Ken Hayes

A few days ago, we learned that Nami Media had been selected as a Finalist for the PricewaterhouseCoopers Entretech Entrepreneursip Award 2008. Only three finalists made our category of emerging companies with annual revenues of $1-$8 million, and after attending the presentations, I can say that Nami is definitely the company which has come the farthest with the least external funding. We’ll learn if we won our category at a dinner on March 6….

PricewaterhouseCoopers and Entretech Announce Finalists for 5th Annual Entrepreneurship Awards 2008

Also, SoCalTech published an interview where Gary Mittman, CEO / Co-founder of Nami Media, and I offered our views on Nami Media’s progress, direction and benefits of being funded by the Pasadena Angels. This exposure is critical for Nami to gain in the LA area, not so much to win more business, but to hire more and better people — we’re growing a great team, and it’s key that people see they’re joining a winner.

Interview with Ken Hayes and Gary Mittman, Nami Media February 8, 2008

That title is definitely presumptuous, but the panel presentation I participated in today was meant to help inform members of the WGA about the Internet advertising industry and to discuss how writers might be able to exploit their creative skills without being dependent on the traditional studio structure.

I was the token non-WGA member. In fact, I have no agenda and frankly don’t understand the issues well enough to take sides in the strike. To me, it’s like Denmark declaring war against Sweden - made sense in the old days, but not in today’s environment. But I do have some good friends who are writers and were open-minded enough to want to understand what makes “new media” tick (thanks to Ken LaZebnik for organizing!)

I was told to expect 50 people in the audience, but there was more like 300. The other panelists were really good, but my favorite was Kent Nichols, who with a partner launched “Ask a Ninja” a couple years ago and now has a thriving Internet video business.  It was a lot of fun, and the audience members were kind and curious and energized.
My presentation is here: InternetAdvertising2008WGA.ppt

The WGA is putting together its own web video site, called StrikeTV, to showcase how writers can be successful without a studio. I wish them good luck. They will need a good viral marketing team to get enough traffic to this site to really make a significant impact (either political or monetary). Anyone want to step up?

As to solving the strike? My own idea is probably too radical. I’d take a cue from the Silicon Valley / Tech / Internet industry and form any new creative project (e.g. a complete television show) as a corporation, just like a tech startup. Every participant (e.g. employee), from the actors, to the writers, to the cameramen to the makeup artists would receive stock options, rather than royalties. The financiers would get their stock too, but spreading the potential wealth around just makes modern sense — that opportunity to hit it big really drives the industry forward and creates super motivation.

Thus the complete “brand” of a show becomes the value, rather than an individual episode. Whether it is ever re-broadcast, syndicated overseas, streamed over the Internet or makes money in t-shirts and mugs - if money is coming into the corporation, the shareholders would get dividends rather than royalties. This puts the creative and production people on the same level as the financiers and reduces the risk of hiding profits.

In my industry, this is equivalent to granting stock options to the Google masseuse.

Go ahead, call me crazy.

One of the ironies of writing a blog is that the busier I am, the less time I have to write blog articles.  Not being a professional writer, or even a paid journalist, I can really only write in my free time, even though I enjoy writing about my industry.  Paid work (and kids and wife) come first.

Free time has been at a premium lately, since I joined Nami Media Inc. as President in July 2007.  Nami is in the “Internet Advertising Technology” business, and we develop and run systems which online advertisers and site publishers use to manage PPC Search campaigns and CPA Affiliate campaigns.  PPC (pay-per-click) and CPA (cost per action) are known as performance marketing:  advertisers only pay for their ads when customers perform an action.  This is the hottest growing area of Internet advertising, led by Google.

Nami Media, which started in 2001, has developed very effective platforms which help marketers manage their advertising.  Most of these marketers are quite sophisticated, but they are in smaller companies without the technology resources which are needed to compete in a rapidly-changing, innovating marketplace. 

For example, a key technology from Nami is click-fraud detection and filtering, which is necessary to protect advertisers from paying for fraudulent clicks.  Another key technology is optimization (generating maximum performance by tweaking various inputs).  By aggregating many smaller marketers, Nami has achieved critical mass in systems development and management. 

