This should be an interesting session, all about creating a viable web business. On hand is Malgosia Green, Michael McDerment, Albert Lai and Leila Boujnane. Here are my notes (my comments in italics):

• Leila says it’s not trivial to get someone to pay, its hard to get out of the “free” hell.
• Michael, from FreshBooks, says that they had to change their name (they used to be 2ndSite or something) because the old name had many shortcomings. The name was not memorable, did not describe the business or industry, etc.
• Albert says to make sure you do a trademark search, and trademark your name.
• Albert says to ship early, and ship often. He also thinks that you shouldn’t build desktop software unless you have to.
• Malgosia says not to get attached to your code. Sometimes rewriting is vital. Alex agrees, you can’t be afraid of shifting gears.
• Don’t be afraid to reach out to the community, bloggers will talk about you if they like what they see.
• Enable people to help each other.
• Michael says the support department is the sales department, they don’t really have a separate group for sales.
• Support, development, and marketing are like the holy trinity of online web apps.
• If the application is for something leisure-related, upgrading from a free account to a paid account is’nt as common as something more focused on business.
• Malgosia says to be humble.
• Michael thinks that just as important as knowing what you know, is knowing what you don’t know.

There seems to be one session per conference that I don’t pay an incredible amount of attention to, and this one turned out to be the one. Some interesting ideas, but everything is really applicable only on a per-business basis. What works for one of these panelists isn’t going to work for everyone. That, and there’s more than one way to skin a cat.

I got to this session slightly late, but that’s okay. Jason Fried and Rick Segal are tackling the question of whether or not Web 2.0 companies need venture capital. Jason is, of course, from 37signals, a Web 2.0 company that didn’t take VC. Here are my notes (my comments in italics):

• Jason says everything they do is profitable.
• Rick agrees with Jason, if you don’t need the venture capital, don’t take it. Institutional money changes the dynamics of what you’re doing.
• On the whole, Rick thinks that 37signals is an anomoly. The norm is folks come up with an idea, and then need some cash to get going.
• If you don’t lose your limited partners’ money, they will love you. There’s a myth that you need to make millions and millions, and its probably not true.
• Jason says the answer to “how do you monetize this” is “you charge for it.” If you build tools that people want and like, you can charge for them.
• If you pay for something and you use it, you’ll see the value. There is a disconnect between buyer and user in the enterprise.
• Rick says in general, free sucks. The problem is that we’ve trained people to do free, and getting people to pay for something is a non-trivial task. Rick says generating revenue quickly is important.
• Jason says “we like to emulate drug dealers”, you give people a little bit for free and get them hooked. Most of 37signals’ business is from upgrades.
• Jason says know what you want to do, and build something that you can manage without requiring the headcount to swell. You need to have people on board who share that vision.
• Rick says there are definite opportunities in Canada. However, there is not enough chest pounding that this is a great place to start a company. This company has a wealth of talent, and there is capital.
• Rick’s standard offer to any entrepreneur is 30 minutes, no harm, no foul. Rick thinks that every entrepreneur who wants to take a shot should get to take that shot.
• Jason says to hire the best talent you can, no matter where they are. He says you don’t need to go to San Francisco.
• The main way to keep costs down is headcount, according to Jason. Also, don’t go buy the server farm before you have any customers. Jason says you should be able to build any product with three people, max. If you need ten people or even five, its too complex, so keep the team small.
• The way to build an audience is by teaching, according to Jason. Either you outspend your competition, or you outteach them.
• Finding like-minded people is more difficult. 37signals has done it through the open source community.
• Rick says that in Canada, there’s lots of opportunities for the “put me in coach” deal, and those people will often work twice as hard. And these people become like-minded, because they are looking to you for guidance.
• Jason thinks resumes are a waste of time. He doesn’t care where you went to school or if you finished school, as long as you do great work. It’s about fucking time someone important said this, thank you Jason, I couldn’t agree more. The school system is largely a waste of time (with regards to tech) as far as I am concerned.
• Rick believes very strongly that the Canadian VC market is not taking enough risk, doesn’t fail enough, and doesn’t take enough flyers. The problem is that the community is very small.
• At the high school and post secondary level, we need to allow people to try things in entrepreneurship, says Rick. If anyone gets a startup camp going, Rick wants to know about it, and he’d be happy to get people and money there.
• There’s lots of potential downsides to taking money. You might get pushed out, you might be forced to go public, etc.
• Rick says when he does a valuation on the company, he does two things. How much capital is going to be required to create that success? How can he stage those dollars into the company? Rick doesn’t do participating, preferred, double dip shares or anything. The best deal possible is common shares. The worst thing you can do is make someone feel like they didn’t win. At the end of the day, Rick wants the entrepreneur to feel like he/she has a partner.
• There has to be a liquidity event for a VC, so after you take money, Rick says there is a meter running to get to that event, so the entrepreneur has to want to sell, or go public.
• Web 2.0 boils down to service, according to Rick. They are successful with passionate customers.
• Jason says that founders shares look good for entrepreneurs nowadays.

