From the Partnership
In this issue we look at the theme of the Internet as a new kind of channel for marketing, sales, and customer relationships. We believe that companies in this sector have potential for extraordinary growth.
Two examples featured in this issue of our newsletter -- TidalTV and Parature -- sit at opposite ends of the Internet marketing value chain, enabling customer acquisition and customer retention respectively.
TidalTV, a new venture by Advertising.com founder Scott Ferber, is an attempt to "crack the code" of advertising-sponsored video on the Internet.
Parature is a "customer-service-as-a-service" company focused on small and medium businesses.
We think that the interviews with the CEOs of these companies below, as well as the views of Valhalla General Partner Art Marks on the "Internet marketing channel", have substantial general interest.
Art Marks on the Internet channel
The rise and subsequent crash of the Internet bubble left a lot of wreckage in its wake, but it also left a number of fundamental changes that have continuing, broad, and beneficial implications:
- A standard set of interfaces for distributed computing, embodied in browsers such as Internet Explorer, Firefox, or Safari.
- An enormous group of millions, perhaps billions, of users who have been trained on the browser interface.
- Near-ubiquitous access to computing power, either through personal computers or, increasingly, through mobile devices.
One area of computing that is just beginning to benefit from this deep change is the broad area of automated customer interaction: sales, customer service, and marketing. All of these application areas are undergoing a revolution in automation not unlike what happened in computer-aided design (CAD) or computer-based financial systems (ERP).
In fact, the Internet is not just supplementing existing channels of commerce but is often replacing them.
Building an Internet-based channel is vital to businesses of all kinds in order to reach, woo, support, and re-sell customers.
While an Internet-based channel has the advantages of being cheap, ubiquitous, and measurable, integrating the customer experience with existing business systems can be challenging.
Internet advertising is a good example. Because of our location near the Eastern Shore of Maryland, I think of the advertising problem online as one of attracting “geese” ("avails", or available ad slots) for “hunters” (brands or advertisers) by providing unique “goose shoots” (media properties or other audience-builders) where the hordes of the best geese will want to come.
How do you build unique advantage in Internet advertising?
- Build a unique “goose magnet”: a property which attracts so many geese of such good quality that hunters will pay top dollar to hunt there. There are a limited number of prime media properties on the Web, and even when a property such as MySpace or Facebook draws many “geese”, they are not of sufficient quality to really appeal to real “hunters”.
- Have a unique system for separating choice geese from not-so-choice geese: companies like Advertising.com, where I was privileged to be on the Board, have found a unique technology or process to serve up better avails in a profitable way.
Valhalla CEOs: Duke Chung
Position: CEO of Parature, a provider of customer-service software over the Web.
How did the initial idea for Parature come to you?
In college, we built a business that provided students with event information, an online dating service, online food menus, forums for buying and selling used furniture, and commerce elements such as a textbook comparison search engine.
We wanted some simple, live chat technology that we could use for this, but there was nothing at the time that was Web-based, so we developed our own technology, which we put on the Internet for others to use during the summer of 2000.
We noticed that a lot of the companies signing up for our service were using it to help answer questions for their Internet-based customers. It was then that we realized the vision for online customer service software.
That first software developed eventually into Parature Customer Service™ software, which we think provides organizations with the smartest, most efficient way to serve, support, retain, engage with, and maximize the value of every one of their customers.
What have you and your team accomplished to date?
We’ve got over 700 customers and 10 million registered end users. Our bookings have grown 70% over each of the past two years and so far into 2008 as well.
Probably the thing we’re proudest of is our 98% customer retention rate, quarter-on-quarter. When you’re running a subscription business, customer retention is your life.
How do companies think about customer contact today? How do consumers? Is there a disconnect?
There are two things that companies can easily forget when it comes to customer service.
First and foremost, all customers want is to get correct answers to their questions and to get them fast. We're in business because there is no faster way to get your questions answered than to go online to find them yourself.
Secondly, customer service, if done right, can be a very powerful differentiator for a business. Organizations that are passionate about providing world-class customer service need to arm themselves with technology that can help them embrace and further amplify that passion. Parature can be a strong technology differentiator, a way to amplify the positive customer service culture that a company has for their customers.
What do you see customer contact looking like in 5 years? Where will a solution like Parature’s fit in?
I think most websites will have an online support application, whether it’s something that they've built themselves or it’s a 3rd party vendor like Parature supporting their website. The new generation of Internet customers will come to expect great online customer service when they shop online.
Valhalla CEOs: Scott Ferber
Position: CEO of TidalTV, a provider of advertiser-sponsored premium IPTV.
Tell us about your history with Advertising.com and what gave you the idea for TidalTV?
I co-founded Advertising.com with my brother John in 1998. We wanted to solve John Wannamaker’s dilemma from 1876 when he said “Half my advertising money is wasted, I just don’t know which half!”. We charged advertisers only when our avails delivered customers, but we paid media owners every time an advertisement was shown. We bore the marketing risk between the advertiser and the media owner. We were able to do this by using mathematics and IT to learn which ads worked best across thousands of sites and to use that information to make better ad placement decisions.
