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About 6 month ago, I had thought that the world of entrepreneurship has really changed and that various factors had make it much much more accessible to the “average joe.” I called it the rise of Armchair Entrepreneurship

Today, I realized I was somewhat wrong... Nicholas Carr of Harvard wrote an enlightening post, FON’s unsavory buzz, reflecting on a WSJ article regarding FON’s blog-lebrity advisory board.

The is something else here that Nick is implying... which is that getting in good with this virtual “blog-lebrity” network has replaced the old boy network of yester-years as the pre-requisite to generating buzz for a startup. For anyone that has been reading tech blogs for a while, he/she would have already realized the amount of ass-kissing in the comment section of any of the famous blogs.

Furthermore, many lesser known blogger spent most of their time trying to get link-backs (read pagerank juice) by posting “me-too” posts that does nothing but “second” the opinion to the original one... creating more useless noise for search engines to crawl and index...(you can call this post one of them.

So what does that mean? It means, if you dont have millions to pay for a real marketing campaing, you better get to know one of these bloggers by creating an useless “echo” blog or just commenting religiously on their blogs with lemming like comments trying to “build” a virtual relationship hoping that once you start your livesexchat company, you get some coverage.

We used to call VC’s lemmings and sheeps for the way they chase after the latest trends and the hottest startups... we need to take a good look at ourselves for the way we behave... otherwise, the pace of innovation will slow... not increase if this keeps up... the real contrarian voices are being drowned out by the group-think lead (certainly not purposely) by the “blog-lebrities”... and perpetrated by ourselves. This virtual cast system needs to end... soon...

My Dilbert Moment

Last week a guy with the same name as me joined eBay in the Taiwan office. Then all hell broke lose...

On Thursday I started to notice my usual email/minute throughput rate had dropped significantly. At first I thought I had become more efficient in communicating my thoughts thus people had stop sending me thier usual questions in responce to my cryptic stream of consciousness emails. Even before I started to pat myself for a job well done... a few guys dropped my cube and told me that I had missed a few meetings because their emails were being routed to some guy in Taiwan utterly confused by the meeting request, deck revisions, and model edits... (imagine its only his first day at work).

No big deal I thought... I’ll just email this William character and demand to get my name back :)... no such luck... its his name as much as it is mine... just cause I have “seniority” doesnt really mean anything. I tried to get him to put his middle initial in the corporate directory but that didnt fly. Despite a full semester in a negotiating class taught by a former NFL agent, I wasn’t able to make any progress. In the end, we compromised... he will forever be know as “William Hsu (Taiwan)”, and I’m “Will Hsu (NABU)”... yes... just like Star Wars... you know, like Queen Amidala of Naboo... So for as long as I’m at eBay... that will be my name... blah blah blah of NABU... or until I travel to Asia, begin my quest, vanquish my nemesis, and reclaim what is rightfully mine!

(Adding insult to injury, for the sequel, this morning IT had me completely erased from the company Outlook directory... my whole row was cracking up while I tried to explain to the Jasminlive help desk what had happened... “eh... I cant email to myself “...” why do you need to email yourself?”... “I mean other people cant email me” )

Dark Side of Network Effects

Building network effects is hard... but once a startup has gathered traction, network effects can also reverse itself pretty quickly. Its not all rosey, sit back, and collect the money... Case in point... Miva networks.

The company generated 219 million paid clickthroughs during the quarter. That’s a 13% reduction from what it produced a year earlier, despite growing its base of advertisers by 20%. This isn’t a mixed bag — it’s just bad. Revenues falling faster than clicks means that the livejasmin company is generating less money per click.

Found it on Motley Fool this morning while checking on my portfolio...

These guys was one of the pioneers of the PPC ad network model. However somewhere along the way, “bad” sites got into their network and they are caught in a situation where they are unable to sacrifice critical mass for quality. And thus, the downward spiral begins...

1) bad sites join network

2) low quality traffic click through ads

3) low conversion for advertiser

4) bids for words goes lower

5) high quality sites leaves cause they can get higher monetization somewhere else

1) more bad sites join network that got kicked out of google/overture

So even though partners are increased at 20% word pricing droped significantly more... this is a cautionary tale for all the web 2.0 plays out there... if you attract the wrong kind of community initially, you are building the wrong kind of network effects that could quickly deterioate.... for example, if Digg attracted spammers when it was initially launched, they would not have become what it is today... if craigslist was over-ran by best-buy when it first launched, no one would go there... chose carefully where you launch your site... not all traffic is good...

Multi-Step Strategies and LaLa (aka Anselm’s new startup)

Multi-step strategies are scary (the company has multiple points of failure that could potentially compound)... but that is what the web is built on... Google is a perfect example, so is Meebo... any company that tries to aggregate traffic first and figure out how to monetize that traffic later is in a multi-step strategy game... VC’s and entrepreneurs calls it “Vision”...

