Vinny Lingham’s Blog

I’m proud to announce that Synthasite has finally gone live today (as promised!), into Alpha. Remember, this is basically a technology teaser, which will indicate more about what we are doing, but we are still a long way off! Comments, feedback and reviews are most appreciated - please blog about it, tell your friends & spread the news - Synthasite is now live!! We’re limiting accounts right now to the first 1500 users, hurry and get yours now, even if are only going to play with it later!

Please feel free to distribute the following press release:

For Immediate Release:

Synthasite, an AJAX based Web Publishing Platform, emerged today from stealth mode. The 6-person startup based in Cape Town, South Africa was recently spun out from the incuBeta group as a separate stand-alone company that will focus on delivering a world class web based software platform for web publishing, focusing specifically on Widgets & Mashups. Synthasite looks and feels like desktop software, but remains firmly rooted in the browser with no reliance on client side technology.

Synthasite CEO, Vinny Lingham (Founder of a leading Search Engine Marketing company, incuBeta), said the following: “Synthasite’s Alpha [Tech Preview] release today was a milestone in the company’s aim to become the standard for web publishing. We’re releasing it at this early stage in order to allow the community to assist in the direction that we will take Synthasite and we are very excited about the potential for this space, especially with the rapid rise of Mashups & Widgets. Synthasite ushers in a new era for web publishing; where people construct using existing building blocks, rather than build everything from scratch, and publish collaboratively from any machine rather than being stuck on a single PC or OS. We’re very excited about rapidly releasing many of the features on our extensive roadmap. We’re opening the Synthasite framework to the developer community so that they can build their own components and templates, and we will also be enabling source code level editing - although this will only be available in the Beta released, scheduled for Q4.”

Synthasite is also being tested on Amazon’s Elastic Compute Cloud, which in theory allows it to be infinitely scalable, although accounts will initially be limited.

Synthasite is currently being seed funded by Lingham Capital, incuBeta & Miombo Capital, all South African based investment firms.

Update: 5 June

Less than 1000 accounts left! Here is a quick video of the Synthasite Alpha Release:

I’ve been very quiet lately, mainly because there are a lot of changes happening at the moment back in Cape Town.

As many of you know, Synthasite is launching soon (final confirmed date for the Technology Preview / Pre-Alpha is 4th June 07). We are looking forward to showing the world what we’ve been up to. Just to set expectations, we’re not releasing a fully functional application, but instead we’re trying to get feedback from our users in the early stages of development, in order to ensure that Synthasite will ultimately meet expectations by the time we get into Beta. In my previous blog post on Synthasite, I explained that I will be taking over Synthasite as CEO and spinning it out of incuBeta as a separate company, with incuBeta still retaining a small stake. I also indicated that we were going to attempt to move it to Silicon Valley in order to be closer to the action.

To this end, I’ve spent the better part of the past two months chatting with a few of the VC players in the space, both in London & Silicon Valley in order to get feedback, and potentially, Series A funding. The feedback we got just from the meetings were excellent, but most importantly, after speaking with VC’s in London, the view is that if development work can be done in a lower cost marketplace, such as Cape Town and the business development team is based in the business area’s that really meets the requirements of most startups.

So, in order to cut a long story short, I, along with the Synthasite team, will be basing ourselves in Cape Town permanently to develop Synthasite, and instead of moving the entire team across (disruptions and all), we’ll instead look to setup a Biz Dev office when the time is right, in key markets. The best part is, if we keep Synthasite in Cape Town, then there is really no need for a Series A type round of funding.

In order to focus on Synthasite, it was announced internally, and now to the rest of the world, that I will be leaving incuBeta on a full time basis, and moving directly into Synthasite, effective 1 August. It’s been really great growing a startup into an award winning company, but my passion has always been startups and I’m finally able to move into a full time role doing that in Synthasite. I’m lucky that there is a strong management team in place at incuBeta to drive the company forward, and the people on the ground are very capable of delivering. In order to ensure that the company can operate independently of me, there will be a full operational and relationship handover before 1 August.

