Privacy groups, lawyers, entrepreneurs, investors and industry associations have written a fair amount about online privacy.  The central question is the degree to which advertisers and their agents should be able to observe consumers’ click behavior across multiple sites in order to deliver advertisements that would be of interest to consumers.  For example, should a company be able to see that an anonymous user recently has visited Expedia, Kayak, various Hawaii hotel sites, medical sites relating to cancer, and five doctors’ websites?  By seeing these click patterns, the company could infer that the consumer might be interested in an advertisement on inexpensive airline tickets.  At the same time, however, the consumer could be concerned about presumed-anonymous-but-sensitive medical information being circulated outside of her control.

Congress may weigh in on the issue within the next year or two.  Much of the discussion has been framed around opt-in and opt-out approaches.  That is, should consumers be given the choice to participate in data collection networks (opt-in), or should data about their click behavior be collected automatically unless they elect against such collection (opt-out)?

So, why would consumers continue to allow their click behavior to be monitored?  Advertisers argue that such monitoring allows for relevant targeting.  If someone is planning a trip to Hawaii, wouldn’t she want to see advertisements on travel promotions instead of advertisements on plumbing repairs?

But little attention has been given to another aspect of all of this:  How about rewarding consumers for agreeing to share their click behavior information?  If advertisers, publishers and others get economic benefit from collecting a consumer’s click behavior, shouldn’t the consumer get some economic benefit as well?  That is exactly what Bynamite is trying to do.  The New York Times wrote a great article on the company and its goals.  Whether or not Bynamite is successful, I am intrigued the idea of introducing some type of structure that rewards consumers with real or virtual currency for participating in the advertising ecosystem.  And even if a market-based concept were to not work well in real life, I am interested in innovative ideas that get us beyond the debate between opt-in and opt-out.  We should find ways to protect consumers’ privacy sufficiently while preserving the advertisement effectiveness that stems from behavioral targeting.

I like the last three paragraphs of the article in particular:

In a few years, Mr. Yoon says, a person’s profile of interests could be the basis for micropayments or discounts. A media company, for example, might charge a monthly subscription fee of $10 for news or entertainment programming, but offer it for $8 to those who exchanged their preference wallets.

The discount, in theory, would be justified because advertisers would pay more to market to people whose interests they knew precisely and thus were more likely to buy.

“I may be wrong about the product and our company,” Mr. Yoon said. “But I’m absolutely convinced that the direction is right, giving people a way to identify and use this store of value that is their personal information.”

Eric Ries has an interesting post named What is a startup?  He writes, “A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”  He then goes on to dissect that definition.

I am often asked about the stage of development that is of interest to SJF Ventures.  While some individuals like to focus on revenue as an indication of seed, early and growth stages, I focus a lot on market validation of the company in the segment of the business that represents upside.

Gauging the level of market validation is a bit of an art, but I tend to focus on growth, engagement and enthusiasm.  For example, a consumer Web business with one million uniques per month and a lot of churn tends to be less exciting than a company that has 250,000 uniques, high growth, an engaged audience that comes back to the site over and over again, and a excited group of members that touts the service to others.  Similarly a business-to-business company with $5 million in revenue and decently interested customers feels riskier to me than a b-to-b company with $1.5 million in revenue and highly enthusiastic customers.

I emphasized that the market validation needs to be in the area that represents upside because new products and lines of business have high failure rates.  Entrepreneurs are often able to get their businesses off the ground by performing a service that generates hundreds of thousands or millions of dollars in slow-growing, tough-to-achieve revenue.  They plan to launch a different service that can turbo charge the business and take it to the moon and seek venture capital to launch the new service.  Such switches in the business model are difficult to pull off and hard to achieve.  Again, I would rather invest in a company that has no revenue but an offering that is on fire and can scale rapidly than a company that has $3 million in revenue but must launch a new type of product in order to achieve the type of growth necessary for a venture return.

Some see it differently.  Some would say that generating $3 million of revenue is tough to do and indicates that a company has worked through a lot of challenges that arise in a startup phase of a business.  It’s a fair point, but I tend to look for a company where the product or service that can generate a venture return is already humming, regardless of the revenue level.

Alan

I like the debate that paidContent is highlighting on Goolge TV.   Staci Kramer says that it’s hard to get excited about the concept when so many similar services have failed.  Forrester Research says that Google TV is going to be bigger than people think.  I tend to believe that the next 24 months will be the time when Internet and TV finally merge in a big way.  And I am really interested to see the extent to which the new media is consumed on tablets (iPads).