It’s an exciting time, and I’ll keep everyone posted on developments.  The fact that our revenue is exploding shows we’re on to something good.  And, okay, I’ll try to write a few articles along the way…

Hilarious article in the LA Times this morning about how at&t (formerly SBC, formerly PacBell, formerly AT&T with big letters) is abandoning their automated time service on 853-1212 in California, active since 1948.  Apparently, there are too many other ways to figure out the correct time.  Funny, because I’ve always relied on the good old phone company to be the most reliable.  No more.   So much for public service.  at&t (now rebranded with small letters) wants to free up the prefix “853″ to regular subscribers. 

What does this have to do with domainers, those guys who buy generic web names and place ads on them?  Well, the most valuable domain names are those which get “natural traffic”, for example is a user types “creditreports” into their browser, and goes to creditreports.com.  Valuable, because the domain owner doesn’t have to pay to drive users to the site.  All ad revenue is pure profit.

How valuable is 853-1212?  I’d be willing to bet that hundreds of thousands, if not millions of people have hard-wired into their brains to call 853-1212 whenever they need the time. Now they will be frustrated at the phone company (get it, at&t?).  These callers represent free traffic.  Why not run an ad-supported time service?  If at&t had any brains, they’d sell off 853-1212 or lease it out on a revenue-share model. Some enterprising domainer could figure out how to run short radio-style ads before the service would speak the time.

Who’s the biggest, smartest domainer out there? Google, of course. They’re willing to try new things - they’ve already set up a free 411 service (try 1-800-GOOG411) - purely to learn how users search by voice for local businesses. Let some smart techie at Google play around with 853-1212.

The most difficult task of this entire venture? Finding who the right person among at&t’s 301,840 employees who has the authority to sell this particular phone number. If you know who he or she is, please let me know!

L.A. Times, Consumer Confidential column on August 29, 2007 by David Lazarus:
Time of day calling it quits at AT&T

While writing an article about how Club Penguin is now passé, I didn’t even get a chance to post it before Disney announced that it had bought the super-cute kids’ casual gaming world for $350 million (up to $700 million if certain targets are met). So, who’ll get the last laugh?

First of all, why is Club Penguin passé? That’s on the evidence of my 8-year-old daughter and a group of her friends, who happily let their paid subscriptions lapse and are now addicted to another kids site. For about six months (and $36 of my paid dues), my daughter could not get enough of CP. See my post from November 2006. But even with the new features and content, eventually, the site lost its appeal. Oh, the fickleness of youth…  Moving on to the next great thing…

Which happened to be Webkinz, also a super-cute “world” focused around virtual pets, for which access can only be gained by buying a $12.99+ plush stuffed toy in select retailers.  Every store near our house was sold out, so we had to buy one on eBay.  Webkinz is hot enough that eBay now highlights those products on their homepage.  Anyway, the only thing better than a virtual pet is one you can cuddle up and sleep with (apparently).  Ganz has bridged the virtual-real world.  Amazingly, there are no subscription fees nor advertising on the Webkinz site.  But to keep your access active, you have to keep buying more stuffed animals.

Now, did Disney buy the cat in the bag with Club Penguin? $350 million CASH for 700,000 paid subscribers is a rich $500 per subscriber.  If a typical subscriber lasts six months, generating $6/month in revenue, it looks like a losing proposition. Note there is NO advertising on Club Penguin, making their current 12 million total registered users a “meaningless” number, in terms of online advertising value.

Unless you’re Disney, who figure that they not only can multiply paid subscriptions by many times, but can also develop Club Penguin movies, plush toys, board games, pajamas, thrill rides and everything else that comes out of the Disney merchandising machine.  Disney’s forte is in extracting maximum concrete value out of a given virtual brand - witness Toy Story, Finding Nemo, etc. etc.  They calculated that Penguin had enough traction and momentum that it would be “easy” to leverage it much larger.

But will Club Penguin have the staying power of a Toy Story or Monsters Inc.? Not according to my 8-year-old. Is it truly more cost effective for Disney to pay $350-$700m for a new character idea than develop it in-house? Perhaps they don’t have a choice or the skill (see the Pixar acquisition). All I know is, I should be buying stock in Webkinz…. And prepare to be bombarded with Club Penguin merchandise this holiday season.

