The @kommons site doesn’t allow for the uploading of links, so I posted the full text here:

OK, fair warning, this is an epically-long reply to a really short question. But I’ve been thinking about these things for a while and figured it was a good opportunity to get some of my random thoughts down on paper (or, in digits, I suppose). Also, it allowed me to jump into that fantasy land that is usually only inhabited by college kids who have smoked a bong and are sitting around eating waffles, Charleston Chews, and bacon while discussing what they would do if they won the $250M Powerball. Read: it was fun.

The Basics

There are a number of seed accelerators/incubators out there that offer great programs. When we launched the Yale Entrepreneurial Institute (YEI), we modeled the summer program on Y Combinator, which was one of the few seed accelerators/incubators running at the time. Since then TechStars, Dog Patch Labs, Betaworks (not, technically, an incubator), and others have sprung up. Additionally, there are co-working spaces like New Work City and General Assembly (launching soon by @brimer) that add additional elements to a thriving entrepreneurial ecosystem.

There are some common threads among many of these programs that I would foster in my factory (which, henceforth, will be called “The Factory” as an ode to Wharhol and the swinging 1960s, which I, regrettably, was not around for; the entrepreneurs will be known as “The Cogs”). These are fairly well-documented at this point, but I’ll summarize here. If you’re already familiar with these programs, skip ahead to the para after #4.

1) Networks: TechStars has helped 70 companies launch and has a network of 200 mentors. Y Combinator has funded over 150 start-ups and has access to some of the most powerful and experienced entrepreneurs in Silicon Valley. These programs are like clubs and membership has its privileges. The primary benefit is access. What you lose in equity, you gain in access to people who can advise you on setting up a corporation, creating a strategy, hiring, financing, and, in general, just provide sanity checks when you need them. This network doesn’t die when you leave a program, but becomes perpetual and grows (as long as you do what you need to do to maintain it—see “Teach Your Children Well” below).

When we started YEI, we had Seth Sternberg (Meebo), Steve Hafner (Kayak), Matt Sanchez (VideoEgg), Leo Laporte (TWiT), Donna Dubinsky (Palm), Barry Nalebuff (Honest Tea) and Marc Cenedella (TheLadders.com), among others. They provided great advice and some went on to mentor a few of the teams. They talked about getting financing, marketing, their particular domains, and, importantly, their failures. They interacted with the teams, answering particular questions and giving advice. And, they energized the group.

In addition to the advice and networking that these outsiders can provide, the teams themselves become incredible resources (see camaraderie below). This is a key element to any successful program.

2) Advice: The success of these programs is also driven by the advice given by founders like Paul Graham, Brad Feld, David Cohen and John Borthwick. They have started or advised hundreds of companies collectively and tend to have deep domain and technical expertise. Having a management team with this type of experience is invaluable. They can help founders recognize hurdles and figure out ways around them. Also, they know which companies are out there, what they are doing, whether they are good potential partners, whether you might want to work with them (from a general personality/fit perspective), and how they may be helpful to you in meeting your objectives. This is a huge time saver.

3) Capital: The benefits of access to capital are obvious. But, I think that it is necessary to expand a bit. Whether it is $20K for 5% or $15K for 3%, the cash, combined with the advice, over a short period of time, can provide the necessary catalyst to take a venture from idea to launch. Additionally, when seed accelerators like Y Combinator invest in ventures, they are essentially creating incentive alignment—their needs, wants and desires map with those of the companies that they have funded. The costs to start something have dropped dramatically, but the ongoing costs post-year 1 can still be substantial. It is great to have a team of people who not only provide the initial capital, but expose you to others who they trust and who can do follow on rounds.

4) Camaraderie: There is an incredible bond that is created when teams work night and day, over a short period of time, to produce a product that is going to be rolled out to a national audience. It is stressful. Things break. Teams crack. VCs ignore you. And, your friends and family think that you’re insane because you’ve chosen to build something that they don’t even understand instead of heading to Goldman Sachs to cash in on some still-lucrative, albeit insanely mind-numbing, corporate job. You speak a different language and the outside world, largely, does not understand you. In order to foster this camaraderie, programs build in time for their entrepreneurs to get to know one another. Whether it is hiking, cocktails or kickball, these activities are important. It gets people to step away from their computers for a while and actually interact with the other amazing Cogs. It gives you the chance to discuss ideas or problems that you’re facing. And, it strengthens the bonds and, as a result, the network.

So these are the basic building blocks of any Entrepreneurship Factory: Advice, Capital, Networks, and Camaraderie. I would create a 10-week program, with speakers throughout the course of the program, and a tight network of mentors. I would limit it to 25 people. In addition to these building blocks, I would add some other elements that might be unique to The Factory (or maybe not, but I’ll add them anyway).

Since I have the chance to do whatever the hell I want with my $100M, I would focus on reducing a few of the issues that I see in the current start-up ecosystem, namely the risks associated with joining a new venture and diversity (both with regard to human capital and to ideas).

Other people may not think that these are valid goals—but it’s not their $100M to spend!

1) Investin.me: The typical start-up has 2-3 founders. The founders do all of the coding, marketing, biz dev, product development, sales, pr, finance, and fundraising. It can get overwhelming quickly. However, early-stage start-ups may not yet have the financing to increase their monthly burn rate by bringing on other full-time people to help.

One of the things that I would do is to create a slush-fund for hiring in early stage start-ups. One of the barriers to people entering early-stage start-ups is that there is an expectation that they will go months without getting any salary. A monthly salary of even $2K can mean the difference between being able to work full-time for a start-up and put the time in necessary to help get it off the ground, and not being able to join a start-up because you have to pay for that thing called rent. $2K can mean the difference between rent + Ramen and eviction.

If you could create a market where the early-stage employees could hypothecate their options for a certain amount of time and money, then you might create a market for start-up employees. A parent or friend who is a qualified investor may not be willing to invest in a start-up where the funds go to operating expenses, but may be willing to back their daughter or friend for a certain period of time. You could put it out there as a loan with a guaranteed 8% return and base the monthly payout on the valuation at the point of the loan and the amount of options pledged to the employee. The founders get labor without diluting their shares and the employees get the opportunity to work for a certain period of time with a paycheck (albeit small). It shifts the dilution risk from the founder to the employee and their personal funder.