In many ways, this has been a lifestyle decision, and I’m going to also try to cut down on the tremendous amount of air miles that I continue to rack up! As many of you may understand, the disruptive nature that flying around the world has on a person, on an almost monthly basis will eventually wear you down! I would like to spend at least the next few months firmly grounded in Cape Town, enjoying the life there (and I’m in Johannesburg right now!). Charlene, my wife & co-founder, will also be leaving the company to pursue her studies further and we’re planning on taking some much needed time off and we’re going to spend those airmiles going to places that we haven’t yet seen over the next year.

On a final note, in addition to Synthasite, I have setup a small Venture Capital fund for Cape Town based startups, called Lingham Capital (no site just yet), and I will aim to assist them with small amounts of seed capital and expertise in building their businesses, all of which will need to be globally focused in the medium term. I do not intend on investing in more than 5 startups at any one time, including Synthasite. My only other investment so far is SkyRove, which is a Social WiFi business based in Cape Town and after 1 August, I will be assisting Henk (the CEO) with taking his business to a global audience.

It’s really sad to be leaving incuBeta, but I know that all my relationships both internally and externally are all intact - so it’s not really a goodbye! I’ll probably post more reflections on this, and a slideshow later this week - but this was just a relatively quick heads up.

I announced late last year that Commission Junction was establishing their Publisher Advisory Board, which was finalised today.

The full members of the board are:

Adam Viener, Imwave, Inc.
Connie Berg, FlamingoWorld.com / iShopDaily.com
Craig Cassata, MrRebates.com
Dan Murray, Ravenwood Marketing
David M. Lewis, 77Blue
Eva Klein, FatWallet
Jennifer Nissenberg, Upromise
Jeremy Palmer, QuitYourDayJob.com
Michael Coley, Amazing-Bargains.com
Paul Nichols, Ebates.com
Scott Jangro, MechMedia, Inc.
Scott Kluth, CouponCabin.com
Steve Schaffer, Vertive, Inc
Vinny Lingham, Clicks2Customers.com

In addition, Kerri Pollard made the following message:

At Commission Junction, we are always looking for ways to develop sustainable relationships and improve our services to our clients in order to drive quality results. Keeping with that tradition, we aspired to enhance the communication channel between Commission Junction and our publishers. As a result, I am proud to introduce our Publisher Advisory Board (PAB).

The objective of the PAB is to help Commission Junction build mutually beneficial solutions for the future. To meet this objective, we have recruited a group of notable, established publishers from within our network to serve as the voice for their community.

Commission Junction will proactively obtain feedback from the PAB regarding successes or opportunities they observe throughout the lifecycle of a business or technical initiative. The PAB will collaborate with the Commission Junction executive board to implement enhancements in order to warrant success for all parties.

I look forward to working with this esteemed group of individuals, and I cannot wait to watch their ideas come to fruition at Commission Junction.

Sincerely,

Kerri Pollard
Vice President, Client Performance
Commission Junction, a division of ValueClick, Inc.

I’m very pleased to be able to be the first to announce that Yahoo! has established an Affiliate Advisory Board and has invited me to sit on this newly formed Board that will deal with issues related to affiliate marketing for Yahoo!, across the company. The Affiliate Advisory will be meeting in May, as per the invitation:

“The two days will consist of meeting the CJ/Yahoo! Affiliate Team plus top Y! Executives, product discussions from each property included in the Y! Affiliate Program, Panama roundtable session, Yahoo! Developer Network presentation and the future of the Yahoo! Affiliate Program.”

This is a hugely positive move by Yahoo! and kudos to them for driving affiliate marketing into the mainstream online marketing channel. This cements affiliate marketing as one of the key online marketing channels, and for a group the size of Yahoo! to embrace affiliate marketers so closely, it really does show both momentum in this space, as well as recognition of the value that affiliate marketers can offer to both large and small enterprises.

So, if you haven’t heard by now, AOL is receiving their own version of Google Adwords (Private Label deal).

I’m not going to rehash the background and deal info, referenced at SearchEngineLand, but instead, I’ll try to explain what I see the market impact as being.

