a big supporter. But when the bill was actually introduced, I expressed some serious worries about it -- specifically over the fact that it was entirely focused on enterpreneurs who could raise a certain amount of money. As I noted, there were some potentially serious unintended consequences of requiring enterpreneurs to raise a specific amount of money just to stay in the country. The leverage between enterpreneurs and VCs can be a delicate enough balance without adding in the fact that you might get deported if you don't take the deal being handed to you.

While many of the people I know and respect in the industry have been vocal champions of the current bill, it was good to see at least someone make a big deal of these serious deficiencies in the bill. Pascal-Emmanuel Gobry wrote up a post for Business Insider that basically reflects this same viewpoint. We both think that a startup/entrepreneur visa makes a ton of sense, and it's something the country needs, but we're a bit worried by the current bill, which seems entirely focused on venture capital, rather than actual entrepreneurship.

Some have responded and suggested that this is better than nothing, but I'm not entirely convinced of that. A bad bill with unintended consequences could create more harm than good and could derail future attempts to put forth more serious (and needed) reform.

In the end, I think (former VC) Jeff Nolan put it best: this is a "well-intentioned bad idea that shouldn't be stopped." The real thing is that it should be fixed. Now, some of the bill's supporters have suggested that the problems with this bill are necessary, in that it's the only way they'll get passed, but that seems like a defeatist attitude. We have an opportunity to actually get this right and to bring smart entrepreneurs who can create a lot of jobs and tremendous value to the US. We shouldn't rush it through in the easiest manner possible: we should focus on getting it right, even if it takes more effort.

Update: It looks like the folks at the Kaufman Foundation have had similar concerns as well, supporting the concept, but worried about tying it to funding. They suggest an alternative, focused on job creation:

Here's a way to improve on the Kerry-Lugar plan. Create a true "job creator's visa," one tied directly and only to job creation by new immigrant entrepreneurs. The visa could be a temporary one for immigrants already here on another visa who establish a business. It could then be extended if the firm hires at least one American non-family resident. The visa should become permanent once the enterprise crosses a certain job threshold (such as five or 10 workers). But it would not be tied to financing.

There are plenty of immigrants who might qualify: the one million skilled foreign workers now here on H1-B visas who otherwise must go home after six years, as well as the roughly 60,000 foreign students who earn degrees at American universities each year. These are far larger numbers than those who could qualify under the Kerry-Lugar proposal.

Filed Under: enterpreneurs, entrepreneur visa, immigration, startup visa, startups, venture capitalists, visas

The US Postal Service's Business Model Is Outdated. Is It Time To Wind It Down Or Privatize It?

from the please-mail-me-a-buggy-whip dept

Just recently, we discussed whether or not ceasing Saturday delivery was a good idea for the USPS. John Potter, the US Postmaster General, recently said that the postal service's business model is as outdated as the newspaper industry's. Potter said:

"Twenty years ago we would laugh at the notion that a newspaper would ever embrace the idea that maybe the channel of the future is electronic and that you may have to change your business model,"

Sure, similarities between the industries definitely exist. Craigslist is a much cheaper and more efficient marketplace for local goods than the classifieds section in the newspaper ever was, and email is a much cheaper and more efficient means of communication than snail mail. That said, whereas for the newspaper industry, delivering a daily, physical newspaper to households may actually be an endangered business, the business itself of delivering physical items to households is still very much in demand. After all, with so much shopping happening online nowadays, someone still has to deliver the goods (until replicators, a la Star Trek, are perfected). In fact, for over a decade now, we've been talking about this opportunity to optimize the "last mile," and as of yet, nobody has really even come close to solving this problem.

That said, the USPS is a government institution, and even though it does not take any tax funding to run, an attempt to attack this opportunity may best be mounted by the private sector (like UPS and FedEx), especially when you consider the USPS's projected $238 billion shortfall for the upcoming decade. So, since it's not a private business, the best solution for the USPS may be to simply accept its diminishing role in the daily lives of Americans, and focus on continuing to run as efficiently as possible for as long as it remains useful. That said, the other solution may be to remove the government-mandated monopoly and privatize the USPS, and then let that private entity decide whether or not to invest in the business. Either way, it seems silly to ask taxpayers to invest anything further in the USPS since so many alternatives exist already. We should definitely all be appreciative of the part that the Postal Service has played in the foundation of our country, but what else can be done?