I am sure that there are about 1,000 reasons why this wouldn’t work legally (transfer of shares for ESOP being one), but I think that it would be interesting to try to figure out how to break down the “internship” model at many start-ups. There are a ton of people out there who may want to work in start-ups, but don’t have the risk tolerance or ability to forgo salaries for 6 months.

Thrust Fund is doing something in this area—creating a fund where people can invest in individuals in the social entrepreneurship space, rather than specific ventures. Again, not sure how the details would work out, but I think that it would be interesting to explore some new models.

2) Moonligh.tr: I would create a website where programmers, designers, and biz dev and marketing folks can post their skills, availability, and interests. Many people, particularly in this economy, are dying a slow, boring death at their day jobs and are looking for something to do on the side to increase their skills—particularly if it is something that can lead to a new opportunity. This site would create a market for moonlighters—or “micro-advisors.”

Although there are freelancing sites out there already—like Freelancer—they seemed to be geared towards creative professionals who actually need to be paid to do work (SHOCKING!) and are looking to gather a number of part-time or short-term gigs in order to earn the money needed to pay their bills. This would be more of a Catchafire for start-ups. The ventures could post projects that need to be done—from market research to design to model building to PR—and the site would match registered users with the appropriate skills/ interests to these projects/ventures.

Many start-ups offer internships; however, they are usually full-time and come with the title “intern.” The reality is that a 34-year-old professional, who might have 5-10 hours to spare each week, may not want to put the title “intern” on their resume. This site would provide more of a market for what I would call “micro-advisors.” These micro-advisors could be brought on for a short period of time to accomplish a very specific task or set of tasks. The start-up wins because they receive free labor (and don’t have to commit in the short-run to allocating advisory shares) and the micro-advisors win because they are gaining new skills and padding their resumes.

There are additional benefits that can come from these relationships. Both the start-ups and the micro-advisors begin to build a network that is outside of their traditional scope of focus. This can lead to deals or jobs or, simply, increased information flow. Micro-advisors who might not know what it is like to work in a start-up can gain that experience while retaining their day jobs (thereby, mitigating one of the risks of joining a start-up—not having a salary). Also, just like living with someone before you get married, it is a great opportunity for ventures and micro-advisors to work together and get to know one another before committing to a long-term relationship.

There may already be a site out there like this that I just don’t know about. I suppose that Startuply fits some of these qualifications, but seems to be missing something to me. If there are others, point them out in the comments.

3) Floaters: I would pay 5 people $50K/year + shares in a pool of equity in order to be floaters among the companies. It is an inexpensive way to expose those who are initially risk-averse to the power and freedom that comes from working in a start-up. These floaters could come from a range of backgrounds—design, development, marketing, etc. The one would requirement is that the floater would be required to take 2 hours each day to learn a new skill. If they know marketing, they will need to learn how to code. If they code, they will need to learn finance. If they know finance, they’ll need to learn marketing. The goal would be to move them out of their comfort zones. They would be expected to stay for only a year (and, in this sense, is very much like an EIR), with the expectation that they either start something of their own or jump onto an existing team once they are done.

4) Teach Your Children Well: Well-run incubators/seed accelerators tend to have one major goal in common—to introduce their entrepreneurs to as many people as they possibly can, within a very short period of time, who can help them succeed and serve as mentors/advisors in the future. It is a big part of the value that the accelerators bring to the table. The problem is that some entrepreneurs are social idiots. Seriously. Sorry. I can remember sitting on a teleconference when I was working for a start-up and the founder actually said to the (much larger, much more powerful, and much more profitable) potential partner, “this is how this partnership will help US…this is how much WE will net off of this deal.” Sorry sister, but your potential partner really doesn’t give a shit what you’re going to net off the deal.

Which brings me to something that I would introduce the first day—the art of communication. Call it business etiquette. Or, call it common sense. But, unfortunately, it’s necessary. Chris Fralic from First Round Capital has a great talk describing the art of the email introduction. Every entrepreneur should watch it. But they should also remember that common courtesy goes a long way. “Please,” “thank you,” and “how can I help you?” (rather than “how can you help me?”) go a long way. Remember that the entrepreneurial/VC community is relatively small. It is better to be known as the nice guy/girl, then to be known as the asshole or the idiot.

@seanglass and @mileslasater put together a great suggested reading list when we launched the Yale Entrepreneurial Institute. It included Keith Ferazzi’s book, Never Eat Alone, and the oldie-but-goodie, How to Win Friends and Influence People. These may seem lame, but I promise they both provide useful tips and would be required reading for any of the cogs in my entrepreneurship factory.

Why is it necessary? Because every single relationship—whether in person, on the phone, or via Twitter or Email or LinkedIn—matters. It is an opportunity to make a connection that can lead to a sale or to a new hire or to a shit-load of cash so that you can keep doing what you’re doing and not have to go work for IBM. And people forget that.

There is another reason—TechCrunch. And, ReadWriteWeb, All ThingsD, Mashable, BITS, and TechMeme. When someone gets the attention of Arrington et. al., they can suddenly switch from a Ramen-noodle-eating, scotch-sipping, late-night code monkey to a tech star. And, as is the case with any type of celebrity, this can lead to shitty behavior. Some people go all Sun Tzu and begin to attack their competitors and their competitor’s products in the press. Others stop returning calls to the friends who helped them get where they are or wait a week to respond to introductions to Ron Conway. Part of that is survival—there are only so many hours in a day and you are trying to acquire customers, make deals, build a product, find funding, hire developers, and manage your existing team. But part of it is ego. It is easy to get good press if you are the darling of SXSW. It is much harder to get good press and remain grounded.

So, I would focus on etiquette and communications early and often. It may be old school, but it’s important. Remember that the competitor that you’re bashing today might be your boss tomorrow. It’s always good to learn how to play nice on the playground.

5) Build a Great Library So The Cogs can Channel Martha Stewart: The stereotypical image of a tech entrepreneur right now—particularly in the consumer internet space—is young and male. If you put a group of young guys in one room, you can end up creating a “frat house for geeks.” This can be great and highly effective. But I think that you run the risk of creating a hyper-tech-heavy, geek-centric echo chamber where you can become constrained to find new ideas if you don’t try to introduce some diversity and new perspective. (On a side note, I’m not going to get into the “lack of women in entrepreneurship” debate, but it is pretty funny to watch this video and see Scoble pan in on a woman when they discuss diversity—around minute 3:14; Yeah! We have chicks here! Woot! We’re sooo diverse!).

