VCinJerusalem

Jerusalem, Tractors, And the Belief in a Better Tomorrow

As you might have heard, another attack occurred in Jerusalem today, with a resident of East Jerusalem using a tractor as a weapon of mass destruction.  The tragic irony of using a tool intended for construction purposes as an instrument of terror is not lost on anyone.

And as usual, only a few hours separated me from the awful events. Drove past with my daughter only few hours before. Was there yesterday. Barack Obama is there tonight, Gordon Brown was there yesterday. Literally at the crossroads of the [Western] world.

How do we in Jerusalem carry on? Well, part of us turns off. Grows numb. We built up these ways of coping with almost constant horror during the years 2001-2004, when barely a week went by without someone blowing themselves up, and yet we had lives to lead. But that is not all--if it was I and my family would have left here long ago.

There is also still a part of us that believes in a better tomorrow. And that somehow, in some way, we can help contribute to bringing that better tomorrow closer, making it a reality.

For now, let us pray that the dozens of innocent hurt in todays attack enjoy a speedy recovery, as best as science will allow (already a report that one person lost his leg when his car was crushed). And pray as well for a better tomorrow. And tomorrow morning, after a few hours of fitful sleep, may we have the strength to do something to make it a better day than today.

Are VCs To Blame For "Free?" And Is Free Model One Size Fits All?

Excellent posting by Hank Williams today on Silicon Alley Insider, which is one of my favorite sources. See full text of his original post below, and definitely check out the discussion that erupted within minutes on SAI...back and forth brings out the angst that many of us have been dealing with over the past few years.

With the success of Google, who weave billions of dollars of profit from millions of "keywords", convincing the world that a "click" has inherent value, there has been a run on the bank. Literally. Everything is now supposed to be supported by "advertising." But remember, as I have often said, in the end someone needs to buy something. That's how advertising works. Otherwise its a massive ponzi scheme.

Traditional media companies have always had (and will have) advertising as a dominant (and sometimes sole) source of revenues. But advertising was never 100% of the revenues, think of movies, video games, even most daily newspapers. There is a price. It is not free.

And now think of services that are not media companies -- there is no historical justification for free. Salesforce.com, a pioneer of using Web X.0, charges. And many gladly pay. Is Gmail free? For now. I doubt it will last, and if it does will mean a re-shuffling, but not complete revolution.

Advertising has its place, but I for one am tired of very smart entrepreneurs acting like deer in the headlights, who have been brainwashed by VCs with too much money that usage/users  are all that's important. We will be facing a capital crunch in the days, months, and years ahead -- those who have developed real revenue generating businesses will survive.

I agree with Hank, that VCs are killing many businesses, but there will be a revival of the dead. Make sure you are prepared!

Free" is Killing Us--Blame The VCs

             

Hank Williams             April 4, 2008 9:20 AM        
                          I believe it should be possible to start a small business and to have a small number of profitable customers, and to earn a living. From there, it should be possible to work hard, and to grow your business into something substantial. Until recently, this was the American way, and it applied to technology as much as to any other business. But no more.

In today’s “free” world, in most online business categories, it is inherently impossible to start a small self-sustaining business and to grow it. This is because in the digital world, advertising, the only real revenue stream, cannot support a small digital business. If businesses were based on the idea that people paid for services then small companies could succeed at a small scale and grow. But it is very hard to charge when your competition is free.

The economic problem with advertising businesses is that advertising businesses do not work without really significant scale. In the past, a good product or service could address a niche and succeed without being a home run. Today, a home run is required because if you do not reach a massive scale, advertisers are uninterested. And even if advertisers could be attracted, CPMs are so low that the revenue would be inconsequential. Small Internet businesses don’t work.

So how did we get here? In a word, VC.

Venture capital has totally distorted the market. VCs are investing billions of dollars in companies with instructions to get big fast and to worry about advertising revenue later. As a result the competition is for users and not for paying customers.

Unfortunately, to fix this, many more companies need to die.

With less “free” floating around, a more regular supply and demand dynamic can take hold, customers will have to pay for the things that are important to them and non-quantized growth dynamics can return. In the meantime, why should consumers pay for products and services that VCs and their pension fund investors are willing to give away for free?

The good news is at some point VCs will indeed realize how dumb all of this is and stop giving away everything of value on the Internet. This will all stop when the average VC can’t get any of his/her companies to scale because there is just too much VC sponsored free stuff out there. Then and only then will this crazy eyeballs business model redux finally be put to bed.

I cant wait.