Filed Under: endangered business, online shopping, usps
Companies: fedex, ups, usps

E-Commerce Sites Realizing They're Media Properties Too

from the blurring-lines dept

We've talked a lot about the fact that adveritisng is content and content is advertising. But, it seems worth mixing a bit of e-commerce into that story as well. As we've been noting (separately), many of the business models that work today have a strong direct-to-consumer component -- giving them a "reason to buy." And, in fact, here at Techdirt, we've begun to blur those lines ourselves -- with various community offerings, including unique opportunities for companies to participate and/or sponsor online conversations, but also with our own CwF+RtB offering, which is really an e-commerce setup.

In the long run, business models are going to combine all these different elements. As we've noted, one of the key scarcities out there is attention -- and that's been the arena that the media business has always been in.

So perhaps it shouldn't be all that surprising to see traditional e-commerce players beginning to realize this themselves from the other direction. That is, many large online retailers are suddenly recognizing that they get a lot of traffic and they can sell that traffic to advertisers (including advertisers from their own competitors) at a nice premium. Of course, I'm not convinced that traditional banner/text advertising will really be all that lucrative in the long term, but it would be interesting to see online retailers work harder at giving people additional reasons to visit their sites beyond just the products alone. We've seen some glimpses of this, such as when Amazon tried to do an online talk show, but I'd bet that we're going to start seeing some much more creative online retail efforts that introduce "content" into the mix more effectively to create other types of scarcities.

Filed Under: advertising, cwf, e-commerce, online retailers

Truncated RSS Is A Bad Business Decision

from the respect-your-audience dept

A few years back, I wrote about why we had found full text RSS feeds to be much more powerful and useful than truncated RSS feeds. The reason that many sites push truncated feeds is the belief that it will force people to click through, and the ads on the webpage are worth a lot more than the ads found in RSS feeds. But it's a short-sighted view. Because what it's really doing is trying to push readers to do something that they don't want to do. Many of them use RSS readers because it's a more convenient way to organize and read the news they want. And, we found that by making life easier for our readers, we were able to get a lot more readers, and then that allowed us to put in place a better business model that didn't rely on trying to trick or force them to click through. This is the same debate as the debate over ad blockers. It's a question of whether or not you respect your community and want to add value for them, or if you just view them as dollar signs and feel you need to force or guilt them into doing stuff they don't want.

The full text vs. partial text debate is flaring up again as Gawker Media has just shifted all its blogs to partial feed blogs. From my standpoint, this makes it significantly less likely that I'll link to them, because I'm less likely to actually read through their posts to see if they're worthwhile. I'll stay subscribed, but whereas in the past I might read through an entire post before deciding it was worth writing about, now I'll only have a snippet to make that decision -- and that makes it that much less likely that I'll find their posts worth linking to. And that seems like a mistake.

Matt McAllister from The Guardian responded to Felix Salmon's blog post (the one linked above), and noted that when The Guardian moved to full text RSS feeds they saw their web traffic go up significantly. Admittedly, there may be other factors involved here, but it's yet another data point in favor of being open and making it easier for your audience and your community to engage.

What I think both this and the whole ad blocking discussion come down to is a question of how different sites look at and treat their audiences. If they feel they need to take a short-term view and "monetize" every interaction with them, or if they realize that there's a long-term value in building up a strong and loyal relationship. It's also quite similar to the constant debates over the music industry -- where the music industry feels that it wants to get paid pennies every time you hear a song. That's the short-term "we have to monetize every use" view, compared to the longer term view, which recognizes that free songs and building up a relationship between the fans and the musicians can lead to something much more lucrative that benefits everyone.

But the key point is made by Salmon in his blog post about this. Others like to accuse Salmon and myself of supporting things like full text RSS feeds, letting people use ad blockers and being against paywalls as "a sense of entitlement." Of course, since I'm on the publishing side of things, I don't see how that actually applies to me since I'm defending the rights of the community of readers over short-sited publisher decisions. But the real reason why we think these (well, for RSS and paywalls -- I don't know Salmon's view on ad blocking) things are important to understand is that taking the simplistic view of trying to maximize short-term monetization is a bad business decision in the long term:

At heart, my argument for full RSS feeds is similar to my argument against a NYT paywall, and neither argument has anything to do with a sense of entitlement on my part. Instead, both are simply bad business decisions. If you truncate your RSS feeds, you'll get less traffic than you had with full feeds, and you'll alienate an important minority of your audience. And if you implement a paywall, the increase in subscription revenues will fail to offset the decrease in ad revenues, even as you'll alienate lots of your audience. So neither makes commercial sense.

