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Archive for July 13th, 2007

Google There is always great interest within the search engine marketing community whenever a search engine files for a patent. Search engine giant Google was granted a new patent last Tuesday, August 22, 2006 . The title is “System and method for supporting editorial opinion in the ranking of search results“. And here is a brief summary of the patent.

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As of now, search engine algorithms have reached their peak. We’ve known for quite some time that an algorithm-based search engine can nevër deliver excellent results. Why, you might ask. Simply because there will always be people out there trying to outdo the system by reverse-engineering it.

Due to this problem, a number of solutions have evolved. One of these is social search engines, which rank their results based on the wisdom of people. Another solution to arise from this problem is a human editorial process.

And now, Google in its new patent application has proposed a hybrid mechanism which combines algorithmic search with a human based editorial process. By integrating editorial opinion, they are looking to enhance the quality of their search results.

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It will be interesting to see how Google evolves over the next few years. Algorithm based search results will continue to be problematic because there will always be those who try to beat the system. Implementing some sort of human editorial opinion into the ranking process seems inevitable.

Also this is true for all of the major search engines. Yahoo, Google, MSN, and AskJeeves must all provide quality search results to compete within this industry. To be truly successful, they will have to go beyond algorithm-based results to deliver the most value for their visitors.

[more] [Google Patent Paper] [demystifying patent]

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Google’s plug-in has a slight head start on two other promising products that, while very different, also aim to take Web services offline: Adobe’s AIR and Mozilla’s Firefox 3 (which will be the first browser to sport built-in features for the purpose). All three packages are welcome news for anyone who’d like to use Web services when the Internet is down, but their significance goes way beyond that. The modern age of Web services began on April 1, 2004, when Google unveiled Gmail, the first Webmail client that was better than most desktop ones. It’s no hype to say that May 30, 2007, the day of Gears’ debut, could be equally momentous.

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Without offline functionality, after all, a Web suite (like Google Apps or Zoho) could never replace Microsoft Office. With offline functionality, future Web suites just might. Would you shell out $500 for Office 2010 Pro if Google Apps were roughly comparable, available online and offline, and completely free? Probably not. That’s why Office will surely leave its desktop roots behind for the Web at some point in the not-too-distant future.

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The influence of Gears and similar programs might even seep into hardware design. A potent Core 2 Duo PC with a couple of gigabytes of RAM and a humongous hard disk is pricey overkill for anyone who mostly works in the browser. Many pundits have mocked Palm’s upcoming Foleo, a $500 subnotebooklike gadget that packs just enough hardware oomph to run Linux, some basic office programs, and a Web browser. But it could be a precursor of a class of browser-in-a-book devices that provide all the oomph you need to run IE, Safari, or Firefox.

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Typically for Google, its spin on Gears is altruistic—the company stresses that it’s an open-source product that it hopes many services will embrace. That it’s also a way to mess with Microsoft’s head may be purely coincidental. But if Google isn’t working furiously to bring offline capabilities to everything from Gmail to Google Spreadsheets, I’d be flabbergasted.

[read more] [download google gears]

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War of Search Engines

The International Herald Tribune had a good article  about Naver search engine

“No matter how powerful Google’s search engine may be, it doesn’t have enough Korean-language data to trawl to satisfy South Korean customers,” said Wayne Lee, an analyst at Woori Investment and Securities.

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Naver’s success surprised many. When NHN, an online gaming company, set up the search portal in 1999, the site looked like a grocery store where most of the shelves were empty. Like Google, Naver found that with few people other than Koreans using the language, there simply was not enough Korean text in cyberspace to make a Korean search engine a viable business.

“So we began creating Korean-language text,” said Lee Kyung Ryul, an NHN spokesman. “At Google, users basically look for data that already exists on the Internet. In South Korea, if you want to be a search engine, you have to create your own database.”

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Naver has so far accumulated a user-generated database of 70 million entries. Typical queries include why North Korea is building a nuclear bomb, which digital music player is best, why people have hair whorls and what a high-school boy should do when he has a crush on a female teacher.

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The company also runs a popular online gaming site, known as Hangame in South Korea and Japan and Ourgame in China. But its Naver search engine – which sells advertisements and links to commercial Web sites that pop up when a user searches for certain words – generated 52 percent of NHN’s revenues last year. Naver took 61 percent of all Web search-related ads last year in South Korea, according to the company.

