to zwink or not?

michael arrington posted a clip today
of a bar-side chat I did with Berkeley entrepreneurs in which I stressed how we
were laser focused from the beginning on finding revenue opportunities that
would scale. The primary reason I pointed to is that entrepreneurs should push
to control their own destinies, and being profitable was the best path.

In the video I refer to how early on
we experimented with offering zwinky toolbars.  Unfortunately, we offered
these before trying them out for ourselves. Once we did, we found them to be
a painful experience and i'm proud that even then as a
10 person startup we decided to take them down.

the lesson we learned was that while we needed
to strive for early profitability, we also couldn't sacrifice user experience.

Btw, these zwinky toolbars from an
IAC subsidiary are still widely offered on the web today.

 

My take on zynga and cpa offers

Michael Arrington posted over the weekend about CPA offers within
social games and questioned why facebook, myspace, zynga and others would expose
these to our users. He raises good points about ‘scammy’ advertisers and the
bad user experience they create. I agree with him and others that some of these
offers misrepresent and hurt our industry. 

It has been my mission at zynga to create a sustainable
consumer service with long term value to our users and partners.  Social gaming is emerging quickly and requiring
new rules of engagement from host networks to user payments and
advertising forms.

So why does zynga offer these ads?  

Most of these offers are good for the
advertiser and user. There are many users who don’t have access to online payment
methods who are still interested in making in game purchases. There is also
great potential for large web players like amzn, ebay and netflix to leverage
social media channels like facebook and zynga to acquire new user
relationships. Sponsoring a white tiger or pink tractor may accelerate these customer acquisition campaigns.

The offer industry is still just getting started and this category
of advertising makes up a small minority of our revenue, the bulk of which comes
from users directly purchasing virtual goods.  

We have worked hard to police and remove bad offers. In fact,
the worst offender, tatto media, referenced in the techcrunch article, had already been taken down and permanently banned prior
to the post. Nevertheless, we need to be more aggressive
and have revised our service level agreements with these providers requiring
them to filter and police offers prior to posting on their networks. We have
also removed all mobile ads until we see any that offer clear user value.

At zynga, we have faced a similar challenge in providing customer support to millions of users of our free games. Six months ago we were
overwhelmed with our ticket volumes and faced an F rating with the better
business bureau. We made massive efforts to address this, getting our maximum
response times for live email and phone support down to 72 hours and raised our
rating to a B+. Even today we realize our customer support isn’t at the level
our users expect and we continue to work on it.

Similarly, we are working to improve the quality of the CPA offers
exposed to our users and evolving our policies and practices to ensure that
zynga is worthy of our users’ trust.

There is no doubt that social gaming is entering the
mainstream culture and there is a business to be created around fun. It's particularly
exciting to see how social games can empower people to change their world.  In a small way, we have seen this with our
sweet seeds for Haiti campaign where Farmville players raised $500k to provide
lunches for 500 kids for the next year. We expect to do more.

As we evolve to a world where people connections are the
basis for the largest consumer services, we will face more challenges. I’m
confident that with so many smart people (and critics) we will overcome these. 

Earmarks

Todays usa today reports that despite obama’s pledge to reduce earmarks to below $7.8b (where they were before bush), they will still hit $19b.

They include F22 jets the pentagon doesn’t want!

$2m for a bike path in spokane.

$600k for the wild turkey federation, a turkey hunting group.

Apparently, obama may now not want to stand up to fellow law makers as he needs their support to pass his healthcare bill.

Guess the dream of a president who will veto earmarked spending bills is still one for movies. Where’s dave?

finally! getting to a common term sheet on series A funding

this has become a big topic in the past week with fred's post and now a techcrunch story. also, thx to adeo ressi for all his great work with the funded and the entrepreneur foundation to help spur more amazing startups. 

this is a comment i posted in response to fred wilson's great post about converging on a common term sheet for first round venture financing of startups. 

i will add a few points.

1. pre money valuation should value the company as it exists today. if investors want to ask for an option pool that is reducing the value of the company as it exists today and is therefore a lower pre money. i've always thought this was a bs way for vc's to sell you an emotional value but make you take a third less.

2. if a company is profitable the entrepreneur should NEVER give up control. if it's not, the vc's can negotiate for that. control is hire/fire the ceo and set budgets. 

3. msg to vc's. if you like an industry, company, team back them. if you dont dont. entrepreneurs – dont work with vc's that demand anything beyond normal preferred with 1x liquidation. if they ask for 8% dividends and a 5 yr forced payback, tell them to go be bankers and lend their money out. 

4. control – entrepreneurs, assume that if a vc can fire you they will. it can happen bc you performed badly and also bc you performed too well, and you have never managed such a big business. 

5. relationships – matter a lot. go with people you know and trust, not the highest bidder. go 10% below your market price, choose your investor and hopefully they will feel priviledged. my advice is pick people you would like to have beer and sushi with like fred. 

6. ref check – ask to interview founders of failed companies the vc backed, especially ones who have been replaced. remember, some should be replaced.