Anselm’s startup finally launched today (or atlease PR wise). I barely got to know the guy before he left to do it, but I did get the name of the company out of him before he left. Anyways, LaLa got alot of PR today from SFChronicle, Mercury News (Silicon Beat) , and more.... As with the grumpy blogosphere these days, people are quick to judge and diss on an idea... over at TechDirt the flames are definitely flowing...

So here is what I got.... PeerFlix for CD’s are not that big of a deal... its pretty cool... but its not gonna make Anselm rich like joining Google (go read the WSJ article)... bartering sites are cool too, but thats about it...

No, Lala is trying to be more than PeerFlix for CD (copying a bad idea is a sure way to fail :) )... the nugget is in this...

For the $1 it charges a user to receive a CD, La la gives 20 cents to the artist.

Why the hell would the WhiteStripes care about 20cents from Lala? they wouldnt... this whole peerflix thing is just an excuse/trojan horse to build a community and social network... on top of which they are building a bunch of recommendation algorithms (Anselm didnt spent 9 month coding the front end). THEN once they reach critical mass of users (more importantly preferrences informaton & social network data) create a record label/publication/distribution network for garage bands....

Its MySpace 2.0... what myspace is trying to become... a way for garage bands to get build a fan base, distribute music, and GET PAID!!!!... 20 cents is actually NOT BAD for independent bands/musicians... $9M raised means ~$18M pre-money... you dont get that valuation by pretending to be PeerFlix for CD’s...

Think of all the tapes and CD’s you’ve recieved at parties from random bands at random parties... Lala is trying to create organization and structure around that process and community... nothing really creates loyalty and “branding” like cool album covers... so physical distribution is actually pretty important... and ofcourse it would cost next to nothing to move to digital distribution of music for independent music and keep majors as a physical trade...

So yes... multi-step strategies are scary and hard... but thats how you take on goliaths as a startup... by being clever and out flanking the competition... I hate all the flaming thats going on in the blogosphere... lame ass people without imagination and startup experience trying to critisize the actually “do-ers”... anyways... I’m not biased at all, I havent even spoken to the Lala guys since Anselm left...

iKarma Pump and Dump

I got the following email in almost ALL my email accounts...you name it... yahoo, gmail, ebay, wharton, stanford... every single one... this is an incredibly organized and expensive stock manipulation scheme. To buy a big enough list to reach that many people, somebody had paid fortune to make this pump and dump work.

I dont know how many other people got it, but it seems to be a lot... here and onTechcrunch. The Techcrunch post is interesting in that its a post from Oct of last year yet it was re-activated with a huge thread regarding this spam issue from people searching for “ikarma” on google or yahoo. Even the CEO came on comments section to defend the company. A lot of the positive comments though, seemed a little planted (IMHO, when they write too much).

So did the pump and dump scheme work? Hell ya... The spam started on Tuesday, by Wednesday the stock went up almost 50%. It looks like someone was acumulating a big position before Monday, then waited till Tuesday to send out the spam. A bunch of fools jumped in on Wednesday and Thursday while whoever was manipulating the stock ended up selling all of it after the price popped on Thursday. The selling then spread to the fools that jumped in on Wednesday (buyers remorse) and the stock ended today at a price lower than when it all started on Monday... a cautionary tale for sure...

The other question is that whether iKarma is involved in this scheme. The huge caveat here is that I have no idea, this is pure speculation. But pink sheet companies are generally pretty sketchy and closely held by a few major shareholders. Many times these comapnies had went through multiple business models, business name, and ticker symbols. Almost all cant even tell you what GAAP stands for.

iKarma, themselves, have been putting out a lot of press releases in the wire hoping to pump up the stock and generate buzz... not exactly the best thing to focus on when you are an early stage company. Furthermore, in these press releases, iKarma seemed to be determined to get the attention of day traders by including these keywords: (press releases here)

Keywords: Reputation Management, Financial Advisor, Registered Rep, Securities Broker, Stock Broker, Financial Planner, Trust

Again, sketchy as hell... having almost nothing to do with the actual service they are offering... Next I did a zoominfo search on the President of the company and got this... Not sure if this Pitchford guy for “stockbroker shop” is the same as iKarma Scott Pitchford. BUT if they are the same person, this Scott Pitchford must be pretty familiar with the brokerage industry and how “pump and dump” schemes work. Seems entirely possible that iKarma was built as a a way to sell stock rather than a real service.

I can’t say if these guys personally responsible for the pump and dump or not, but their past behaviour doesn’t seem so innocent. If they are responsible, Techcrunch, news.com, and whole host of journalists/bloggers were unwilling accomplices by helping iKarma raise their profile. Which brings out another question on how much due dilligience bloggers should do before writing about a company... in the end... with big readership comes great responsibilities...