Tara Hunt is on stage now, to present the third and final keynote of the day, talking about building a community. Here are my notes (my comments in italics):

• Tara says she left thinking there wasn’t a tech community in Toronto, but thinks that things have changed now.
• She wants the session to be interactive. Who doesn’t? Every presenter says that.
• Tara blogs because she is creating her own personal history.
• Tara says the consumer revolution is here. We know better than to listen to marketing lies. There are bad customer experiences, and too many unsatisfactory choices. We’re people, not consumers.
• Once we make a choice, we’re locked in, such as with DRM. There are too many messages – ads in the bathroom, on the train, etc. People are pissed.
• People have good choices now.
• Okay, this is actually interactive for once, gj Tara. A side effect of that, however, is that its harder to take notes 😉
• We’re having a discussion now about a video Tara showed. The video, on YouTube, was of a teenage girl (bowiechick) showing off the capabilities of her Logitech webcam. Some people wonder if the video is actually some sort of marketing on the part of Logitech.
• pinko principle #1: inbound, rather than outbound messages
• pinko principle #2: be a community advocate (not a company evangelist)
• pinko principle #3: 100% authenticity
• pinko principle #4: serve niche markets
• pinko principle #5: follow open source principles
• Tara says to stop using the term “viral”
• Snakes on a Plane…check it out. We just watched a CNN news segment on the upcoming movie.
• You can’t put this stuff in a list, it’s organic.
• You have to be part of the community you serve.

Apparently an alarm has been tripped somewhere in the MaRS conference centre, so there’s a flashing light and a repeating loud beeping, which has brought the conference to a halt. Every now and then a lady comes over the loudspeaker to tell us that the cause of the alarm is being investigated, causing great humor for all attendees. Apparently the Toronto Fire Department is en route.

We’re on a fifteen minute break now. You just never know what will happen at these events 😉

Today’s second keynote features Mathew Ingram talking with Dr. Paul Kedrosky about venture capital and Web 2.0. Here are my notes from the session (my comments in italics):