The obvious thing to do to resolve the echo chamber issue is to make sure that the entrepreneurs in your factory come from diverse backgrounds (so obvious, I can’t believe I actually wrote it down). But there are other ways to spur new ideas and help people break out of their comfort zones (also discussed in other sections). One of the easiest is media. You may not be able to turn into a white, female, mother of three living in a Toll Brothers McMansion in central Ohio, but you can sure get a sense of her likes, dislikes, wants and desires by reading what she is reading. You can get into her head.

I would have subscriptions to 50 magazines displayed, library style, somewhere in the space. Not just Wired and Fast Company and Make, but Martha Stewart, Good Housekeeping, Parenting, Southern Living, and Redbook. Never heard of these? Well, it turns out that this is what mainstream America is reading. What “the normals” are reading. Browsing one of these magazines while you’re sitting there drinking your extra-dry, soy cappuccino from Stumptown might just help you understand them better. You may want to believe that your product is only going to be used by 25-year-old guys who wear Dear Creatures cardigans, feel comfortable in man-scarves, and spend their off-time building customized Whac-a-mole arcade games. That’s a good game plan if you want to fail. Otherwise, it is helpful to try to understand your total potential audience.

If you’re thinking now, who cares? Well, your investors might. You may think that you’re not targeting white females between the ages of 28-40, with two kids and a mortgage, but the models in your deck probably say that you are. I’m not saying that you need to turn into your mother, but you should to try to understand her better.

Which leads me to two other suggestions…

6 ) Sponsor a Walk About (experience expanding suggestion 1): Chris Sacca wrote what was probably one of the best job descriptions I’ve ever read a few months ago (it has apparently been filled because it’s no longer up on the site). In the description, he suggested that he wouldn’t hire anyone who hasn’t travelled abroad—particularly to India and Africa. I agree with Chris, but would also suggest that many highly-educated people haven’t spent enough time travelling around the good ‘ol US of A. There are 310M people in the US and my guess is that the majority of start-up founders have not spent enough time really exploring how the other 309,990,000 people live. If you haven’t spent a significant amount of time in a town where the only job for 30 miles is as a check-out girl at the local Piggly Wiggly, then you need a walk-about. If you have never eaten at a Lizard’s Thicket or had ice cream at the local DQ in Decatur County Iowa or had a piece of pie at any number of the Pennsylvania Dutch restaurants in Western PA, then you need a walk about.

I would require a two week, cross-country, Cog-caravan that would stop in county seats and towns with populations < 10K. It could be made into some sort of game, where the Cogs can only “level up” if they meet certain challenges. It would undoubtedly be an eye opening experience for many people and would be great for bonding.

7) Open up the Community (experience expanding suggestion #2): Stephen Johnson, one of the co-founders of Outside.in and a brilliant thinker, is releasing a book next week called “Where Good Ideas Come From.” (I would check out the cool promo video). You can get a taste of the content of the book by watching Johnson’s Ted Talk. Essentially, he argues that an idea is a new network of neurons firing in your brain and that there are ways to create spaces that foster the development of these new networks. One of these ways is to create a “Liquid Network”—a chaotic environment where people from diverse backgrounds can interact. My guess is that this is what @brimer is trying to recreate with his plans for General Assembly.

I would design a space that would increase serendipitous interactions between diverse groups of people from both inside and outside of The Factory. I would offer to host the local Tedx talks—in doing so, The Factory would have built-in access to an interesting collection of outsiders who are already in the mode of expanding and discussing ideas. I would bring in professors from local universities to explain their research. I would host concerts once a month and have a few spaces available for struggling artists. Again, the point is to break down the tech-centric echo chamber and create access to new ideas.

I would also require the teams to get together weekly to discuss issues, failures, hurdles and successes (over happy hour?). Not only does this lead to new ideas, it can also help people by creating common experiences.

8 ) Create a Common Project: At the beginning of the program, I would get the group together and have everyone suggest a common, non-profit or socially-responsible idea that they could work on as a team over the course of the program. Everyone would have to work on the project the equivalent of ½ hour per day. This would force people to step away from their own work for a small bit of time and actually think of how to solve other people’s problems. Sometimes stepping away from your own world is exactly what you need to do to make a breakthrough on a problem that you’re facing. It would also create a bonding experience for the teams that would lead to a stronger long-term network.

9) Increase Communications: I would have a web-based bulletin board with displays throughout the space where the start-ups in the incubator could post problems/questions throughout the week. Each week, the teams would have to come up with at least one answer to one of the questions. These questions could be as simple as, “does anyone know someone at company X that could help me get my foot in the door for a meeting?” or as complex as an issue around coding. The goal would be to harness the collective knowledge of the group.

I’ve spent way too much time already answering this question and don’t think that I’ve come close to spending my $100M. So I put it back to you, @codybrown. What would you do with $100M?

Flipboard is taking the idea of content deconstruction one step further by providing users with their own realtime, personalized magazine filled with newspaper and magazine articles, blog posts, photos, Tweets, and other content surfaced via updates from the social web. No longer will you need to go to Style.com, T Magazine, The Sartorialist, and The Cool Hunter to catch up on the latest fashion news. Flipboard will deliver what is important to you—and to those within your social graph—in a shiny, stylized package. Goodbye traditional content verticals, hello social recommendation engine. Goodbye newspaper editorial teams, hello crowd.

Impact on Advertising

According to Going Social Now, the iPad offers user engagement comparable to TV with the measurability (and targeting capability) of the Web.

“Conde Nast says the average reader spends 60 minutes with each monthly issue of its magazine’s iPad apps (90,000 downloads for the Wired app beating newsstand sales for that month). In comparison, the average visitor on the Web spends just 2.1 minutes per month at Vanityfair.com and 3.8 minutes per month at GQ.com, according to comScore.”

The increased engagement associated with the platform already opens up opportunities for content creators like USA Today and The New York Times to reap higher CPMs from brand advertisers. However, Flipboard ups the ante by harnessing the social web and delivering content in a style more akin to a long-favored and familiar medium—the magazine.

