Felicis Ventures Blog

Don't Let User Experience be an Afterthought

One of the lesser appreciated aspects of Google's success is its commitment to being the best, not just in technology but the User Experience as well. Even when the company was barely a year old, its engineers obsessed with response time, simplicity and purity which then reinforced the favorable brand image of Google. While its competitors were throwing tons of money on advertising (CMGI announced a $ 100 million advertising blitz for Altavista on October 1999 [!]), Google was focusing on other aspects like keeping response time below one second (mentioned again by Marissa Mayer during the recent Web 2.0 Conference in San Francisco), innovating with the world's coolest spell-checker, besides improving core search technology. It was all based on cold, hard data: 25% of Google's users frequently misspelled their queries, while the usage dropped noticeably when the response time crossed over one second. This might not be ground-breaking news, yet early stage companies could learn quite a lot from it.

We all love great technology but it's the User Experience in my opinion that really turns great ideas into more pervasive success stories - iPod being the classic example. Judging from Apple's Leopard or Microsoft's Aero in Windows Vista, User Experience keeps gaining on importance as evidenced in some of the biggest tech products.

I would like to highlight two recent User Experience examples I personally liked, though both of these sites are pretty early stage and their success by no means guaranteed:

• iScrybe (check out their demo on YouTube linked from their homepage)
• Pluggd (great coverage of their Audio Search UI in VentureBeat)
• MyBlogLog (their Rockin' Widgets are all over the blogosphere)

While UI alone won't make a site successful, great technology coupled with equally appealing UI, makes that technology more useful, more accessible, and more compelling.

Silicon Valley vs International...

Is there a significant opportunity for non-English, non-US startups ?

Arguably, the valley firms have faster, better access to venture capital, created more value than in any other place in terms of market capitalization and benefit from close proximity to some of the world's largest established firms like Google, Cisco, Apple and Oracle, which were once startups themselves. This also translates into a self-replenishing and immense talent pool that reinforces the valley's lead in the global startup scene. But there are also impressive international success stories :

Mixi, the Japanese social networking phenomenon, was launched on February 2004, and went public on September 14 of this year in the Tokyo Stock Exchange. While neither its 5 million members nor its close to $1 billion market capitalization (as of September 2006) compare to  US giants like  Google, it was the number 3 site in Japan with about 7 billion monthly page views in September 2006. That's pretty impressive for a company that's only 19 months old. Baidu, recently chosen as the Best International Stock for 2007 by Motley Fool, was founded by Robin Li, formerly of Infoseek by 2000. It's currently valued at nearly $4 billion and remains the leading search site in China. Skype of course was the big European "Successful Exit" with its $ 4.1B sale to eBay in 2005. The list can be extended to many others like Israel-originated Mirabilis (creator of ICQ) which was acquired by AOL.

There are many other international startups in earlier stages working hard to differentiate themselves with unique ideas or useful features compared to their US counterparts. Newly renamed Xing (formerly OpenBC) for instance is trying to distinguish itself with the ability for each member to contact another directly as opposed to on LinkedIn which has been the leading business social network in the US. Xing is currently awaiting its IPO on the German and Swiss stock markets. Lokalisten.de from Germany is another social networking site building communities based on the same city (you actually have to choose a "home city" when you log in). Pikeo, a new photo-sharing site is available in Spanish and French besides English which as  TechCrunch points out, might be a key feature onto itself as non-English speakers increasingly seem to prefer sites in their own language.

Being in Silicon Valley without a doubt constitutes a huge advantage for startups but that doesn't mean success can't come from outside of the US. It's exciting to see innovation proliferating globally.

Online Video Ads: Keep them Short and Engaging

A WebAdvantage.net study conducted on June 2006 found that the top concern among online video advertising buyers was "How to Keep Consumers Engaged with the Ad" based on 96% of the respondents in the survey indicating that they were "somewhat or very concerned" about this.

This of course doesn't come as a surprise because most online consumers are hard to please. Their short attention span is confirmed by a Forrester Research Online report which found that 75% of online users ignore the pre- or post-roll ads but are more amenable to ads appearing on the side of the video, especially if the ads come in the form of text links. As for in-stream video ads, according to research from Podzinger, most consumers are willing to tolerate online video ads if they're 15 seconds or shorter. The short attention span is not just limited to the ads: that same research also reports that most people watching online videos usually view no more than 15% of the entire video.

Despite the challenges, online video advertising is clearly poised for strong growth following the path of online search advertising: data from a November 2006 American Advertising Federation Survey of advertising executives points out that search advertising is considered to be the most effective emerging media (71% of respondents found it very or somewhat effective); Online video advertising is next with 40% of respondents finding it very or somewhat effective, ahead of other mediums such as Mobile, Blogs and RSS. Success should not be taken for granted however, so online video advertisers better keep their message short, engaging and relevant.

(Note: the research and surveys mentioned above were found in eMarketer)

Seeking More Original Ideas in Web 2.0

Searching for "Web 2.0 bubble" on Google returns over 64,000 results, including numerous hits from blogs, major newspapers like San Jose Mercury News and many other sites. According to this ZDNet blogpost of a few days ago, more than 55% of video streams on the web is dominated by the top 10 sites yet many more video-sharing sites have been created. The revenue model is fundamentally the  same with slight variations of when and where to insert ads. The picture isn't that different in photo-sharing sites where once again tons of sites are competing for much of the same user base with similar business models. I'm not holding my breath for another multi-billion dollar acquisition in this space.

According to an eMarketer study published on September 2006, online ad spending slowed down to less than 30% this year (after growing more than 30%, two years in a row). It's impossible to imagine all these start-ups succeeding. Yes, Web 2.0 is much more than photo- or video-sharing; but these segments clearly exhibit the signs of a bubble - and originality has suffered as a result. Intensely competing for similar customers with undifferentiated revenue models doesn't seem like a recipe for success (Full disclosure: I have invested in companies that target video advertising in different ways, so I'm playing my bet differently in this space). Hence my excitement when I come across a truly original idea, especially one that actually solves a recurring problem.

A great example is Remote Control Mail covered by Marshall Kirkpatrick on Techcrunch on November 22. Here's an application that would be so useful for so many of us constantly crunched for time or often on the road. Dealing with junkmail is one of those drudgeries of life none of us enjoy. Issues like privacy and accuracy will probably concern new users for Remote Control Mail - yet the idea of outsourcing junkmail handling and regular postal mail processing to someone else is very interesting (even at an activation fee of $25 and monthly fees of $19.99).

No need to ask Santa for a nice gift this Holiday season: the chance to back new, original start-up ideas with passionate teams would be just fine.