• Is this another bubble? In a sense we’ve returned to 1995, two browsers got funding! (Maxthon and Flock) In a sense, it feels like we’re renacting a lot of the same things that happened last time. “It takes a lot of dead bodies to fill a swamp.” Mathew says Web 2.0 is making the same mistakes faster! Paul says he sees the same plan four times a day, which is always a sign of the bubble.
• Paul says there’s a strong argument to be made that the first bubble (not tech, but way back) wasn’t a bubble at all, but rather a reaction to policy. We’re really good at overpainting bubbles.
• Mathew says there seems to be a lot of money, and people have to make investments. Paul says we’re at record levels for VC, in terms of capital under management. There’s as much more money out there now as the last bubble, it’s just much more concentrated among the so-called top tier.
• In the venture industry is a rigged market, in that the best venture investors fish from a well stocked pond.
• Mathew wonders if you need the money VCs have? Paul says if you don’t need the venture capital, don’t take it. If you can build a company that doesn’t require capital, you’d be an idiot to give part of it away for VC involvement.
• The nice thing about a lot of the consumer-centric Web 2.0 companies is that you can do them very cheaply. Well, sort of I guess. Cheaper when compared to ten years ago, sure. People still cost money!
• Paul says there is very little barrier to entry now. He says its sort of like being pecked to death by ducks!
• Given that its so easy to start a company, how can they raise all this money if they don’t have a business model? Paul says YouTube looks like a very early mockup of a television network of the future, so its a very interesting company (though they should stop stealing other peoples stuff). Paul thinks you can come up with a business model later.
• Look at Google, the precedent is well set, maybe you can stumble your way into a business model. You better have scale though.
• Questions from the floor are starting early. What about progression, say to B2B or enterprise? Paul says its definitely starting. He thinks the spread from consumer to enterprise has gone from 99% and 1% to maybe 60% and 40%. One of the most interesting companies Paul likes is DabbleDB, a classically Web 2.0 company oriented towards enterprise.
• Any examples of good, profitable models? Paul says a good Canadian example is PlentyOfFish.com, who are pretty profitable. Paul thinks they are doing about $15,000 a day.
• Is VC in Canada lagging for Web 2.0? Paul says that everywhere he goes, it seems they think they have a seed financing gap. Even in Silicon Valley! In Canada in particular, the level of wealth per capita isn’t high enough, so yes there is a gap. Under the current structure, it’s hard to do seed investing out of a large fund.
• While it may be easy to build a Web 2.0 company on credit cards, you can’t build a sustainable, successful company. Thoughts? Paul says that’s true. Later often doesn’t happen for venture capital firms.
• How many things that get investment are actually features and not products? Paul says its epidemic proportions. He says it is easy to start thinking that features are products. People feel they have plausible deniability though, because things are getting sold, and big companies are doing it, just look at Google.
• Has Skype made some VCs rethink their strategy? Paul says investing and venture capital is trend following and number following, so absolutely.
• The death of the IPO has caused some big change in the venture game. So a big acquisition (like Skype) that looks like what an IPO might have been, they’ll all jump.
• Is AdSense the only model? Paul says there is a preoccupation with AdSense, for sure. In a sense, Google is the single customer. The cashflow is great, but there are other ways to get paid, even just multiple ad networks or subscribers.
• Paul says we are back at the advertising level online that we were in 2001, and it’s still just a drip in the bucket in terms of the total ad spend in North America. Paul thinks network television is starting to lose it’s monopoly, there are some cracks in the dam.
• Paul says in Canada, we need more big exits in a dense area so that people have some examples to follow. In the Valley, people see other people being successful and think “I gotta get out there and do that!” It’s a chicken and egg problem in Canada, and as (missed his name) from Bessemer says, “we don’t have enough chickens or eggs.”
• Paul says the Boston area investors have a history of investing up in Canada.
• Paul thinks that venture folks remain as preoccupied with how you’ll spend your money as ever, if for no other reason than it’s an important discipline to have, to go through the steps of planning. You’ll find venture firms are more creative than usual when structuring deals.
• Paul says institutional VCs are more flexible and creative lately, not stuck on doing the same old thing.

In the first keynote of the day, Stuart MacDonald will be chatting with popular blogger Steve Rubel of Edelman about the future of marketing. Here are my notes from the session (my comments in italics):

• Throughout the conference they have been showing short ads for Mesh, made by a company called Storystream, whose tagline is “ads you want to watch”. I’m not sure what the point is, but they are fairly interesting and sometimes funny.
• What does micropersuasion mean? Steve says its no longer about Superbowl ads, but rather about one person with a voice and the same impact. One individual being just as persuasive as anyone.
• Steve says public relations has to mean exactly what the words say, relating to the public. The PR professional needs to know how to interact with people as people. Bloggers have many different motivations, you have to consider a person’s motivation and how to help them with it.
• Stuart remarks that blogging is harder than just issuing a press release, it feels like “a military campaign with no end.” Steve says that’s not the best analogy, it’s more about befriending the community. The new model is “further the conversation.”
• This time, for the first time, the Edelman annual survey showed that a peer is the most authoritative person, no longer a CEO or someone else. People like to find people like themselves.
• Steve says advertising is still working, let’s not kid ourselves. Marketing isn’t dying, PR isn’t dying, it’s just that new disciplines are appearing.
• Stuart asks if Steve gets a lot of fear from clients, and Steve says we get fear from the whole industry. Sooner or later though, you have to face that fear, and when people see there are ways to succesfully engage that conversation, they’ll get over the fear.
• The community will tell us who is credible and who isn’t, Steve says.
• It’s not a numbers game, you don’t need to go for the blogs that have the largest numbers. A deep level of engagement with a particular audience is better, that’s the new model.
• Steve has seen some companies setup budgets for community marketing, so people are starting to pay for this kind of PR, and others will follow.
• Steve says blogs can surely generate a lot of traffic, and many campaigns these days are measured using traffic.
• We learn as we go, that certain things will work and others wont, but we need to remain transparent.