At TidalTV we are looking to extend that value proposition to both advertisers and publishers into the most powerful of all media…sight, sound, and motion. TidalTV provides a TV-like experience in terms of its simplicity and familiarity but leverages the benefits of the Internet for real-time viewing, on-demand viewing, interactivity, measurability, and addressability.
It is a win
- for consumers, who want content anytime, anywhere they are.
- for media owners, who want to monetize their content investments.
- for advertisers, who want accountability in their marketing spend.
How does a startup in the Internet marketing space gain enduring advantage over competitors?
The basic concept has not changed… solve a problem for a client/industry and deliver on the promise. I have always taken the “just because we can, doesn’t mean we should” approach with my companies. The world of digital technology provides great flexibility to do many different things, but at the same time this flexibility can lead to a lack of focus on your core mission.
The TidalTV approach is rooted in simplicity for each of our constituents - simplicity in design and usability for visitors, simplicity in distribution and monetization for content creators, and simplicity in partnership and accountability for advertisers.
How will consumers use the “three screens” for video 5 years from now?
I think over the next five years we will see a more ubiquitous distribution of the same content across multiple screens, whatever screen they might be. However, the consumption habits will remain pretty consistent with what we see today from the tech-savvy audiences, the only difference being the audience size utilizing the multi-screen capabilities will increase as a result of technology improvements – price, ease of use, etc. Each screen will serve its purpose and the programmer will have to play to the consumer needs and demands - primarily a device-driven experience.
What advertising formats for video are the most promising today? Do you see anything new on the horizon?
There are a number of different media companies doing some cool things with regard to their advertising offering:
- ABC.com empowers brands to utilize a Flash container anyway they wish.
- CBS is pushing a new skinning capability for advertisers [ed.: "skins" are ads that surround a video player or page].
- Ripe Digital is producing custom content and promotions for brands across their sites.
The problem however is that very few advertisers have the creative and/or development budgets to capitalize on these opportunities because they are not standard or transferable across sites.
At TidalTV, we’re looking at how we take the messages and assets that an advertiser has and make them work harder. Yes, we will have a variety of custom concepts for branded advertisers to test and experiment, but we are also putting a lot of emphasis on increased accountability, scalability and flexibility. Focusing on the advertisers’ objectives and delivering solutions that create energy, stir desire and compel action is what matters most for TidalTV.
JumpTap, Inc., Cambridge, MA
Valhalla, General Catalyst, and other existing investors welcomed Alliance Bernstein L.P., one of the largest publicly-traded global asset management firms in the world, as an investor. Alliance led a Series D round in excess of $26 million.
JumpTap is a leader in the mobile search and advertising business.
Parature, Inc., Vienna, VA
Valhalla, Sierra Ventures, and other existing investors welcomed Accel Partners as an investor as they led a $16.0 million Series B round.
Parature offers web-based help desk and support solutions that enable businesses to publish self-service knowledge bases on the web. The company’s software assists in cutting its customers’ costs through a reduction in telephone support as the clients’ web site becomes a user-friendly, instructive self-service center.
Persystent, Inc., Tampa, FL
ABS Ventures joined Persystent as an investor and, along with Valhalla and existing investors, led an $11.0 million investment round.
Persystent’s software enables high-speed imaging and increases the usability and reliability of computing devices by repairing operating systems and application programs, automatically or on demand. This reduces the need for human intervention in repairing software problems, resulting in lower help desk and service technician costs, more uptime for users, and desktop configuration enforcement on or off the network.
SEPATON, Inc., Marlborough, MA
Valhalla and existing investors led a $6.0 million extension to the Series E round investment in Sepaton.
Sepaton provides customers with affordable high performance data protection applications, which are non-disruptive to their existing infrastructure and business practices. The company’s products are easy to install and use, are scalable over time and are optimized to lower ownership costs at each level of data protection selected.
Fishbowl, Inc., Alexandria, VA
Valhalla invested $10.0 million of a $12.0 million Series A round in Fishbowl. Although Fishbowl has received funding in the past, this round represented the first preferred stock investment in the company.
Fishbowl has established itself as the leading provider of e-mail based loyalty programs to restaurants. The Company’s turn-key programs are used by over 700 restaurant companies in North America and Europe and at over 30,000 restaurant locations.
Local Labs, Inc. New York, NY
Valhalla invested $0.9 million of a $1.0 million Series A round at Local Labs.
Local Labs is developing a semantic, social and application-delivery platform designed to bring a city’s people, places and businesses closer together. The Company’s goal is to use a combination of computer modeling and social interaction to create a more efficient medium for people and businesses to interact with each other and commercially.
MiserWare, Inc. (no website yet), Blacksburg, VA
Valhalla invested $0.4 million in a seed-stage investment in MiserWare.
MiserWare seeks to become a player in the “Green IT” market as it works to enable companies to decrease power consumption in their data centers.
Q & A
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