SAI Contributor Hank Williams is a New York-based entrepreneur. He recently launched a new blog: Why Does Everything Suck? Exploring the tech marketplace from 10,000 feet.

    

   

Where Google Goes, the Dollar is Not Far Behind

Google has represented the decade we are now winding down, and tracked the resurgence of the American economy after the blows of NASDAQ implosion in 2000 and then of course 9/11. With the succesful growth of Google, its IPO took off, and while I thought it was a short at 80, stock price continued to climb.

While the dollar did not follow the same meteoric rise over the past 6-7 years as the Google stock price, Google is many ways was keeping the dollar propped up, overshadowing the many serious problems in the American economy and government (not the least the American invasion and occupation of Iraq, costing the American taxpayer, which includes me, more money than it would take to feed all the hungry people in the world).

Clicks. Click throughs. PPC. Adwords. Adsense. These are the ingredients of Google's billions of dollars of profits (and still insane valuation). What it boils down to is the ultimate American value point: marketing. The Google guys convinced the world that clicks=$$, and until the emperors cloths start to fade noone knows he is standing there naked (or nude, if you prefer). But how well tested is the core Google theory? What are conversion rates really like? None of "know," tremendous amount of guesswork involved. Look back to my post on Jaxtr for a taste of emptiness of usage--10 million users and no revenue to speak of, in my eyes that is not a business.

Now, let me stress that while I know little about the public markets, I know far less about the global currency market. When my children ask me about the dollar falling in value against the Shekel, I blabber for a bit about "shakiness in the American economy," but actually have no idea what I am saying. I do know, however, that much like Google, America marketed itself well, even in the face of some astonishingly stupid moves in the world. In 1990 we defended one dictatorship from another (to this day not clear why). In 2001, in response to 19 Saudi men bombing New York and Washington the US went to war in Afghanistan and Iraq. Go explain that one to your kids.

Now people are losing confidence in Google, and in the Greenback. As long as you cashed out and your life is all in dollars, nothing to  worry about.

For those of us who live in the world, and I mean in the world...multi-currency,  multi-lingual,  multi-national,  the  rapid deterioration of the  Google stock price and  the dollar  remind  us  that we cannot rest  all our hopes on one player. Going global means being global, and even living in Jerusalem (in the center of the world) I am feeling left behind. Time to move savings in multiple currencies. Time to figure where the next waves are coming from -- because Google Greenbacks are so....what do we call this decade?

When I have None, Rely On Other's Words

When I am lack for words for myself, as I have been the past few days (really weeks, but hit home more this past Thursday night), as I passed the Mercaz Harav Yeshiva minutes after 8 teenagers were slaughtered while they studied in the library. I again passed there yesterday morning and afternoon. And then word came our that their killer was a Palestinian Jerusalemite from Jabel Mukaber, a village less than a mile from my house.

With so many conflicting thoughts racing around in my brain, trying to stay focused on my immediate family, my venture business, was so moved to receive the following note from a friend in California, for whom we are her only connection to Jerusalem:

 

Jacob, I just had to write to tell you how sad I was to read today’s news about the murders in Jerusalem.   I know how hard you and your family have worked for peace, and how especially devastating it must be to see it eroded within your own city, and in such an ugly and senseless way.  I am praying for reason and a shared humanity to prevail over ignorance and hatred, and am ever more grateful to know people like you and Haviva who live your lives in peace and teach your children love. 

           Wishing you the best,
            Martha

I certainly could not have said it better. Amen Martha. Amen.

Going Beyond the HEADLINES, Skype Silliness

In many disciplines, going beyond the headline is important, but in the tech space, especially with start-ups (I include in that anyone yet to prove they can make serious money) facts are really important, because many of us tend to slip into la la land when talking about our products/service.

Take a look at this posting from FierceVOIP blog:

Skype scores 12M concurrent customers

      

February 21, 2008

         

       

Tags       Skype   VoIP Phones      

      

   
       

   

Skype watchers noted the big VoIP provider this week enjoyed 12 million concurrent users for a short period. The peak occurred around 19:00 GMT and coincided to a period when both European and U.S. users were using Skype. According to the Skype Journal, the strong rise in usage reflects a recent lift in the take-up of Skype by U.S. customers. Over 80 percent of Skype's user base is offshore from the U.S. and Skype has long yearned for a bigger U.S. audience. The peaks are driven by its European base.

At the same time, Skype claimed to have clocked 100 billion minutes of audio and video usage. What that means is hard to get your head around, other than to note there are now 276 million users with registered Skype accounts. If only someone could work out how to make money from free telephony!