Now, some questions from the floor:

• Blog posts are being circulated to political people, do you see this with companies? Steve says the companies that get it use services like Tailrank, but he doesn’t think posts are printed out and spread to executives.
• What is happening with MySpace? Steve says it is more than just MySpace, it’s all social networks. There are centers of gravity that pull people in, like MySpace, Flickr, YouTube, etc. Whatever you do with social networks, needs to be on the terms of service of the community, in a way that’s polite and accepted. Social networks are a great place to engage people, but you need to engage in a way that furthers the community.
• Someone asked about Strumpet. Apparently it is a blog that wonders how long Steve will last at Edelman. Steve says that as a blogger he recognizes that he lives in the public, and with that, you gotta take your lumps. The lesson to marketers is that you’ve got to take the bad with the good.
• Question about Second Life and the opportunity for marketing. Steve says for him, Second Life came out of nowhere, and he thinks the potential is terrific, provided you can find a way to engage in a way that is accepted.
• Do bloggers need to learn any new skills to better communicate with PR people? Steve says they don’t need to learn new skills, they need to be people.
• Steve says what he would measure is conversations, engagement with the most influential people.
• How do you represent the masses when its the educated tech elite doing the talking? Steve says the old stuff doesn’t go away, but there’s a new group of people you focus on more deeply. (I don’t think he quite understood the question.)
• What about “pay for play” in the blogosphere? Steve thinks it is fine if accepted, but right now, it’s not accepted at all. The way to know what will work is to read blogs, to keep track of what people are talking about.
• What are some of the techniques used today to calculate community ROI? Steve says you could use touch points, web traffic, inbound links, the rank within the search engines, etc. Ultimately it comes back to sales, did people buy more product? Clients right now might want measurement in a way that doesn’t exist yet.
• Who did the biggest rain wreck? Kryptonite? Sony and DRM? Steve says it is anyone who created a fake blog, like Captain Morgan, character blogs. Steve thinks characters are great for ads, not for blogs. Blogs are about authenticity.
• Tris asks, what about character blogs for entertainment purposes? Steve says why do a blog and not something like a Flash microsite? Steve doesn’t think there have been many great successes with it.
• Steve is getting hammered over the character blogs right now. Steve says a character blog is a shield, it says to the consumer, “I don’t want to get down and dirty.” The best blogging companies take real people from the gut of the company.
• Jeremy Wright just made a good point – “If Darth Vader blogged, I’d read that every bloody day.” Steve says well, let’s try it and measure it and see if it works!
• Stuart says that without data, it’s just opinion. And don’t be afraid to fail.
• Where do you think this is going? Steve says its heading to a shift of advertising dollars from one-way communication to two-way. In three years there will be metrics, more case studies, processes, more failures, and a new budget created for generating conversation. We’ll see indexes like the the most talked about brands in the world.
• Step 1: know where your customers hang out. Step 2: develop the infrastructure to listen to the conversation. Step 3: engage the audience in a dialogue. Step 4: empower the audience, figure out what they want to achieve, and help them do it.
• Steve says if you want to do “I talk, you listen” then do podcasting, or microsites, or something.
• Will blogging bring more truth to advertising? Steve thinks so, he says “the blogosphere is the greatest fact checking machine ever invented.” It will force companies to be more honest.
• Some guy just basically said blogging hasn’t reached the masses. Um, hello? Over sixty million blogs worldwide? Probably double that if you count all the ones in China that we don’t keep proper track of. I wish Steve would have said something to that effect.

Just got settled in the auditorium for day two of Mesh. Tris Hussey and I just remarked that the conference is much more business focused, which is a good thing for Canada, we really haven’t had that yet. We’re starting late, but I think it’s because there was hardly anyone here at ten to 9, unlike yesterday. The auditorium seems to be filling up now though.

We’ve got back to back keynotes this morning, followed by a break, then fifteen minutes of fame, and another keynote bringing us to lunch.