What does this mean for advertising? A key element of any advertising campaign is the alignment of the message and the brand with the content and the publisher. This is where social media has fallen short. It is well known that advertisers were initially hesitant to migrate to social networks for fear of the unknown (will my ad end up adjacent to porn?). However, I believe that part of their hesitation was also based upon the recognition that Facebook, MySpace, and Friendster are just so bloody ugly. It’s like going to a party where all of the cool kids are hanging out in rainbow leg warmers, listening to Milli Vanilli, and sipping Zima from twirly straws. You know that you should be there, but something is just a bit off.

Flipboard solves this problem and provides an opportunity for advertisers to move past the mass market, flashing banner ad world of social networks into the more interesting, immersive, experiential brand opportunities that arise when ads are run adjacent to graphically pleasing content on a platform that favors rich media.

And that is not all. Since Flipboard pulls in streams from your multiple social networks, it is able to create the ultimate database of intentions. By scraping and analyzing user behavior data (e.g., Likes, Retweets, time spent reading articles), Flipboard will ultimately be able to determine the current interests of users and target advertising accordingly.

Advertisers will be able to create immersive brand experiences that can be targeted based on intention and seamlessly integrated with a highly personalized livestream of information. What does this mean? Flipboard is going to be able to charge a hell of a lot more per impression or click for a highly engaging, rich media ad that sits snugly, from a design perspective, within their beautiful user interface than Facebook is for the crappy tiles that have thus far passed for advertising on the social network.

So how does Flipboard differ from Facebook’s or Twitter’s interface? Let’s look at an example. Below is a screenshot of Twitter’s @earlybird feed. It is just one of a stream of Tweets that a user scrolls through every day. Useful? Yes. Notable? Not really.

Now look at the same Tweet as it would appear on Flipboard. It is far more compelling.

From Blog pix

And, this example doesn’t even demonstrate the potential of incorporating rich media into the ad to create a more immersive brand experience (I honestly just grabbed the first @earlybird ad that I saw). Imagine replacing the gaudy Facebook banner ads with engaging rich media ads that incorporate full-screen in-line video, wallpapers, games, interactive maps, in-ad app or iTunes content downloads, social networking tools, and more. This is the equivalent of comparing a Google Text Ad to a Home Page Takeover on The New York Times. There is just no comparison.

But it is not just the social web that is competing for advertising dollars.

So how does Flipboard differ from The New York Times or The Wall Street Journal? Most importantly, there is no editorial control. Traditional newspaper companies are still beholden to the approval of the editorial team in launching new advertising units. Editorial content is king and advertising is seen as a necessary evil. Anything that detracts from the content is not going to get past the digital gate guards. As such, you will continue to see ad units that look shockingly similar to what is being run on the web (see the Times’ iPad app below). It is just easier to get this type of ad through.

From Blog pix

This attitude toward advertising flies counter to the view held by traditional print magazine publishers, where advertising can be viewed as an opportunity to provide readers with useful content (albeit obviously different from editorial content). If Flipboard is able to connect with advertisers and provide users with engaging ads (like those running currently in LonnyMag), it will create real value—and reap higher CPMs as a reward.

In addition to traditional branding campaigns, there are some real opportunities for advertisers to launch novel content integration campaigns. The line is blurring between advertisers and content creators. The savviest advertisers have figured out how to strengthen their brands by becoming content creators. 1stdibs‘ Introspective Magazine is an excellent example of a content strategy that both strengthens the brand and creates a stickier user experience. Virgin is undoubtedly gunning for the same impact by launching Maverick magazine. It will be interesting to see how Flipboard integrates this content with the rest of their platform. There is an opportunity for them to become the go-to distribution source for these newfangled advertorials.

Potential Hurdles

The media industry has had a somewhat schizophrenic response to innovations in the ways that stories are shared and presented. Newspapers and Magazines embraced Google’s Fast Flip, which also provides more than a snippet of text and photos to entice readers, perhaps because they recognized the platform’s potential to increase traffic to their sites. Also, it didn’t hurt that Google agreed to share advertising revenue with publishers who provided content on the Fast Flip platform.

The New York Times’ reaction to content that was surfaced via Pulse was much more aggressive and may be more akin to the type of response that Flipboard will see. The New York Times argued that Pulse violated the company’s “terms of use” by making commercial use of their RSS feed. After Apple was notified of the infringement, Pulse was pulled from the App Store. It seems like Flipboard is trying to get around this hurdle by offering its app for free. This might put off the legal dogs at the Times for a while, but my guess is that the two companies are going to have to sit down and negotiate a mutually beneficial path forward (read: rev share agreement or paywall management). Otherwise, the Times might opt to block content from Flipboard. Given the Times’ historically tight relationship with Steve Jobs and Apple, they might have some leverage.

Going Forward

Over-burdened servers aside, Flipboard is certainly one of the more interesting product launches that I’ve seen lately. It elegantly solves the static/noise issue and creates some amazing opportunities for advertisers.

There are also some interesting implications for journalists. Newspapers are in the process of being deconstructed to their most basic elements—articles. If the crowd, or your social graph, becomes your editorial team, what reason do you have to visit The Wall Street Journal and scroll through endless irrelevant articles in search of the five that are interesting to you? If Flipboard created the app version of Journalism Online, and your social graph (and, eventually, your personal user behavior) surfaced the most relevant content, then you might actually only have to pay for what you read. That certainly would be revolutionary.

I actively use Twitter, LinkedIn, Facebook, WordPress (not so actively, but trying), and, most recently, Tumblr (somewhat hyper-actively). I actually have a del.icio.us account that I never use for one simple reason—the registration process. When I originally registered, I thought that it was preposterous that I had to set up a Yahoo! email account. I already have a Gmail account (for everyday use) and a Hotmail account (for signing up for services where I assume there is going to be heavy spam potential—think Facebook or any photo-sharing site outside of Picassa). I don’t know about you, but I don’t want to have to sign up for a totally new email service in order to access another, totally unrelated service. It is one more email address and password that I need to remember. And, because I wasn’t an early Yahoo! email adopter, I couldn’t register as jhmcfadden or jennifer.h.mcfadden. Instead, I got assigned something like jennmcfad49765423331687wtf@yahoo.com. Honestly, I have no idea what the address is. I can never remember it.