Now, did Skype actually have 12 million concurrent users? NO! They had 12 million on-line at the same time. Impressive, but not the same as 12 million people actually all making a phone call at the same time. Also need to remember that many Skype  "users,"  including me,  mainly use Skype as  another IM  tool, and rarely for actual  phone calls.  I do  have some Euro  loaded into my account, for  those desperate times when I have wifi and need to call off the IP network (using SkypeOut).

The most important line of the post above was the last line, which is that Skype still has not figured out how to makes gobs of money from its "12 million concurrent users," much to Ebay's sadness (for those of you who already forgot that deal, Ebay bought Skype for billions of dollars, many of us are still trying to figure out why they would have paid anything...).

Call me old-fashioned, but while I love whiz-bang technology as much as the next person, a start-up is [at some point] supposed to actually become a business, which means turning a profit.

Oh, even in business you can be a loss leader at times (see here what my friend Rami Levi is doing to chicken prices in Israeli supermarkets) but that is quite simply a marketing ploy.

Writing a headline is an art, but those only get you so far. After the headline comes reality, and even if Skype really had 12 million people talking at the same time (imagine listening in), if it's gross profit margin is no better than Rami Levi, well, then they better start selling chicken--at least then people will get something to eat after all that talking (as a Vegan, only using chicken to make the point, would prefer tofu!).

                                                                        

Yes We Can: Over 10 million views...and counting

Just saw a report on New York Times video interviewing will.i.am on the Yes We Can music video...stated authoritatively, as only the NYTimes can, that there have been over 10 million views so far. Wow.

Just think what the Obama campaign would have had to pay for that kind of exposure (was also featured on NBC and other news outlets). Now keep in mind that what is absolutely gorgeous about all this is the reality that were was no coordination. Inspired by Obama, will.i.am and friends just created, and uploaded. And started to change.

It's still not a done deal for Obama, and while my prayers are with him, we already have learned that "Yes We Can." We can, through modern technology, get the word out, with few barriers in our way. Not since Paine printing pamphlets of Common Sense has technology been used in such a dramatic way to spread the word.

A Bright Spot in Israeli Politics: My Friend Shlomo

In the midst of all the frustration of stalled out peace talks (once again), the biting self-critique of the state of our army and military decision making process in the "Winograd Report," and the general lack of charismatic leadership in the Israeli political pantheon, there are my bright spots.

One of the them is Shlomo Molla, as of yesterday a new member of Knesset, the Israeli parliament. Shlomo replaced Avigdor Yitzhaki, who resigned in wake of the Winograd report. Shlomo is the only Jew of Ethiopian origin in this Knesset, and only the second in history of State of Israel.

Below is Shlomo's formal bio, but let me add a few words. I first met Shlomo in 1988, four years after he arrived in Israel as part of "Operation Moses." Shlomo literally walked to Israel, trekking 600 kilometers across Sudan to reach Israel from Gondar. He saw many fall along the way, and knew little Hebrew when he got here as a teenager. Within four years he was not only fluent in Hebrew (and English), but organized and led the Ethiopian Students Association. I helped organize Shlomo's first trip to the United States (to speak on college campuses), and remember how amazed he was at the skyscrapers (we didn't have those back then in Israel, and certainly not in Gondar...).

What connected Shlomo to me then and now is the belief that through the modern State of Israel we make this world a better place. Sometimes that belief is shaky, and sorely tested, but we [still] believe. Shlomo has devoted his life to the Jewish people and tikkun olam--I am so glad he is now in the knesset, representing not only the success (with all its warts) of the aliya from Ethiopia, but so much more.

I look forward to his service in the Knesset, we are a better people for him being there!

Shabbat Shalom.

Mr. Shlomo Molla (WZO) Board Member

Shlomo (Naguse) Molla  was born in Ethiopia and made Aliyah to Israel in 1984 from Sudan in "Operation Moses". He is a member of the Zionist Executive and heads the WZO Department for Zionist Institutions.   Prior to his current position, Shlomo was the Head of the Ethiopian Division of the Aliyah & Klitah Department in JAFI. In the past he was the Supervisor of Ethiopian Immigration and Supervisor of Absorption Centers and Ulpanim in Northern Kibbutzim; he also served as the Head of the Absorption Center in Tiberias and the Coordinator of distressed population, WUJS.   Shlomo has a LLB Law degree from Kiryat Ono College and a BA in Social Work, from Bar Ilan University . His Volunteering activity included running to the Knesset as a part of the Kadima Party in 2006; he was a  Member of the advisory committee for civilian opposition at the Ministry of Interior; Treasurer of non-profit organization for defense law in Ethiopia; Member of committee to advise Ministry of Health on war conditions and Co-Chair for the Organization of Ethiopian students.   Shlomo Molla is a member of the Board of Governors since June 2006.