L.A. Times, August 2, 2007 “Disney Buying Club Penguin Website”

And the pain continues:  Yahoo recently “upgraded” their Maps application with a bunch of new user interface gimmicks.  By trying to add new features, they slowed down the site, dropped functions real people had been using, made the site less intuitive, and probably frustrated a good chunk of their 29 million existing Maps users. 

The question is, if Yahoo wants to make a new version, why not let the existing version remain unchanged, or at least ensure that all the old features make it through?  Why unnecessarily piss off loyal users and give them an excuse to switch to another service?

Well, more bravely than Yahoo Webmail (see earlier post), the Yahoo Maps team actually posted their changes in a blog, for which they have received 159 user comments.  I’m not sure if anyone from Yahoo reads them, but in a fit of frustration, I actually counted them up, and the tally is:  6% neutral, 10% positive, whopping 84% negative comments.  These are comments by users who actually took the effort to find a place to vent their frustrations.

Yahoo has missed the boat on user experience.  I’ve been a diehard Yahoo supporter, but I am soon to be sucked into the Google fold for good.  Is this why Yahoo stock is down 8% over the past year, while Google has soared 35%+ ??  Will annoying users make this better?  Time will tell.

The only application I still like with Yahoo is Calendar, and I realize that it’s only a matter of time before that’s changed.  Don’t worry, in my next post, I’ll bring some positive news about alternative web applications!

I hate to complain, especially about a service I have liked for so long, but Yahoo has recently ruined the user experience for their most loyal clients.

It started by introducing banner ads in the Yahoo Address pages.

June 1st was the last straw:  banner ads and graphic text links in my Yahoo Webmail.

I am already a monthly cash-paying customer for Yahoo services.  I consciously choose to pay AT&T Yahoo DSL for mail, addresses and calendar.  In addition, I am a Yahoo Small Business hosted customer who also pays a monthly fee for these same services.

The worst part:  zero useful response from both AT&T and Yahoo Customer Service. The best line I got, from a representative who was clearly reading from a script, was “We display ads in order to pay for the award winning Yahoo mail service.”  Excuse me, I don’t care if you win awards; I just want stable, easy-to-use e-mail without intrusions.

I can accept ads in applications I use only occasionally and don’t pay for, like Yahoo Movies.  But I resent being forced to view ads for a service I already pay a premium for.  Put another way, if I paid an extra $2 per month (the value of me as a web viewer), would Yahoo remove the ads for me?  I’d gladly pay that raise, if it could free me from ads.

Granted, I’m in the Internet advertising business, so I should accept these ads, right?

By degrading the user experience, Yahoo will frustrate users and drive them away to competing services.  And by repeatedly showing irrelevant ads (mortgage anyone?) every day to the same user in the same application, the click-through rates on those ads fall over time.  How many mortgage ads does one need to view in a year?  (Inside tip:  if you ever need to refinance, click on one ad just once, fill in the form, and you will be bombarded with more mortgage brokers falling over themselves to close a deal.)

Because Yahoo is so big, they sell these ads at a premium CPM (cost per impression), meaning that Yahoo has no incentive to display ads which users actually click on.  The advertisers, though, measure the ad value in actual conversions.  Most of the ads I’ve seen are for education and mortgages — both verticals driven by CPL - Cost Per Lead.  What this means is, it will take a while for the lead-gen providers to realize that e-mail advertising won’t pay off.

I hope so.  In the meantime, I am now testing alternative services so that I can eliminate my dependency on Yahoo and turn them off forever.

Being so focused on my own professional world of “virtual” products, which Internet advertising is, occasionally I’m interrupted to appreciate another virtual world, the movie business. In my case, the Jake Kasdan film, “Walk Hard”, starring John C. Reilly, filmed on our street the other week. 

Internet advertising may help sell “real” products, but the work I do in lead generation, advertising and strategy have no physical components.  At best, I help produce blips on a screen and send a lot of electrons through wires.

Movies are essentially also virtual, except for the DVD you might buy.  But I can assure you, there’s nothing virtual in the actual filming one of these beasts.  There’s a reason movie budgets are tens of millions of dollars.

“Walk Hard” will be a comedy. I won’t give much away, because it won’t be released until December 2007 (see IMDB), but it’s got to be funny, because there was a camel walking down our street for one of the scenes. Although we, as gracious neighborhood hosts, were admonished not to take pictures (”so they don’t end up on YouTube,” said the location assistant), just about every crew member whipped out their camera or cell phone and snapped away. I guess camels are pretty rare on the streets of L.A…

What most impressed me was the fact that it took three days and 130+ crew members on site to film what will become less than 30 seconds of film. They made our street look like the 1950’s South, apparently.