Exactly. All of these are decisions that don't take into account the bigger picture or understand the overall dynamic of a community. They assume that each transaction is a single impact: if this user doesn't "pay" a site now, it's "lost revenue." But it doesn't take into account that that user might "pay" in other means -- via a comment or by passing it along to others. And what if that individual is influential and passes it on to a lot of people? It blocking off that possibility because that individual doesn't "pay" by ad or paywall seems incredibly short sighted and quite disrespectful of a community.

Filed Under: ad blocking, business models, community, long term view, paywalls, respect, rss

The Real Problem With The Economy: Misallocation Of Capital?

from the gov't-tinkering dept

Andy Kessler has one of his standard thought-provoking opinion pieces discussing the economy of the past decade, suggesting that the real lesson learned from the past decade is the dangers of bad gov't policies leading to misallocated capital. Starting with bad telco regulations in the 90s that drove a bubble in unnecessary and misguided investment in infrastructure, some of which overflowed into a ridiculous dot com gold rush:

The late '90s Internet love fest was crazy enough, driven by former FCC Chairman Reed Hundt's misguided telecom reform that had the effect of keeping data rates artificially high. This created a gold rush to install fiber and build applications that didn't make economic sense (though electronic commerce, online banking, as well as wireless and broadband deployment would eventually prove productive over the next decade). Bad policy meant capital got overallocated and too quickly, as momentum mutual funds (momos) and day traders furiously drove up stock prices of every company with dot-com in its name for no fundamental reasons. Wall Street trading was broken.

But, he notes, there was a core of a good idea in there. What made the investment in the internet and new technologies make sense was that it actually did drive productivity. The proper use of such tools increased productivity, decreased costs and opened up new markets. But with the flood of misallocated money, a lot of that got obscured in chasing sock puppets selling pet food.

Following this, there was a combination of bad policy decisions -- Greenspan flooding the system with money out of fear of a Y2K problem, combined with Enron freaking people out and leading to Sarbanes Oxley -- and a new mess was created:

Instead of finishing what the dot-com era started to deliver--a productive, wealth-producing economy--capital was seduced into the financial lair of private equity and real-estate mortgages. Trillions were pumped into unneeded housing stock. Fannie and Freddie fanned the flames, and then fizzled and failed. And leveraged buyouts reigned. Even in 2007, one Blackstone private equity fund raised almost as much money as all of the venture capital industry.

The key point here is that venture capital tends to (though, certainly not always...) invest in real innovation, nurturing concepts from idea to market and beyond. Private equity, however, is more about just moving money around and looking for quick hit opportunities to get increasing returns. One grows the economy. The other does not. But, by punishing the capital markets that fund real innovation and company growth via Sarbanes Oxley, money that used to go to venture investment went towards the east coast private equity world, where it was shuffled around, rather than invested productively. And, tragically, it doesn't look like anything the government is doing is designed to fix this:

Today, we are still left with almost no initial public offerings. While private equity fund-raising was down 68% in 2009 to $96 billion, venture capital barely raised $13 billion.

Capital gains taxes are set to return to 20% on Jan. 1, 2011. And worse, investing is as uncertain as ever. No one wants to fund health care, medical devices or even much biotech if they can't figure out how they are going to be paid via reimbursements from ObamaCare. Energy investing is also a mess. And while "green" investing is booming, with few exceptions that is about efficiency rather than productivity. There's a big difference: You can make the Post Office more efficient while email makes us more productive and wealthier.

Big regulated oligopolists control our communications infrastructure. Startups are nowhere to be found. Few are willing to take the risk of true venture investing.

It's been 10 long years since the economy has created real wealth, as opposed to easy-credit induced real-estate or paper wealth. Amidst all the current confusion over health care and tax rates and energy and banking reforms, maybe it's time that the market transitions back to investments that drive productivity and increase living standards rather than just paper profits.

Reaching back to our economic parables, it's a question of whether or not our government has been making a giant broken window fallacy. It's not working on plans that fund actual productivity and economic growth. The government is focused, instead, on getting money moving around again, and all that means is it will move into another unproductive bubble, until we align the incentives properly again.