Last session of the day is all about media and it’s future, particularly that of newspapers. Participating is Mathew Ingram, Angus Frame, Tomer Strolight, and Tomi Poutanen. Here some notes from the session (my comments in italics):

• Why is Craigslist successful? Because newspaper classifieds are restrictive and expensive. Apparently the site steals $50 million of advertising from newspapers a year.
• Angus says you need to get people to change their understanding of what the daily paper is. A big change was adding breaking news to globeandmail.com, so that the paper isn’t only publishing once every 24 hours. The next goal is to have the Globe understand that control has to change; allowing readers to comment on articles, for example.
• Angus says its tough to get this new kind of thinking into the daily activities of a newsroom such as The Globe’s.
• Tomer says that while not everyone is on board with doing things online, the organization is. This means they (Toronto Star) are doing things like a Craigslist competitor.
• Mathew wonders if its easier for Yahoo to become a new media organization. Tomi says absolutely. Yahoo doesn’t create a lot of content, but works to make sure the infrastructure is right. The vision is to enrich peoples lives by allowing them to find news, share it, etc. Yahoo is by no means a traditional media company.
• Yahoo has a ton of partnerships with publishers, because they drive a lot of traffic to them. Tomi says things are changing, you can no longer just print Reuters articles and call it a newspaper. Angus says what’s being missed in the acceptance of huge change, going from the newspaper as a whole as a product to just the importance of a single article that might appear on Yahoo News.
• Angus says aggregators are going to be the dominant stop for people looking for information. So you have to make it worthwhile for people to go to The Globe. The strengths for The Globe are journalists, and the audience, which provides a unique opportunity. You can’t aggregate the package.
• Tomer says that now the publishers have information such as which stories are most popular, what are people following, etc. He says the change is unbundling, so newspapers need to find new ways to make money.
• In a lot of ways, traditional media was about pushing stuff out there. Comments, voting, patterns, etc gives much more data than previously possible, so writers can find out instantly if people liked their articles.
• Tomer says that in the past, you could have an entire career in journalism writing stuff that no one ever read and be none the wiser. That doesn’t happen anymore, due largely to the availability of so much more data.
• Tomer says you have to find a unique value proposition, and not trying to change the newspaper into commodity content. Newspapers have to get leaner to meet people’s time constraints.
• Angus says it is very common for publishers and writers to underestimate the intelligence of their readers, who might have something to add. Writers shouldn’t shy away from that opportunity!
• Angus says that the online reader is very similar to the offline reader, the newness of the medium has worn off. One is not really more or less tech-savvy than the other.
• There’s no doubt about it, people go to where they feel the information is the best, according to Angus.
• What about registration for newspapers, even if it was free? Tomer says it was a lose-lose situation for everyone. After registration was removed, traffic rose by 50% after three months.
• Are newspapers moving towards reporting or opinion? Angus says everyone is trying to add something more of value, so yes, a lot more opinion as part of the drive to make something unique. There is more opinion on everything now than there ever has before.
• Yahoo highlights the content that is most popular among readers. Yahoo is also more editorial while Google’s competing news product is entirely algorithmic.
• Any thought to becoming a news aggregator? Angus says no, The Globe is a niche player in the Canadian media market. The idea of partnering and linking to content sources that complement what the Globe already offers is the main change to go after. Tomer says there’s no way to compete with Yahoo and Google, so why would you become an aggregator?
• Angus hopes the whole idea of a walled garden is long dead.

Here we go for the next session, talking about where broadcasting is going, with Barnaby Marshall, Amber MacArthur, Jian Ghomeshi, and Andrew Baron. Here some notes from the session (my comments in italics):

