Category Archives: Internet Strategy

Google Launches Pay Per Action (CPA)

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I’m not going to rehash my previous post on this topic (still highly applicable – I highly recommend reading it before continuing with this post), but Google has finally launched Pay Per Action across their Adwords Network for US advertisers onto Adsense (not Search Network yet). I still believe that there are severe problems with the model, and Google will discover that it is not sustainable.

Search Engine Watch believes that Commission Junction’s days are numbered – I don’t think so! Andy Beal also has a similar view. We’ve been running CPA campaigns through Google for nearly 4 years now, and I think Google vastly under-estimates the risks and relationships at play with CPA marketing. The biggest concern though, is that Google’s internal arbitrage of CPC to CPA (which is what they’re doing, effectively), pushes prices CPC prices up in the short term, while they make mistakes that we’ve forgotten how to make, in our Clicks2Customers business.

Also, from the Inside Adwords blog, it’s not clear how they will deal with chargebacks – I’m guessing that the merchants have to factor this in? Can you imagine what’s next? Click-Order-Return (COR) fraud (i.e. Website owner clicks a merchant, places an order – merchant pays Google, Website owner returns goods – Google doesn’t refund merchant and Google pays Adsense site share of CPA). What if I’m a Google stockholder and I make a $1m purchase in order to boost the earnings, and then return or cancel the order – in theory, Google still gets paid and their stock goes up, but the merchant is out of business – just summising here, but I still don’t think CPA is viable for Google.

As I said in my previous post on this topic – Google has a smart bunch of guys, and I’m sure they will figure it out!

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My Summit TV Interview

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For those of you that didn’t catch my Summit TV interview in November 2006 on DSTV, after incuBeta won South Africa’s Top 100 Technology Award, here it is…

Also, my brother recorded the following clip on his cellphone on the night of the awards – he’s understandably quite excited:

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Synthasite & My Venture Capital Blogroll

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I’ve been spending much of my time reading and understanding Startups & Venture Capital, especially in the US markets (which was somewhat foreign to me, in terms of financial structuring – being South African, of course). As many of you know, Synthasite has been under development for a while now, and sits smack in the middle of that over-used catchphrase, Web 2.0. For me, it’s been a great learning curve both from a hands-on perspective (with incuBeta having just raised private equity/venture capital from Mark Shuttleworth’s HBD Fund), but also a theoretical one, where I have been trying to build the mental bridge between what an entrepreneur wants, and a venture capitalist wants.

We’re launching Synthasite Version 2.0 on 1 June 2007 and in terms of the rebuild it will have taken us a total of 6 months from concept to deployment, using a core team of 3 full time engineers, 1 QA/Server infrastructure resource & some very agile methodologies (utilizing Basebamp & Rally) to launch Version 2.0. By comparison, Version 1.0 took the inputs of over a dozen people and about 2 years of development to complete. Couple that, in addition to the fact that we were building an AJAX application way before it was even called AJAX, means that there was a large amount of R&D that went into evolving the product, none of which was wasted, and ultimately led us down the new path that we are walking.

We aim to relocate the Synthasite team (6 people in total) to Silicon Valley in the next few months and run Synthasite from there, spinning it off as a separate entity to incuBeta – which as a Group is growing quickly in many areas, hence the reason to apply a more dedicated and focused team to grow Synthasite. I will be leading the company from there and I have effectively taken over as CEO of Synthasite.

Update: Here is the video embedded for your convenience.

Why are we doing the move? Paul Graham’s article on “Why Startups Condense in America” somehow struck a chord with me. Synthasite is South African homegrown technology, but in order for us to grow the business and stay ahead, it seems like the most obvious move is to base ourselves at the center of the the tech world. That’s not to say that you can’t grow a tech business elsewhere, but for most techies & geeks, at some point in your life, you want to be in a startup in Silicon Valley! Also, I had a meeting with Reid Hoffman, CEO of LinkedIn back in January and he basically said to me that (admittedly biased), it’s no coincidence that global companies such as eBay, Yahoo, Google & YouTube are all within a few miles from each other – good point!
Why have we done the rebuild? In short, when we started building Synthasite – Internet Explorer had a 90% market share and Firefox was a 1980′s movie starring Clint Eastwood. That was then and this is now – the new version of Synthasite will be cross browser compatible and have a host of other great features. Bear in mind that we’re only going with an Alpha launch in June, with Beta expected sometime around Q3, not everything will be in the first build.

Another good reason for the relaunch was that the market has evolved considerably since the original planning and build phase, and it was good to take a step back and create a vision for Version 2.0 before jumping straight in. Much of what has been done up to now has been trial and error – with great feedback from our Version 1.0 Beta testers. We now know where we are going, and in the spirit of all things “Web 2.0″ we’ve gone back into Stealth mode until June 1st.

So, a bit of advice to other Internet startup entrepreneurs that I have either learnt the easy way, or the hard way (not going to say which!):

  1. Read Jason Fried’s Getting Real
  2. Bootstrap Version 1.0 and get it out there ASAP – user feedback is imperative
  3. Talk to other entrepreneurs who have been there, done that
  4. Don’t bother the VC’s until you’re really ready with a focused offering – you only really get one shot to do a solid pitch.
  5. Just do it! Stop planning and start prioritizing. It’s amazing what we can achieve when we focus and take action.

Here are some of the VC blogs that I read regularly – I don’t necessarily know these guys, but trust me, judging from their content, they know what they are talking about – and it’s worth taking a page out of their book, err… blog.