Filed Under: andy kessler, economics

Sorry, There's No Silver Bullet Business Model For The Music Industry

from the more-like-silver-blanks dept

Forrester analyst Mark Mulligan believes that the problem for the recording industry is one of demographics. Mulligan uses the fact that the billionth application purchaser on iTunes, 13 year-old Connor Mulcahey, was much younger than the 10 billionth iTunes music purchaser, 71 year-old Louie Sulcer, to highlight the issue: older users may still pay for music tracks, but younger users are more likely to "part with their cash" for apps than for music. To Mulligan, the problem is with the current digital-music product itself. Thus, he prescribes a feature-rich app as the savior -- and the future -- of the music industry. He proposes a music application that wraps digital tracks with social networking, live on-demand footage, song lyrics, games, and forums. This sounds like an interesting idea, which could see some success (if well-executed), but if the music industry is seeking a "silver bullet" business model, this is not likely to be it.

It's pretty well understood that what has driven the recording industry for decades now is "format change," where the record companies have continually asked their customers to essentially re-buy their recordings each time a new format is adopted -- from records, to cassettes, to CDs. With each new technology, customers were compelled to buy the products not by legislature or law, but rather, by a continual desire to have their music be more accessible. First, the phonograph made music more affordable and accessible, as compared to hiring a band of musicians to come and play in your living room. In the 80s, the cassette tape made listening more portable, albeit with a loss in audio quality. Then, in the 90s, the CD combined both portability and high audio quality into one small package, leading to a huge up-swell in recording purchases. For years, the recording industry has had a fantastic, well-defined business model: Record music that people want to hear on physical media. Sell that media. Repeat. Then, the 00s brought the latest maturation of the recording format, the mp3, with its near-infinite portability and an audio quality that can only really be contested by audio snobs. Since it could be easily copied and used in many different devices, it had the opportunity to become the most widely used music format ever. But, because of its near-infinite portability, the recording industry's old tried-and-true business model of selling physical media was no longer as viable.

The evolution of recording formats shows that what has really driven the industry has been a hunger for increased accessibility and portability, not necessarily the introduction of new features. So, while Mulligan's music application idea may drive some interest in recoded music, by empowering the audience to do more with it, it is very unlikely to drive the type of purchasing behavior that, in the past, came with each new recording format -- and it certainly won't "save recorded music." The problem is that the user is no longer locked into the recording industry's physical product for the distribution of music. There is no "one thing" they can sell that the audience will have no alternative but to buy. To be successful, the recording industry is going to have to experiment and figure out how make revenue from many different sources, which requires creativity that the labels have so far been unable or unwilling to muster. While the industry is out there looking for the "silver bullet" of a business model, the reality is that the answer is more like a whole clip full of silver bullets, coupled with some garlic, and finished off with a wooden stake or two.

Filed Under: business models, music industry

Don't Blame Your Community: Ad Blocking Is Not Killing Any Sites

from the get-over-it dept

Every so often we hear about a random blog or website that freaks out and claims that ad blockers are "stealing" or somehow damaging websites. But it's quite a surprise to see a similar argument from a site like Ars Technica -- one of the top techie sites out there, which is now owned by Conde Nast. Over the weekend, Ars wrote an odd post claiming that ad blocking "is devastating to the sites you love." Ars decided to run an experiment where it blocked access to its content to any user using an ad blocker (with no warning or explanation). Not surprisingly, this pissed off a bunch of readers, and Ars now admits that it was a mistake in how it was handled -- but that it still believes ad blockers are harming sites.

Frankly, such a position is insulting (though, even more insulting was the way Ars staff responded to complaints in its comments, dismissing people who don't like their ads as not adding anything and actively telling them to go away). If you're reading Techdirt, and the ads we serve are not good, you have every right to use an ad blocker. It's your browser, do whatever you want with it. I, personally, do not use an ad blocker because I don't find most ads annoying -- but if you do, more power to you. You're absolutely welcome here on Techdirt.

If the ads are bad, it's bad for the advertisers

Back in December of last year, we signed an experimental ad deal to run a series of ads on the site, where a single advertiser would effectively have all the ads for a 24-hour period. As a part of that, there would be an ad at the top that temporarily "pushed down" the content for a few seconds, before pulling back up. Nothing was covered. Nothing prevented readers from getting the content. And the "pushdown" ad only showed once per visitor and never again. We went back and forth about it, but decided it was worth an experiment -- especially since no content was blocked or covered. I won't name the advertiser who was in the first test... but many of you did notice, and did not like it. We got a lot of complaints. So we killed the additional tests. I won't lie: these deals were for quite a bit of money -- a very large premium on the amount of money we typically make from advertising. But when we saw how annoyed our users were, we realized immediately what a bad idea this was and told the others who were scheduled to run similar campaigns, "sorry." We gave up a lot of money to do so, but what it came down to in our mind was that it wasn't worth it.