Obama For President Web 2.0 Style via will.i.am, Enjoy

I got to know will.i.am from the Black Eyed Peas a little when we produced Jerusalem ROCKS! 2007 (see here for a taste of that event), which BEP headlined. I was already a fan of will.i.am and BEP, which is why we invited them--they are a unique combination of ideology, talent, and fun. Those are the ingredients I look for in all my activities, non-profit and not-only-for profit.

A few days ago a song and accompanying video were released, as an overt promotion of Obama for President, but also a celebration of the potential for good in the world. A belief in the power to repair the world, otherwise known as "tikkun olam."  Below please find the music video of "Yes We Can" (can also click here if your feed doesn't support embedded video).

Beyond the song and the video, there is also an explanation [below] by will.i.am of the inspiration and the process of creating "Yes We Can," which I found timeless and oh so timely. Ten years ago it would have taken months to pull off what will.i.am and friends did in a matter of days. The web circa 2008 is definitely  a platform for incredible good in the world. Here is excerpt of what will.i.am had to say about the process, with some emphasis added:

I wasn't afraid to stand for something...
to stand for "change"...
I wasn't afraid of "fear"...
it was pure inspiration...

so I called my friends...
and they called their friends...
in a matter of 2 days...
We made the song and video...

Usually this process would take months...
a bunch of record company people figuring out strategies and release dates...
interviews...
all that stuff...
but this time i took it in my own hands...
so i called my friends sarah pantera, mike jurkovac, fred goldring, and jesse dylan to help make it happen...
and they called their friends..
and we did it together in 48 hours...
and instead of putting it in the hands of profit we put it in the hands of inspiration...

then we put it on the net for the world to feel...

When you are truly inspired..
magic happens...
incredible things happen...
love happens..
(and with that combination)

Now sit back and enjoy, as well as be inspired:

Death Over Life? Auschwitz Gets More Tourists Than Jerusalem...

OK, so maybe I exaggerated in the headline, but not by much. Unfortunately the Jerusalem municipality doesn't have very accurate tourism statistics (ok, they have no statistics at all!), but a fair leap to say that Jerusalem did not get much more than 1 million tourists in 2007.

And the former Auschwitz Death Camp , which today is a Polish government run "museam,"  collects tickets at the "door," and they know exactly how many  people visited: "a record number visited....more than 1.2 million in 2007." According to museam spokespeople, the biggest group came from Poland itself (many Polish schools today require students to visit Auschwitz).

It will take me some time to process this, but immediately what I thought when I saw this headline is to think that the real living Jerusalem has to compete with a former death camp for tourists...

Some more food for thought: on the holiest day (or at least the most celebrated) of the Christian calendar, Christmas, the grand total of tourists visiting the birthplace of Jesus (Bethlehem, about ten minutes from house by bicycle) was...around 22,000. And see here for how proud the Israeli foreign ministry was about that!

While I could go on about the culture of death, and the negation of life in favor of a worship of persecution, I will not. I simply would like to hope and pray that 2008 will bring peace to Jerusalem the living, and many more tourists celebrate life. Amen.

Free Wifi...To Be or Not To Be? Does Free Pay? WiFi in Jerusalem

Every time I see another story about free Wifi, I wince. I spent way too much time in the free wifi discussion and reality to read all these stories without taking it a little personally.
Read on to understand ...and to get a "scoop" on life in Jerusalem.

A little background.

Four years ago, motivated by a desire to do something good for Jerusalem, I joined up with some friends (including Mati Herbst, Shai Kavas) to create UnwireJerusalem , a grand project to bring free WiFi access to key areas of Jerusalem. First of all, we were way before our time, a good two years before our friends at Google started to make noise about free Wifi (see here for details on their Mountain View project). Our project was completely non-profit, we recruited companies such as Intel (NASDAQ: INTC), Checkpoint (NASDAQ: CHKP ), Cisco (NASDAQ: CSCO ) Golden Lines (NASDAQ: SMLC )and Compumat  to donate equipment, some cash, and human capital (employee time). Later on we enjoyed some support from the Jerusalem Development Authority and Boot-Net, led by Robby Leon.