I’ve long argued the point that we should be able to price keyword by partner on all the major search engines, as they all have quite different conversion rates and “Not every click is created equally”, to paraphrase. The AOL deal has forced Google to make this move, and I think it will probably hurt their margin numbers and not just their revenues. Overall, it’s probably close to a zero sum gain as the money will flow to AOL, but their cut will just reduce. I haven’t done the math, but they might be just slightly worse off on revenues, but definitely down on margin.

Also, this impact will hurt many of Google’s partner sites that relied on high conversions from AOL to “slip” clicks through the door at higher than market value (respective earning or value per click), because of the fact that marketers cannot price each partner differently.

This is quite a complicated post, so please bear with me - I’ll try to explain this as simply as possible.

Currently, when buying Adwords ads, you pay a single price for a click & keyword that goes to Google’s distribution network.

For example (and I’m using hypothetical, BUT REALISTIC numbers here), let’s say that a keyword received 100 clicks and the breakdown by partner is as follows:

25 Clicks from AOL - 5 Conversions
50 Clicks from Google - 4 Conversions
25 Clicks from Google Partners - 1 Conversion

Total Clicks = 100 x CPC of 25c = $25 in costs
Total Conversions = 10 divided by $25 in costs, leaves us with a $2.50 CPA (Cost Per Acquisition)
Assume an average position of 3 and as you can see from above, AOL has the better conversion rate.

Let’s assume that your breakeven point is $2.50 CPA. Now, because Google runs a single blind marketplace, there is no price discrimination, which means that there is cross subsidization of keyword value (you pay an average price for everything, yet some clicks are worth more and others are worth less).

For the record, our logs indicate that AOL has the best conversion rate across all Google partners, and this simple means that if there is a separate marketplace for AOL, that prices across the Google Adwords network (especially direct) should fall, IN THEORY (see conclusions).

Now, let’s assume that we removed the AOL numbers:

50 Clicks from Google - 4 Conversions
25 Clicks from Google Partners - 1 Conversion
25c CPC x 75 Clicks / 5 conversions = $3.75 CPA

By AOL moving out of the marketplace, this would effectively mean that the remaining traffic would become too expensive, because AOL would not be cross subsidizing it (and obviously, they know this already, and that’s why they want their own marketplace). This would mean that prices would drop in order to offset the drop in traffic quality.

What would this mean for AOL?

$2.50 CPA x 5 Conversions = $12.50 / 25 Clicks = 50c CPC - almost DOUBLE what Google was raking in for them by cross subsidizing, is what the merchant would be willing to pay direct on AOL, because of the higher conversion rate.

Now, here are the possible conclusions vis a vis Google CPC’s:

1. Google CPC’s will drop as marketers move their spend directly onto AOL and adjust ROI’s according on Google. This will impact Google’s financials, as they will have to pay out a lot more money to AOL.

2. Google CPC’s will increase as dumb money floods the market because marketers are either too lazy or overworked to load AOL campaigns (highly unlikely in the long term) and instead they make it more profitable for Google to show Adwords direct ads for AOL, than AOL marketplace ads. I doubt this would occur though, but it’s a possibility.

3. Google CPC remain unchanged as AOL take-up rates are too low to impact the overall conversion number in the short to medium term.

So, logically speaking, by removing the “bane of mankind” *according to me* (Cross Subsidization) from the Adwords system, we as marketers will be able to align ourselves far more closely with the value per click.

Where do I get this insight from? Well, as an affiliate marketer, we have to watch the earnings per click very closely. EPC is a key metric and we are also able to distinguish (using our proprietary technology) the different conversion rates and therefore effective EPC’s per network partner for all the search engines. This data allows us to derive very accurate statistical models and also understand how the market is interpreted (well, as best as possible) by other players.

Every cent we spend is our own, so we have to ensure that we’re as closely aligned to value per click or EPC as possible, and therefore we’re very excited about the AOL prospects, but realise equally that it’s a lot of work.

I think this is a great move by Google and I applaud them. They’ve thrown the gauntlet down to the other search engines, and let’s see how they respond!