Occam's Razor

Convergence in the air

Interesting convergence deal where OpenWave (ex UnWired Planet, ex Software.com, provider of value added software stack for the telecom industry) buys into a consumer/content music provider.

Openwave Systems Inc., agreed today to acquire Musiwave, a music entertainment services supplier, for up to EUR114.5 million in cash and stock.

MusiWave did close a third round of funding in September 2002 for 4M€. Shareholders includes ETMF II L.P. a private equity fund advised by BNP Paribas Private Equity, Ventech and CAPE (Crédit Agricole Private Equity).

At €114M, this is a great demonstration of Europe ability to build exit in the 100M€ windows.

Tales from the long tail

Great posting on what the long tail is not.

Invoking the Long Tail is not a magic wand to explain away the apparent lack of demand for what you've got. 

The Long Tail is not a get-out-of-jail-free card for poor-selling product. Or weak sectors. Or bad ideas.

• For Long Tail effects to work, you need both a head of relatively few hits and a tail of many niches, so that recommendations and other filters can lead consumers from one to the other.
• A tail without a head is too noisy and apparently random to get consumer traction; people need to start with the familiar and then move, via trusted recommendations, to the unfamiliar.
• Likewise a head without a tail is too limited in choice; the odds of finding a niche you want are too low to bother exploring much beyond what you already know.

Thus the two big Long Tail opportunities are:

• Aggregating hits and niches into a one big curve, from head to tail.
• Creating content and products that can plug into someone else's aggregated curve.

Skype driven innovation

A Norwegian company has developed bridging technology that will allow you to link your cell phone to Skype - that will then allow you to make long distance phone calls as merely local prices. Oslo’s IPdrum is scheduled for early release this August. IPDrum also stated that they have not been endorsed by Skype, and this is complementary, rather than competition.

You need two cell phones, two SIM cards - one of them connected to your computer with internet access and the Skype program operating. Once you have this set up, you will be able to dial into the phone connected to your computer from anywhere, and then you’ll be prompted to dial the location you want to reach. Once you do so, you’ve made your call. But, of course, calling non-Skype users will get charged as SkypeOut and the fees will apply (about 2.4 cents a minute). Skype calls are free.

UK Gaming M&A's

InfoSpace has made its second buy of the year in the space, IOMO, a U.K.-based mobile games developer for $15 million in cash. IOMO develops five of the top 10 mobile games being offered by Orange and Vodafone in the United Kingdome. In the three months ended September 30, 2004, IOMO generated approximately $1 million in revenue.

In July of this year, InfoSpace snapped up the assets of Atlas Mobile, marking its first play for a piece of the wireless gaming market. Prior to the asset acquisition, Atlas announced in March that more than 1 million multiplayer games had been played on its platform in 10 weeks time.

A second transaction was also announced as Sorrent, a developer and publisher of mobile entertainment, has finalized an agreement to acquire Macrospace, an mobile games publisher based in London. (no price available on that deal).

Success on the low end (when things do not scale...)

Compare and contrast the following projects, the moral of the story : When you do have have any real technology barrier to entry (ie theVoIP industry), be very carefull of what and how you build, and build in the small, not in the large...

(1) Innovation in the small

Telio, a bunch of smart ex Erricson guys start a shoestring operation of VoIP in Norway, and become profitable without raising any significant money. They later raise a small local round (less than 5M€) and expand though acquisition to build a pan-Nordic VoIP niche operator.

(2) Innovation in the large

Internet phone companies face big challenges

Executives at the slew of small or start-up companies trying to make a go of it in the Internet telephony business — including Vonage and 8x8 in Santa Clara — can't be happy with Kate Griffin. A senior analyst at the Yankee Group, Griffin wrote a withering assessment of the Internet phone market in which she concluded that the start-ups were going to get big-footed by the cable and telephone companies. Griffin said that Vonage, Packet8, Voice Pulse and others will not be able to compete on brand recognition, service quality and customer service once companies such as Cablevision, AT&T, Time Warner aggresively enter the market. In fact, Griffin says that Vonage — the early leader in Internet telephony (known as VoIP) with 200,000 subscribers— has already lost market share to the big guns.

AOL France to go VoIP in 2005

Today Bloomberg reports that Les Echos (registration and knowledge of French required) carries an interview with AOL France's CEO, in which he confirms that the company is to launch a number of internet applications for mobile, including IM, as well as a Voice on the Internet offering, in early 2005. He also claims that the aggressive pricing employed by AOL France is winning back customers (he claims about 100k of the 150k who left in H1 have returned). My feeling is that we should look for similar moves next year from AOL across Europe.

Vonage will need money again!

The company is going to need more money, maybe by end of this year. At $50K per employee, VONAGE is going to have to shell out nearly $30 million in additional salaries. I am not sure how many people Vonage has right now, but lets assume there are 200 employees now, so that makes it a whopping $40 million in payroll expenses alone. Earlier, Andy had calculated that Vonage was spending around $450 in customer acquisition and other hardware costs. Citron told Investor's Business daily that he would have more than half-a-million customers by end of 2005. That means spending a cool $225 million on them in gear, and acquisition costs. Vonage has raised nearly $207 million in VC funding. Let us assume, it generates about $25 a month from these customers, or roughly $150 million in annual sales. Total monthly costs etc, for PSTN termination and other carriage charges, as estimated by Andy are around $15 a month. That's about $90 million per annum. And with the payroll being what it is, I am pretty certain that company will have to raise more money.

Convergence in my living room

I finally got some time to connect my SqeezeBox device to my sound system, and I’m amazed at the quality of the sound I can WiFi-stream from my PC LAN. This is a great illustration of the power of consumer-driven innovation, and what's to come once most of my home appliance will use my 8802.11.g transport layer to move digital asset across my living room.

The only question I have is to know if/how I can still use my Itune application as a client (vs. the existing slimdevice server front-end...)