When we started we had a few principles:
1. Service needed to be free for end users
2. Coverage was focused on outdoor areas
3. No dependencies on any governmental bodies

With those in mind, we approached business owners in certain areas of downtown Jerusalem, and asked them to host WiFi access points and simple ADSL modems, with all costs associated with the connections for those born by us, except for electricity. Obvious bonus for these business owners (mainly restaurants, coffee shops, etc.) was getting free WiFi in their establishments as well...

It worked out quite well, and in November 2004 we formally launched Unwire Jerusalem. Since then we have had monthly usage in the thousands, and sometimes in the tens of thousands.

Recently I took the very painful and difficult decision to pull the plug on Unwire Jerusalem...yep, we turned off the lights, yanked the plug, cut the cord. Let me try to explain why, and where I think all this (i.e. "free" internet connectivity) is headed.

1. Municipal Support
We had none. We went to literally dozens of meetings with various city officials, and not a one seemed to understand what we were doing and/or why. That we we felt a sense of civic responsibility seemed to mystify most of the city management we met with, and they constantly suspected us of a hidden agenda. Oh, some of the them said nice words, from the Mayor on down, but then completely failed to follow up or do any of what we asked for, even the most minimal. But wait, you say, wasn't one of the principles above no dependency on government? Yes, for the initial launch, but we always wanted some cooperation. And long term, yes, to get serious we needed government buy-in, if it was for public signage or even more for outdoor antenna. As we were not interested in running a municipal network, but rather a service for plain old citizens and visitors, could not get anyone to focus.

2. Business Model
We wanted to keep it free, but were also running the project as a non-profit, with a lot of big names but no major sponsor. Without a Google like backer, my friends and I could not keep up the sustained effort required to keep the network running. The basic costs are (after initial set-up and equipment) connectivity and network maintenance. Connectivity we received from 012  (local Israeli  ISP)  for the first 2 years as a donation. And then they wanted to be paid. We thought about rolling out all kinds of ad support, but could not find ad model that would really operate seamlessly, or that would really generate funds to cover to core operating costs. And bottom line, there was no working full time to implement  such a system.   

3. Need - Or, we created great momentum
When we started (4-5 years ago) there was virtually no free WiFi in Jerusalem, and as I was working out of coffee shops back then, felt it  every day...Today the  reality is very different. I like to think we were part of the momentum that resulted in many establishments directly sponsoring free WiFi, some like Aroma that made it a standard in any of their franchises. Pretty soon free WiFi became the norm in Jerusalem. Now, outdoor wifi is still limited, meaning if I don't want to fork over 20 shekel ($5) for a latte and a cookie, signals are going to be weak. But they are there. Especially downtown, which was our focus anyway.

4. The WOW! Factor
When we envisioned and launched Unwire Jerusalem part of our motivation was to initiate a WOW! response, to push the needle a bit on how Jerusalem was looked at -- as proud Jerusalemites we wanted to show that we are here and now. We succeeded in that, garnering massive publicity and good feeling. Together with momentum I cited above, not much more WOW! factor to milk out of this project.  While possibly we should have pushed more for BOT (Build Operate Transfer)model with municipality, again, we did not want to be dragged down by that in the beginning. And at this point we have given up on the municipality. Perhaps if my good friend Nir Barkat wins the mayoral elections later this year we can revisit...

Based on the above, decided that we had accomplished what we set out to do, and I for one (and may partners in creating Unwire Jerusalem) could not justify spending more time (or money) on it, so we notified 012 to pull the plug a few days ago.

Now comes the bigger question: Does public access free wifi make sense? Well, I believe it does, just as public toilets make sense (by the way, see this April's fools initiative by Googlers...priceless! http://www.google.com/tisp/). Should local governments pay for local toilet facilities in highly trafficked areas? Sure. Could there be some ads in there? Yeah, why not, but that shouldn't be the determining factor!  Consider malls, which are essentially little privately managed towns. All the malls I have been to have toilet facilities that are free to use. And the people that run malls know that they need to be there--and figure the costs into the business model of the mall.

Internet connectivity is a basic service today -- without it difficult to make your way in the world. Municipalities should do all they can to make sure that some level of "free" connectivity is in place (not only WiFi, but banks of computers for public use as well--not everyone has a laptop, no matter how cheap they are becoming).

I obviously could go on and on about this subject, having invested untold hours over the past 4-5 years. And perhaps I will write more in the future.

For now, however, want to look back on what we did with Unwire Jerusalem, smile, and thank all of those who helped along the way.