• Barnaby started off with a survey of the audience. It seems satellite radio is not that popular, but lots of people like iPods and have bought music on iTunes. “Buying music is the new piracy.”
• Jian says, at the end of the day, while the platforms may be changes, the major players won’t. This is both telling, and somewhat disheartening. I disagree here. BoingBoing anyone?
• The New York Times print may be dying, but the New York Times itself will not. The traditional media have done a great job of scrambling to diversify. Really? Name another great example besides News Corp. Murdoch is the only one who really gets it.
• Andrew says the music industry has lost control. Apple is the now the single entity that is determining prices, etc.
• Rocketboom could not have existed a few years ago, but now that its possible, Andrew thinks we’ll start to see things change.
• Amber thinks the most interesting thing is reach. You really can’t compare the number of eyeballs in Canada to the number of eyeballs worldwide, and that’s a big difference between old and new media. Amber says old media needs to be believe in the power of new media.
• Amber says NBC asking YouTube to pull content is pretty shortsighted. You have to get in the game, or you’re going to get left behind.
• Jian says that Pandora is a great example of a service that allows people to get excited about something while putting up with advertising. He doesn’t believe however that you can boil music down to mathematical equations.
• Jian says Yahoo Music is overly confident in suggesting their goal is the death of terrestrial radio. He thinks people still want to own something, they don’t want to rent.
• Someone in the audience just brought up my mantra, though he calls it ubiquitous wifi. I call it wireless everywhere. Why do I need an iPod or a satellite radio? Barnaby says Google’s project is incredibly disruptive, and Amber says satellite radio will die if it happens. Jian thinks that wireless in the automobile will be the turning point.
• Why will traditional media not die? Because they can buy the new media, seems to be Jian’s answer.
• Andrew says the big companies are going to be sharing, they won’t be in control.
• “Is Seinfeld any funnier in HD?”
• Jian thinks on demand in general is what’s shaking in the industry.
• To do things like The Sopranos or 24, you need the best writers, the best actors, etc. And no matter what the platform is, that stuff will be successful.
• Amber says that even if a lot of people can do it, only a few can do it well.
• Someone says that people are habitual, they get home, sit on the couch, turn on the TV. “Editorialize to me because I don’t have time to think!” Is traditional media really going to die?

Just got back from lunch, and I decided to attend the session about bloggers and journalists, featuring Matthew Ingram, Om Malik, Michael Tippet, and Scott Karp. The Editor-In-Chief of Dose is sitting right behind me, which is kind of cool. Should bloggers be treated as journalists? Here some notes from the session:

• Scott says bloggers can be journalists, sometimes. And blogs can be journalism, sometimes. Finding that middle ground is the tricky part. News gathering has to happen in a lot of places where it requires an institution or money.
• Matthew seems to think the recent participatory journalism survey on The Economist is a good example of something you wouldn’t see on a blog, because of the time and effort involved. Basically, they have the resources available whereas most bloggers simply don’t.
• Om will give the people that pay him first right of refusal on breaking stories, but will post on his blog if he can’t reach them (say if news breaks at 2 AM). Om sees the blog almost as a reporter’s notebook, more than anything else.
• Michael says that from the perspective of consumers, this dichotomy is ridiculous. They just want pictures, stories, they want the stuff. When you’ve got 500 photos of an event coming in, you get a sense of what’s really happening. Most of the stuff reported on NowPublic is big spectacle events, things like Katrina, etc.
• Michael says trust is important, he trusts the Globe and Mail, but he also trusts his friends.
• Matthew says that on Google News, many of the articles are repeated, because many outlets use something like AP, so its refreshing to see photos from someone actually on the ground.
• Om says this whole user generated media thing is a big myth. Say if you take photos on holidays, you’ve got maybe 20 good photos out of 500. Om says that 80% of the time, user generated stuff is crap, and it applies through any media. Om says there is a reason that people turn to established media outlets, like credibility and packaging.
• Scott thinks user generated media functions in a spiking fashion, once in a while, something strikes a nerve. Matthew says it also makes it easier to find stories of interest in the future.
• Om says that user generated media is just like forums, we’ve finally figured out how to do forums correctly, but you can’t make a big deal out of it.
• Om isn’t against participatory journalism, but sometimes too much is too much.
• Michael says the goal is to find likeminded individuals, not necessarily to have the front page story on NYTimes.
• Om: Look at American Idol – not everyone can sing, but everyone loves to vote.
• It’s more citizen editors than citizen journalists.
• Om says, find me someone in this room who doesn’t have an agenda. Is there really objectivity?
• Michael says he likes to gather a plurality of viewpoints.
• Om says people who aspire to be editors online in the future are going to be aggregators. Trusting users to make the right call is the only way to go, that’s why Digg is doing better than the NYTimes.
• The biggest thing that Om has learned is to be willing to apologize, you self-correct in real-time. Be flexible to listen to your readers, and just say sorry when you’re wrong.