Forgetting my del.icio.us username and password wouldn’t be a problem if I didn’t clear my cookies fairly frequently. But I do. So anytime I try to use del.icio.us, I’m prompted to input my username/password or my Yahoo! account, which I can’t remember. What does that mean? I never use it. I get too frustrated. If it were tied to my Hotmail or Gmail accounts, it wouldn’t be a problem. But instead it’s tied to jennmcfad49765423331687wtf@yahoo.com. Two steps too many for me to stay engaged.

Undoubtedly, this wasn’t the case when Del.icio.us was a stand-alone company. I doubt they required users to register with a Yahoo! account. But once it was acquired by Yahoo!, some brilliant product manager likely decided that this would be a good way to increase the number of Yahoo! mail users. Horrible. Maybe there are a ton of Yahoo! mail users who were happy to have this added to their list of available services. Who knows? But for new users—particularly those who have zero interest in setting up a Yahoo! account—it sucks. And, I would argue, something to think about if you are at a portfolio company that gets acquired and you’re required to meet certain customer acquisition hurdles. It would be interesting to see what the user data on del.icio.us looks like post-Yahoo! Union Square was an early investor, perhaps they could provide insight.

So this got me thinking about registration and user experience in general. I remember sitting in meetings at The New York Times with the product manager responsible for the registration process. For those of you who don’t know, registration data serves a purpose. It allows The New York Times (and other sites who rely on advertising) to say things like “85% of our users earn $100K+ in annual income, are female, live in Darien, CT, and have C-Suite jobs” (obviously made up stats, FYI)—which provides information to advertisers for targeting purposes. From an ad salesperson’s perspective, the more data that The New York Times collects on their audience, the more data they can share with their clients. [Despite my skepticism, the % of people providing accurate information has been studied and is apparently quite high.] As a Product Marketing Manager, it was my job to push the product manager to add additional fields to the registration page. At the time, I assumed that the more information collected the better. You only have to register once. It’s not that arduous to provide the data. And, it helps the Times.

I was wrong. By adding additional fields, you create friction. Friction reduces adoption. If there is a large upfront opportunity cost (the time lost filling out information and the aggravation at having to do so) in registering, you can expect to lose users (or never acquire them, for that matter). Something I argued against at the time, but agree with now. Counter my experience registering with del.icio.us with the frictionless regi processes at Tumblr, Zemanta, Twitter, and Disqus. There is no comparison. Del.icio.us lost me.

The same could be said for post-registration user experience. When thinking through a product, always ask, “how easy is this to use?” Obvious, huh? Most developers are told this repeatedly, but somehow forget this advice when building out a site. The draw of creating something new and cool seems to override any ingrained understanding that less really is more. I have had a WordPress blog since the fall. Before that, I was using SquaredSpace. SquaredSpace is great because it is easy for people (like me) with limited HTML/CSS experience to create an incredibly visually compelling blog (which is the value proposition that enables them to charge a monthly fee). I spent an enormous amount of time playing around with the template in order to set it up—and then never used it. I always got frustrated by the user experience. Consequently, I left SquaredSpace for WordPress, where it is super-easy to upload posts (actually writing the posts is a completely different story–and I can’t blame that on the platform UX!)

Twitter is brilliant because you provide your email address, username and password. That’s it. There is a box there that tells you what to do by asking “what’s happening?” You add your link, add your thought, and press enter. You scroll through the most recent Tweets in your stream to figure out what you should be reading now. Perhaps you use a Twitter client (I don’t). It’s fabulously simple and, as a result, incredibly addictive. The only Twitter complaint that I have is that it’s too difficult, as a new user, to figure out which of your friends (or people who you would like to follow) are using the service. I have to imagine that they’re working on this, though.

Tumblr is another example of an extraordinarily seamless regi and user experience. I started a Tumblr a few weeks ago because I was looking for something between Twitter, which I use to pass links/information to a largely professional group of followers, and WordPress, which I use (admittedly infrequently) to post well thought out (read: long) posts. It was ridiculously easy to set up. And, it is just as ridiculously easy to use. It is far more visual than either Twitter or WordPress, which adds to its appeal. I linked my account to Twitter and Facebook—where I have very little overlap of Friends/Followers. And the process of broadcasting posts to these two groups is dead simple. It is quickly becoming my preferred means of communicating sentiment at a particular point in time. Unlike WordPress, where you feel compelled to think before you write, Tumblr allows you to quickly share information—photos, random thoughts, recipes, whatever—in a fast and simple way. Using Tumblr, I can add color to my Twitter and Facebook feeds using one dead simple site. I love it.

So what does all of this mean? Like I said before—KISS. I try a ton of new services daily—particularly anything that comes out in the news space because I’m helplessly hoping that someone will build a compelling site that will solve the industry’s problems. If I go to your site and I don’t know what to do—or can’t figure it out within the first five minutes—you’ve lost me. If I have to give away my first child to sign up, you’ve lost me. If it takes me 10 minutes longer than I think it should take me to do whatever it is that you’re asking me to do, you’ve lost me. The more attributes you add to your product, the more likely it is that it will be confusing to new (and sometimes existing) users. Keep that in mind as you build out your site. Your time as a founder may be better spent marketing your current bells, than developing new whistles.

As such, I thought that it might be a good time to run some numbers and explore the potential impact that the iPad might have on revenues for a large news organization. This analysis is meant to be a conversation starter. The goal is to get some numbers out there for people to play with. It is, by no means, a comprehensive deep dive into all of the variables that will lead to the success/failure of the iPad as a revenue-generating machine for the industry.

With newspapers like The San Francisco Chronicle losing $1M per week, it’s going to take a hell of a lot to more than the iPad to save the industry. In what I consider a best case (and far fetched) scenario, 7% of iPad owners have downloaded The New York Times’ paid app by the end of 2011; the NYT is generating $200k/month in advertising revenues from the platform; and they are able to charge $15/month/user for subscription fees. In this case, NYT is still only generating approximately $20M in net revenues. This would be fantastic for any new venture launching a news-based app; but does little for a company that has around $2.34bn in annual expenses (and approximately $600M associated with print operations). As the NYT acknowledges in their annual report, “significant portions of our expenses are fixed costs that neither increase nor decrease proportionately with revenues.” In other words, they’re not going away anytime soon. And a $20M bump in net revenues is going to mean little to nothing.