And when I say "wasn't worth it," I don't mean just to us or our community -- but to the advertiser. Most of the anger we saw over the original ad campaign wasn't directed at us -- it was directed at the company doing the advertising. So we told a bunch of companies willing to pay us a lot of money not that we didn't want their money -- but that they didn't want to buy that kind of advertising, because it would only damage their own brands.

Advertising that works, not annoys

Now, compare that to another "project" that we did late last year. As you may recall, UPS sponsored me doing a series of "whiteboard videos" about topics that we regularly talk about here -- one on the economics of abundance, one on the innovator's dilemma and one on the difference between innovation and invention. Before releasing these, I was actually a bit nervous about how people would respond. But these videos, which were clearly labeled as being sponsored by UPS, actually were a huge hit, and we received lots of compliments about them. Even more interesting? Numerous comments on the videos thanked UPS for sponsoring them and making them happen.

A similar thing happened when we launched our IT Innovation website, sponsored by Sun and Intel. In that case, those two companies were sponsoring us to develop more general content around a topic that we (and many of you) found interesting. The editorial control was still entirely our own, but Sun and Intel received branding on the website, and the ability to offer up some whitepapers to download in the sidebar. The end result has been wonderful, and we'll likely do similar projects in the future. Rather than annoying readers, we lined up everything in a way that benefited everyone. It really was a win-win-win sort of setup.

Those types of projects are the kinds that we love to do, and which add real value to the community and to the sponsors. Those are the types of things that we think all media publications should be looking at doing. Things that add value, not take it away. Oh, and if you're a company that wants to do a project like this that gets people excited, rather than annoyed by your brand, feel free to contact us.

Don't blame others for your failures

Mike Markson recently wrote up a blog post for entrepreneurs, talking about how every entrepreneur needs to learn the lesson that, whatever doesn't go right is your fault. It's a tough lesson for people (especially entrepreneurs) to learn. If you can't raise money, don't blame the investors. You were the one who failed to convince them. If you can't make sales, don't blame the sales people. You either hired the wrong sales people or didn't put together a compelling enough pitch or didn't have a good enough product. It's your responsibility as an entrepreneur to fix things. And I'm not saying this as a third party: I've been in both of the experiences discussed in this paragraph, and had to learn not to blame others, because that is the natural tendency. But it's not productive at all.

Along those lines, if you are running a media site, if you're having trouble making money, it's your fault. Don't blame your readers. Don't blame your community by telling them they're "devastating" a site by blocking ads or failing to pay for a paywall. As the producers of that site, it's your responsibility to do things to get that site paid for. If you don't like what we're doing on Techdirt, go ahead and block our ads. Sure, just like Ars, many of our ads are paid for based on impressions and we may make less money from those ads, but that's our problem and the problem of advertisers who aren't willing to do more unique, creative and compelling projects that benefit the community rather than annoy it. We want the advertisers, sponsors and partners we work with to get the best results possible in a way that everyone wins. And that's not by forcing people who don't want to see their ads to see them, or by pissing off our readers by blocking them if they use ad blocking. It's by taking on the responsibility ourselves to put together compelling programs that make everything more valuable for all participants.

There's lots of ways to value a community

And we value you as readers even if you're not seeing any ads at all. That's because you take part in the community. You share links to our posts. You comment. You tell others about what we've written -- and that's all incredibly valuable to us and the rest of the community -- much more than any CPM value we'd get from a few extra ad impressions. If you don't see an ad, that doesn't mean you have no value. Quite the opposite.

Claiming that ad blocking is harming sites is like the recording industry claiming that piracy (or home taping) is killing music. Or it's like the newspaper industry claiming that aggregators are killing them. It's passing the blame. If you run a company, it's your responsibility to put together a business model that works. And if people are somehow figuring out ways to do what they want where you don't get paid, then it means you're doing something that needs to change. A good business model is one where everyone is happy with the transaction, not one where one party feels forced or coerced into accepting something they don't want.

So, let's get past this idea of blaming others, and focus on building business models where everyone benefits.

Filed Under: adblocking, adblocks, advertising, ars technica, business models, community, economics, publishing, value
Companies: ars technica, conde nast