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Adobe Releases Online (Web 2.0) Version of Photoshop

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The headline says it all!  I’m hoping they don’t release an online version of Dreamweaver, before we get Synthasite out into Open Beta (SOON, I PROMISE!).  We truly see Synthasite as a next generation Dreamweaver and we’re doing everything possible to release Version 2.0 to the market – but more on this later.

The one concern I have is that Adobe still doesn’t understand the market of Web Applications (in my opinion).  I don’t believe that advertising supported web apps, especially productivity apps, are the way to go.  I understand that Google does it with Gmail, but that’s slightly different in that Gmail can contextualize the ads to the content of the emails.  I doubt that there is much contextualization that could occur within an online version of Photoshop.

One of my favourite blogs posts on the topic of Web 2.0 Business Models is by Ken Yarmosh, from Technosight.  I’m going to summarise it, so basically, network effect business models are best suited to advertising as a means of reaching profitability/sustainability, whereas technology plays like Photoshop & Synthasite are best support by premium use and partnership models.   It’s a great post, and I often refer back to it – so I advise that those in the Web 2.0 sphere particularly give it a read.

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Top 20 Reasons why Web Apps are Superior to Desktop Apps

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The Synthasite team recently had a strategy & planning session, and one of the things we did, was to look at the real benefits of why users (we hope) would use a platform like Synthasite, instead of Dreamweaver or Frontpage (i.e. Web App vs Desktop App).

There is a screencast demo of Synthasite that we produced from the sessions, but also, here is the list of reasons that we came up with as to why Web Apps are superior to (most) desktop apps – and herein lies the future of the web! The clip is available on YouTube here and in higher res format here.
And here are the 20 reasons why Web Apps are superior to Desktop Apps!


Never installed

Browser based software never requires installation processes or hard drive space. It lives in a virtual cloud in the Internet and this means that whenever you launch it, it always has the latest version. Ajax has made it possible to deliver Desktop-like look & feel, and functionality, with no loss of performance!

Updates are seamless

Instead of having to patch each and every individual user, the patches/upgrades are applied to the server and each user received the updated version the next time they log in.

No legacy

This is a big issue for traditional software vendors. Users who purchase previous versions of a software almost always will result in legacy versions lying around which need support (which is costly). The problems relating to legacy software are almost limitless, and often is not efficient for both the vendor or the customer.

No admin rights required

Finally, a world where the network administrator in the company does not have to approve the installation of your software!

Available anywhere, anytime

Ok, so the anytime comment is a stretch, but that’s only until Adobe’s Apollo gets here (here’s hoping!). The same way that people access their email from any browser, web apps are exactly the same.

Platform independent

This opens a wider market for software vendors – no longer do they have to build technology around a specific platform and limit their market (or incur additional costs to build for another platform). The browser is the platfom and therefore I believe you will see increased uptake in OS’s like Mac OS and Linus, due to the increased availability of Web Applications.

Less environmental conflicts

There are certainly going to be a lot less bugs in Web based software, due to the fact that it is not depending on any of the hardware or environment settings in the OS that may usually cause a problem.

Enables social possibilities

Many Web Apps are creating chat facilities and the ability to share your work in real time. This removes the previous “stand-alone” functionality that use to exist with most installed desktop applications. The world is becoming more and more social – people want to collaborate and work online together – Web Apps allows this, painlessly.

Lower cost of sale

No boxes, printed manual, expensive shipping costs, CD’s, distribution channels, middlemen, etc. Desktop apps are going to be more economical to produce and will result in a lower cost of sale!

Usable from inexpensive PCs

$100 Laptops, here we come! What do you need a dual core processor for, if you’re running a thin client application? This opens up a world of cost savings for both companies and consumers, especially in the field of productivity apps (obviously, not gaming!).

Piracy-proof

Here is a big one. Imagine a world without software piracy. That world is here, and Web Applications are the solution to that problem. Next problem, please!

No bad debts

Sofware companies are often owed money from distributors, that invariably go bust from time to time. With Web Apps, the cash is collected upfront and as long as the customer pays, the account is in good stead.

Low-cost support and maintenance

Given that the browser is now the platform, operational support costs and maintenance for Web Application providers will drop substantially. No need to have expensive operating system gurus on hand to help with installation problems. Also, using products like the Amazon EC2 cloud, will allow scalability, without a proportionate increase in costs.

User’s data is kept safe in hosting environment

Although this is probably not going to be true for all Web App companies, but using providers like Rackspace or Amazon’s EC2 cloud will go a long way in reassuring your customers that their data is safer than on their desktop!

No Viruses

No installation, means no viruses. Start shorting all those Anti-Virus stocks! Enough said!

Low cost global distribution

No more channel reliance. Most software companies make it or break it, depending on their channel. Forget that – focus on the biggest channel of all – the 1 billion users online!

Lower software price entry point for customers

Given the benefits above, you will see more products such as Basecamp and Synthasite that will offer far greater value than their desktop equivalents.

Access to the entire assets of the Web (APIs, widgets, messaging, collaboration)

By being wired into the web, Web Apps are able to integrate seamless into API’s etc and are a lot more customizable, than traditional software applications.

Mobile is here

Compiled desktop applications are going to have a hard time being adapted for mobile devices. Web apps are ready made (in most cases).

Widest potential audience

For all the points above, this basically unlocks markets for software vendors that previously were inaccessible due to technical reasons.

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