[read full]

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Entrepreneurs Before looking for VC, Build product to at least Alpha stage so that VC will get a grasp about your product and in parallel build Good Business Model before meeting VC.

Do not fully concentrate on funding, first build great product then all else will follow.

Business Gyan has a great article about Venture Capitalist by Sanjay Anandaram from Jumpstartup.

Excerpts:

“VCs don’t want to take risks”! “Hey, you claim to be in the risk capital business, so why can’t you take a risk and fund my young company?” “I’ve been trying to get funding for my startup but no VC gets it, they don’t understand what I’m saying!” “Gosh, they want me to make more progress but how do I show progress if I don’t have money?” “They want to take a significant stake in my company when all I want is some money!”

And the litany from entrepreneurs frustrated with their fund-raising experiences goes on and on. Having been on both sides of the table, first as an entrepreneur and then as a VC, I’ve presented some ideas here that I hope will be of value:

 

The Context

 

a) Understand what a VC does: A VC is a not a bank or a financial institution that lends some money against collateral. In India, the distinction between a VC and private equity (PE) investor isn’t very clear. An early stage VC typically invests small amounts in young, fast growing companies that have the potential for delivering 10X+ returns on the money invested – usually within a 5 year period. There’s no collateral and the investments are in the form of equity with no financial engineering involved. It is a high risk investment and so the involvement of the VC is high. Empirical data of VC investments suggests that about 50% of the companies lose all the money invested, about 30% deliver marginal returns, while the balance 20% deliver the super-normal returns thereby ensuring that the portfolio delivers an attractive return in the aggregate. Now, you can see why VCs look for the possibility of very high returns. [...]

b) There are different types of VCs: They can be largely segmented based on their preferred investment stages (e.g. seed, early, expansion), sectors (e.g. technology, services, healthcare, medical devices, clean-tech), geographic focus, minimum investment sizes (e.g. some VCs will not invest less than a certain size). Pitching a technology startup therefore to a VC who largely invests in services isn’t likely to generate much interest. Do your research on the VC!

The 5 key Specifics

a) Team: This is the most important aspect of a VC’s decision making. Given the high risks of the venture and the minimal downside protection, the only real collateral the VC has is the team. Integrity, academic background, work experience, ability to deal with high pressure and challenges, ability to attract and retain customers, employees, and partners, are some of the qualitative criteria that VCs use for evaluation.

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b) Market: What is the problem you are trying to solve? Is it a real customer issue or is it a “nice to have” thing? Is there a market for your startup’s offeings? Is it large? Is it growing? What is the competitive landscape like? How many potential customers have been spoken to?

All too often entrepreneurs say: “According to various market research analysts, the market size will be over US$5 billion in 2010. I’ve made a very conservative estimate of a market share of just 1%, so I’ll be a US$50million business”. Well, its like saying there are 6 billion people in the world and all I have to do is sell my Rs 50 T-shirt to just 1% of them to be a Rs 3 billion company! Easier said than done, don’t you think? Remember, VCs read the same research reports!

c) Offering: What exactly is your offering? Why is it different from those in the market? How can the uniqueness be sustained and defended?

The ability to clearly define what your offering is and the articulation of the benefits (not features) of the offering are critical. Is there defensible intellectual property in the offering? Why cannot someone else do the same thing? How will the innovation be protected? Is the competitive advantage in the business model, in the supply chain, or in the partnership arrangements? Again, how defensible are these? Is there a road map for the maintenance of the competitive advantage?

 

d) Model: How will your company make money on the bottom-line; is it clear? How much will customers pay? Why? What is the customer acquisition cost? What is the go-to-market plan e.g. OEM, license, direct, channel? Is there a partnership plan? How will customer support be undertaken? Is there a monthly financial plan especially cash-flows, in place? Any what-if scenarios planned?

What kind of partners does your startup have? Remember, tying up with another cash-starved company isn’t going to do you a lot of good. Two poor people don’t make one rich person. Find partners who are better, bigger, and have more money.

e) Valuation: How much cash will the company likely consume before it breaks-even? Will there be other investors interested in the company? How much can this company be worth in a 3 to 5 year horizon? Can it go public? Can it get acquired? What is the entry valuation?

Rest about Reaching out to VCs and Presentation here.

If you have any good link about VC’s and Startups please leave in the comment’s. It would be a great help for aspiring entrepreneurs.

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