This is, of course, what I would consider the best case scenario. It is far more likely that the NYT will be lucky to see 1% of iPad owners download the app for a $15 subscription fee—and, this figure will undoubtedly drop dramatically if they charge more than $15/month. If they are lucky enough to generate $200K in incremental (rather than cannibalized) advertising revenues, they might see an increase to net of $3.4M by the end of 2011. Not a world changer.

The problem with launching any new product in the context of a larger organization is that you inevitably end up allocating resources away from existing projects. That can be great if you are reaching a new set of users or are able to provide a differentiated product that you can market to existing users (without cannibalizing existing products). This doesn’t seem to be the case with the iPad. According to a article in MediaPost, the early adopters who are buying the iPad “look a lot like iPhone owners.” This might be a highly valuable audience (44.3% with average HHI > $100K; 58% with bachelor’s or graduate degrees), but it is a highly valuable audience that The New York Times and other newspapers are already reaching via their (free) iPhone app. Yes, the user experience on the iPad will be different; but will it really be that different? And, will it really be so different that people will be willing to shell out $180 + dollars a year for it? I doubt it.

Spreadsheets can be found here: View new-york-times-ipad-analysis-xls (Open as Read Only; to make changes, save it to your desktop).

A few notes on the spreadsheets:

Please note that these spreadsheets provide a rough estimate of the potential revenues and costs associated with expanding into the new form factor. This is by no means a comprehensive analysis. However, I figured that it would be worth putting a stake in the ground and starting a conversation.

On the Sensitivity Analysis tab, you can see how three of the more important variables–% of iPad owners who download the app, sponsorship revenues, and monthly subscriptions fees– affect the overall revenues. There are obviously other variables that will impact the overall return on the project. The spreadsheet has been set up so that you can adjust these variables and see the impact on the net revenues. You can adjust, for instance, the salary expense and see how that will affect revenues holding all else equal. I didn’t include a laundry list of expenses (e.g., marketing) because this was meant to be just a quick summary. Clearly, these could be added easily.

I have included sources for data where necessary (unhide column D). Below is some of my reasoning. Again, this is meant as a rough estimate.

• I used data from Apple Insider to get an estimate of the number of iPads that are projected to be sold by 2011.

• I used data recently divulged by Janet Robinson to get an estimate of the number of people who have downloaded the iPhone app. I divided this figure by the number of iPhones sold by the end of 2009 to get a rough estimate for the number of iPhone users who have downloaded the NYT app. I then scaled this figure down for several reasons. [N.B.: I think that I’m still being pretty generous here]

o First, the 9% (cell B29) represents a relatively mature application—NYT introduced the iPhone app in 2008. I wouldn’t expect the NYT to reach this penetration rate by the end of the year.
o Second, the iPhone app is currently free. NYT has suggested that they are going to charge subscribers anywhere from $10-$30/month for access to the full iPad site. This will undoubtedly have an effect on the number of people who actually download the app.
o Third, the stats for online usage show that when paywalls are erected, approximately 10% of the existing audience shows a willingness to pay. This would put the estimated # of iPad users who are willing to download AND pay for the app at around 1%.
o Fourth, if the NYT puts up a paywall for their online content in 2011, then they might have hardcore readers who will switch form factors. Again, there seems to be an industry-wide ceiling of 10% with regard to paywalls, so this shouldn’t move the needle much (for more on the conversion of users when paywalls are erected, see: http://paidcontent.org/table/whos-charging.)

• I used data from a July 2009 post to get an estimate of the average number of page views/month/user for the iPhone app. You could argue that these will be higher for the iPad, because of the larger screen and the differentiated experience. Also, you could argue that only the most engaged users will download the app and, as such, this figure could skew higher. Therefore, I doubled this figure in cells 8B and 8C.

• Although The New York Times will likely initially sell sponsorship packages against the iPad inventory (rather than impressions), it is useful to use effective CPM to gauge the overall potential value of the inventory (you can just substitute a flat fee into the cell and that will override the CPM-based pricing). The launch package is likely in the $300K-range, so you could scale this up for the first few months. However, I think that it is important to remember that this additional content will likely cannibalize revenue from existing platforms. For instance, although Chase bought the initial launch sponsorship, it is unlikely that these were incremental dollars. Rather the buy likely represented a shift from other inventory. In the long run, this is likely to continue. It is not likely that Chase will increase their annual spend based on the platform. If NYT can attract new advertisers, then their revenues will increase. If not, they will just be spreading existing ad spend across multiple platforms.

• I used $15 for an estimate for the subscription fee, based on the Gawker article and the subscription price that was announced by Murdoch for The Wall Street Journal. As you can see from the scenario analysis, there seems to be a floor of $7/month.

• There is an assumption that the iPad will cannibalize some of the NYT print subscribers (hence the difference between potential subscription prices of $10 and $30). I estimated that 10% of print subscribers would be converted in year 2010 and 15% in year 2011 and then incorporated this loss of subscriber revenue into the net. It should be noted that a shift of paid subscribers from print to other platforms is a major issue for NYT and other newspapers with legacy costs associated with print operations. They will definitely see declines in capital efficiency.

• The salary expense is a complete guestimate and based on what it might take to launch something outside of NYT. You can skew this downward. However, remember that a number of other expenses are not included in the assumptions.

Feel free to tear apart the model, comment, or add your own assumptions. You can alter the cells in the Excel doc; however, if you want to save any changes you will need to download it onto your desktop.

Full disclosure: I used to work for The New York Times as a Digital Product Marketing Manager where I helped build advertising programs around new product launches. I was laid off, along with 100+ colleagues, last April. This analysis is not based on any insider information and certainly does not represent the views of the company. I selected NYT because it is one of the newspapers most widely discussed and is one of the few newspapers that might actually have success in launching an iPad app.

The future of the local social web lies at the confluence of two emerging realities: Government 2.0 and Media 2.0. Here we see social networking tools, user-centered design, wikis, blogs, and mashups being used to create novel networks and platforms that enable a new civic reality: Community 2.0.