FilmL.A., Inc., the non-profit economic development corporation that handles permits and promotes filming on the streets of Los Angeles, reported that there were 1,860 production days on local streets the first quarter 2007. 

Unfortunately, those days were down 22% from last year, in part due to so many other states and countries offering subsidized incentives to draw production away from L.A. Well, our street accounted for 3 of those days — and I’m happy that hundreds of crew members were able to earn a good living while using our neighborhood. At least they didn’t have to commute to Toronto.

By the way, if you’re ever approached by a location scout named Boyd Wilson, be nice to him, because he and his crew are fair, professional and easy to work with. They left our homes and street better off than before, and we had a lot of fun in the process. Not to mention with a little extra cash for the inconvenience.

Here’s a further shout-out to John C. Reilly and Kristen Wiig, who were super-nice to my children and very personable. They made my kids’ day - who then got the chance to see a real movie being made in front of their eyes.

P.S. And yes, I did get a pretty good photo of the camel…

Yesterday I had the pleasure of being interviewed by Tony DeMaio for the emerging Internet radio company, BigMediaUSA, for his program Ugotta Get Funded. A number of Pasadena Angels have been interviewed about the Angel funding process, but my topic was really how angels specifically assist companies (besides investment) and how small companies can attract the right angels for help.

How do angels help entrepreneurs and their companies before they invest, and what kind of work do they do after investment? What kind of entrepreneurs benefit best by this arrangement, where angels have a desire to participate in the company, rather than just invest passively?

Tony has put together a radio concept to enable multiple channels, programs and segments which will appeal to a wide variety of listeners, with search-engine-optimized descriptions to draw traffic. This is my first time being on Internet Radio. I’d love to hear your comments - can you actually sit through a 40 minute program on the web? It went by quickly for me, at least. Do you actually download these programs to your iPod?

Radio isn’t new to me. For four years in college, I was a DJ on KSPC FM 88.7 The Space.  That was a pretty fun time; although we were a “small” station, our broadcast footprint included nearly 2 million people in Los Angeles. I enjoyed playing 80’s New Wave and Alternative music which I found on my study abroad trips to Europe. Back then, a first-year DJ would start out on the dreaded Sunday 6am-9am shift, eventually working up to the coveted Friday 6pm-9pm shift - late enough to play loud music, but finished early enough to hit the parties. Ah, the good old days…

Ken’s interview: http://www.bigmediausa.com/archive.asp?aid=9365

Disclosure:  I was not paid, nor did I pay, a fee to be interviewed. BigMediaUSA is not a client nor investment of mine.

Last night I spoke as part of a panel discussion on the effects of the Internet on our children. I gave my take on the forces which encourage kids to use the Internet and my suggestions as to what parents can do to make this positive.

Below is a link to the PowerPoint presentation. I believe there are strong economic forces which drive children to use the Internet. Children use sites like MySpace and YouTube as fun outlets of expression and entertainment. But the force behind these sites is Advertising. Rising advertising value and spending encourages the development of sites which need the most people to spend as much time as possible as often as possible in one place. By this reasoning, MySpace enables (or perhaps tacitly encourages) many young people to sign up, even if they are underage, in order to gain as large an audience as possible.  The site is free, has no age verification, and all your friends are there - how powerful is that?

The second point of my presentation was to offer my suggestions as to how parents can instill good behavior in their children. I included my analogy to sex education, the concept of information persistence, and the values/dangers of World of Warcraft.

The best part of my presentation was in fact the questions/comments from other parents. Most parents recognize that they cannot control completely their children’s use of the Internet (and at best, only in their own home). Stories came out of children changing the clock in the PC, disabling monitoring programs, etc. Kids are smart. Parents are just trying to keep up with what their kids figure out.

The most relevant comment of the night was from a mother who said that parents need to maintain communication among themselves, to share experiences and understand what each others’ kids are doing. Yup, the Internet is no different from every other new fangled innovation society has adopted in each generation. Rock’n'Roll in the 50’s anyone?

InternetAdvertising2007 PowerPoint (524 KB)