According to technologist Tim O’Reilly, Government 2.0 has several defining characteristics. Foremost is the concept of government as a platform, rather than a service, that enables the development of an ecosystem of self-governance, transparency and accountability. Whereas Government 1.0 represents power in the hands of the few; Government 2.0 represents power in the hands of the many. Citizens become participants, rather than observers, in their local government, actively engaging with civic leaders, government officials, and each other to proactively define and solve the most pressing local issues.

The social web is also leading to new models in the media industry. According to Jeff Jarvis, the hierarchical, siloed world of mainstream media is being replaced by a new news ecosystem that is ever-dependent on a network of voices and links. There is no longer one centralized, autocratic, top-down news source, but a series of linked enterprises—both large and small—that work together to report on local issues. These professional and amateur journalists do what they do best and link to the rest , creating a richer and more vibrant community of voices at the local level.

The new news ecosystem is built on an interlocking system of platforms. Imagine if you combined hyper-local versions of WikiLeaks and data.gov , with SeeClickFix, Document Cloud , Meetup , citizen journalists, and local news sites. You would end up with a new news ecosystem that is more transparent and efficient. Using these tools, news organizations with smaller editorial teams would still be able to perform the critical watchdog function that is a necessary component of a well-functioning democracy.

In Community 2.0, the relationship between government, the press, and the citizenry evolves into something that is much more transparent, engaging, and active. It is about redefining the idea of the Fourth Estate . Members of the former audience are now producers, not just consumers. Members of the former constituency are now actors, not just voters. Community 2.0 creates a living, evolving ecosystem of citizens.

Community 2.0 is open, local and vocal. At the heart of Community 2.0 are platforms like SeeClickFix, which make the traditional modes of communicating with media and the government more iterative, process-oriented and real-time. Using these tools, voices are aggregated, issues are documented, groups are organized, actions are broadcast, and citizens are more engaged in their environments. The output is a curated, crowdsourced live stream of information detailing the most topical and timely issues in a community.

Earlier this fall, The Knight Commission on the Information Needs of Communities in Democracy released its report detailing the ways that technology can be harnessed to help local communities help themselves. Using citizen-centered design, SeeClickFix has created a multi-platform social tool that allows citizens not just to complain, but to act. It enables Community 2.0, where citizens can communicate with one another to solve the most pressing issues in their cities or towns—from graffiti to crime to potholes to transit issues. It allows citizens to self-organize, crowdsource solutions to problems, reach out to relevant public officials, and work collectively to improve the quality of life in their cities and towns. The power of the tool is not limited to the few, but open to the many.

The local social web embodied in Community 2.0 is more inclusive. Web 2.0 technologies like SeeClickFix can atomize activities to reduce a primary barrier to civic engagement—time. Unlike a town hall meeting, that requires a significant time commitment; systems like SeeClickFix account and provide for different levels of engagement and make the act of contributing to the community simple. As these constraints on participation are liberalized, a wider cross-section of the community begins to contribute to the collective efforts. In a networked information economy where citizens are linked together, the tragedy of the commons is replaced with the promise of the collective.

On SeeClickFix we have seen utility companies, clean air non-profits, police chiefs, public works officials, State Transit officials, business improvement districts, city councilman and citizens all working together and communicating on issues to resolve them. Since no one individual typically owns the problem and no one agency typically can solve it, SeeClickFix enables these types of public/private partnerships.

Something interesting occurs within a community when people begin to experience the power of the SeeClickFix platform. As with any networked tool, the utility of the tool increases exponentially as the number of users increases. Residents start by using SeeClickFix to do simple tasks, like reporting potholes and traffic issues, or noting that they would like an issue fixed. They are alerted via email when people join the conversation which allows them to see that others in the community share their concerns. These alerts draw users back into the conversation and help to create a sense of community. The next step in the evolution from resident to member of Community 2.0 is when people use the tool to self-organize to find solutions to the problem, moving the community from complaint to action.

The impact of SeeClickFix is magnified through the positive feedback loop that is created via interaction between media, citizens and the government. In New Haven, issues are being uploaded on SeeClickFix. The New Haven Independent and The New Haven Register are then using the tool to source stories. Links to the issue on SeeClickFix are embedded in these stories or in the reader comments, directing others in the community to contribute to the conversation. Links to the stories are embedded in the issue report on SeeClickFix and used as rallying cries to gather support. Emails are sent to government officials, citizens, non-profits and other interested actors detailing the issue and alerting them when someone else in the community has joined the conversation. Government officials can post on the issues and thus communicate with many citizens at once. It is these multiple layers of feedback that encourage repeated engagement.

Recently, SeeClickFix was used to report increased instances of muggings occurring in a specific block in New Haven. The New Haven Independent used SeeClickFix to source leads for a story. The story linked to SeeClickFix , where the problem had first been acknowledged. Immediately, hundreds of citizens voted to have the problem “fixed.” Neighbors used the platform to organize a neighborhood watch, suggest solutions such as better lighting and an increased police presence, and arrange a meeting with the Mayor. Officials from City Council and City Hall responded to citizens’ concerns via SeeClickFix and followed-up these online conversations with offline meetings to work to resolve the issue. These meetings have lead to promises of increased lighting from the City and the arrest of several mugging suspects. More importantly, the neighborhood is now better connected and, therefore, better prepared to self-organize to solve issues in the future. SeeClickFix has enabled the creation of Community 2.0.

This is just one example of the way that the tool is being used in one city. Now imagine a world where we have data from every city and town across the country. Through geographically-specific collaborative democracy projects, we begin to see patterns of engagement, self-organization, deliberation, and problem resolution. We can evaluate what works and what doesn’t and then share this information across the platform. Experts in one city who have discovered solutions to issues that are broadly applicable to other cities can easily disseminate this information. Web2.0 allows for the creation of a new collective commons, where hyper-local, hyper-specific issues are hashed out in an open and transparent manner and then dispersed across the network.

Through the web and tools like SeeClickFix, an instrumented, interconnected and intelligent local citizenry coalesces to become Community 2.0.

Last night there was another in what has become a string of muggings at the corner of Olive and Court Streets in New Haven. The incident occurred around 6:00 pm and by 7:30 there was an issue opened on SeeClickFix (http://www.seeclickfix.com/issues/10256). As of this posting, 45 people have commented on the thread.

As reported in a story in The New Haven Independent, poor lighting in the area is contributing to the proliferation of crime in the area (http://www.newhavenindependent.org/archives/2009/11/ashley_kremzer.php). The problem was first acknowledged in SeeClickFix a month ago (http://www.seeclickfix.com/issues/9603.html) and over 133 citizens have joined the conversation to voice concern over the significant public safety issue that has arisen.

Surfing through the comments provides insight into the ways that SeeClickFix can be used to rally support around an issue and engage with government. Several citizens have posted contact information for the New Haven Police Department and Mayor’s office. Others have suggested that citizens form neighborhood watches and attend the Mayor’s open house this evening en masse to discuss the issue. Email alerts have been sent to the Mayor’s office, the Downtown-Wooster Square Management Team, the Downtown-Wooster Square Policing District, and the New Haven Police Department.

And the collective action is beginning to have an impact. Wes on Wooster wrote:

I emailed Mike Piscitelli this afternoon and soon got a return call. He was very supportive and assured me that a number of departments are aware and working on the situation. He also said that a few suspects have just been caught.

I hope that everyone will show up at the neighborhood meeting on the 16th. In the meantime, I hope the NHPD will station a patrol car or unmarked during the evening hours to curtail this dangerous criminal activity.

After an email alert was sent to Alderman Smart’s office, he has jumped into the conversation, acknowledging that the muggings pose a serious public safety issue and that resolution is top on his list of priorities. The Alderman has already contacted the City Engineer to advocate for increased lighting in the neighborhood that will help mitigate the problem in the long-run.

The Wooster Square Block Watch has been intensely involved in advocating for lighting in the area, using SeeClickFix as a tool for rallying support. According to The New Haven Independent, their voices are being heard—the group has a meeting with Traffic Chief Mike Piscitelli and other city officials scheduled for Dec. 16th.

It is amazing to see the positive feedback loop that is being created by the interaction between SeeClickFix and local media outlets in New Haven. Issues are being uploaded on SeeClickFix, The New Haven Independent and The New Haven Register are then jumping onto the thread to source stories, the stories are being used as rallying cries on SeeClickFix to gather support to have the problem fixed, and the increased citizen participation is being conveyed to government officials via email. With coverage on the major news sites, citizens then become more aware of the fact that they have a platform for voicing their concerns to local government officials—and that the officials are actually listening.

As Plato said, “the city is what it is because our citizens are what they are.” When the citizens are vocal, action will follow. Pretty powerful stuff.

1. Real Time Content comes to the Newspaper Industry: From live sports coverage to live coverage of the election to Twitter feeds, the newspaper industry has embraced the real time web. Over the next year, the industry will struggle to make this stream of information not only readily available and integrated into their sites, but useful. This leads to innovation # 2, curation of the stream.

2. Curation of the Stream: With the addition of real time feeds and the abundance of content available across multiple platforms, newspapers will increasingly have a curatorial role to play. This might be one of the areas ripe for pay walls. There is a chance, and I say only a chance, that users will value curation enough that editorial teams can charge for it. It is all about context around the content.

3. Increased personalization: This doesn’t just mean allowing users to choose one RSS feed over another, it means creating a completely unique experience tailored to each users’ needs. What do I need to know right here, right now, and why? Those are the questions that the newspaper industry will need to answer for each user. This will be a far different role than the one than newspapers are playing now—where it is the editorial team, and not the user, who is dictating what is important.

4. Augmented Reality & Location-Based Applications: Newspapers will begin to take a cue from the gaming industry and incorporate elements of augmented reality into and around their content. There are some interesting potential applications that could be built around this. Imagine traveling in Paris and having access to all of the New York Times content relevant to your current location. Layar.com is already doing some incredibly interesting work in this arena. It should be interesting to see if the newspapers can follow along.

5. Hyper-Local Coverage: With $13 billion in local advertising dollars up for grab, you will continue to see some of the larger mainstream media companies move into the hyper-local space. This will increase the content available and, hence, the need for curation and hyper-personalization. Patch is the beginning, but certainly not the end.

6. Paid Content Walls: Whether you agree with it or not, paid content walls are coming. One would hope that the industry does something interesting here and doesn’t just try to put up a wall around commoditized content. If they do, they will fail miserably. Why not put up a site where curators can add context to the newspaper industry’s content? Users could bid for a limited number of access slots to the curators feeds. The more time and effort the curator takes to provide content and context, the higher the bid they receive. Curators would share the revenues generated via bidding with the newspapers whose content they are linking to.

7. Data Visualization: Let’s face it, data is boring. Visualization tools are the only salvation for making sense of the tremendous amount of data being generated every day. Word clouds will seem clumsy and naïve once newspapers begin to get creative in this area. The New York Times has already done some amazing work in this area through the development of their multimedia tools. In order to draw audiences, other newspapers will need to move more towards visual journalism.

8. Community Organizing Tools: SeeClickFix is one example of the tools that are being created by enterprising new ventures to fill the reporting void being left by the newspapers. It allows individuals to report on issues in their immediate area—from potholes to uncollected trash to broken headlights. Novel interfaces with local governments and media outlets mean that the information is getting to those people who can find solutions to the problems. These tools enable individuals to create a collective voice around issues of immediate interest to them.

9. Outsourced Layered Content: Newspapers previously tried to provide all news and information to a specific set of people within a specific geographic area. Given current economic realities, this is becoming increasingly difficult. I have argued for awhile that the delivery of local news is going to evolve into more of an amalgamation of what could be called content layers. Newcos in this new world are getting scale not by covering all things in one market, but by covering one thing, really well, in all markets. Game Changers does this for sports; SeeClickFix does it for government accountability/community engagement; Outside.in does it for content aggregation. When you break it out like this, you start to see other opportunities for monetization outside of traditional advertising. Game Changers has the iPhone app; SeeClickFix has a premium model that is geared toward governments. This is the most likely immediate opportunity for new ventures. And, that brings us to #10.

10. Increased Competition: Industry disruption breeds opportunity. Newcos and VC funds have begun sorting through all of the detritus leftover from the disintegration of mainstream media firms and honing in on opportunities for innovation. Y Combinator’s new focus on “The Future of Journalism” is one example. And, where Y Combinator goes, the rest of the tech industry tends to follow. So, mainstream media companies should consider themselves warned.