Morgan Stanley analyst Mary Meeker may speak in broad brush strokes and have a strong bullish bias, but her presentations on Internet trends are always fun to see.  Here is her latest trends report.

I think Fred Wilson nailed it with these comments:

“We use it for our sonos remote, to do crossword puzzles, play games, pull up menus to order in, read techmeme and hacker news, and watch the occasional youtube video. It’s replaced our kitchen computer on our kitchen countertop. It’s become a member of our family. And when visitors come over, they love to use it. It’s great at a party.

Our iPhones, Androids, and Blackberries are our personal devices. We wear them and they are with us everywhere. Our iPad is our family computer in way that the kitchen macbook never was.”

I find videos that illustrate the user experience to be very valuable and time efficient if I am interested in using using a service or if I am trying to understand a company from an investment perspective.  MediaMath, Zimride, and foursquare provide nice examples of the power of video (click on the “learn more” button to see foursquare’s video).

Like other investors, SJF needs to look at metrics and other data to determine the attractiveness of an investment.  But inevitably we have to make leaps of faith.    Getting a good sense of the user experience is integral to determining whether to take those leaps of faith, and video demonstrations are a very helpful way to achieve a good initial understanding of the user experience.

David Shirmacher has joined one of SJF’s portfolio companies, FieldView Solutions.  FieldView provides a Web-based interface for branch circuit monitoring in data centers.  The solution helps to reduce energy costs in data centers.  My colleague, Arrun, has written about the investment on SJF’s cleantech blog.

As global head of engineering and critical systems for Goldman Sachs, David designed and operated Goldman’s data centers.

When looking at investment opportunities, SJF looks for enthusiastic customer validation from authoritative sources.  David’s joining FieldView is about as good as it gets in satisfying that criterion.  We are very excited that he is joining FieldView.

A few years ago I heard of an interesting concept:   hyper-localized manufacturing.  The idea goes something like this:  One day, individuals will have highly sophisticated tools that can build almost any type of item by downloading instructions that are then used to “print” an object.  The concept is analogous to the transition from using FedEx to recipients’ printers.  Whereas in the old days a company would print a document and then then ship it via FedEx to a recipient, today the company can email the document and it will be printed by the recipient.  As a result, the hard document is created by the recipient.  Similarly, a table designer in the future industry could send instructions to a recipient’s tool, which would be capable of “printing” a table — or a chair, a shoe, or automobile, etc.

The idea is way out there, but supposedly Jeff Bezos and others have been very excited about the idea.

It’s hard to know if this concept will ever develop as envisioned, but I think one can make a bet that directionally the trend will be towards do-it-yourself manufacturing of some type.  The original author of “the long tail,” Chris Anderson, has laid out a pretty interesting map for how DIY manufacturing might unfold.  See the story here.

Excerpt:

Here’s the history of two decades in one sentence: If the past 10 years have been about discovering post-institutional social models on the Web, then the next 10 years will be about applying them to the real world.

This story is about the next 10 years.

Transformative change happens when industries democratize, when they’re ripped from the sole domain of companies, governments, and other institutions and handed over to regular folks. The Internet democratized publishing, broadcasting, and communications, and the consequence was a massive increase in the range of both participation and participants in everything digital — the long tail of bits.

Now the same is happening to manufacturing — the long tail of things.

The tools of factory production, from electronics assembly to 3-D printing, are now available to individuals, in batches as small as a single unit. Anybody with an idea and a little expertise can set assembly lines in China into motion with nothing more than some keystrokes on their laptop. A few days later, a prototype will be at their door, and once it all checks out, they can push a few more buttons and be in full production, making hundreds, thousands, or more. They can become a virtual micro-factory, able to design and sell goods without any infrastructure or even inventory; products can be assembled and drop-shipped by contractors who serve hundreds of such customers simultaneously.

Today, micro-factories make everything from cars to bike components to bespoke furniture in any design you can imagine. The collective potential of a million garage tinkerers is about to be unleashed on the global markets, as ideas go straight into production, no financing or tooling required. “Three guys with laptops” used to describe a Web startup. Now it describes a hardware company, too.

WIRED Magazine has been covering the “tablet revolution” very well.  Today, it summarized early reviews on the iPad.  More importantly, however, WIRED has some very interesting thoughts on why tablet computing has the power to be truly revolutionary.  It gathered views from 13 writers.  See the full story here. Not surprisingly, Kevin Kelly and Nicholas Negroponte have some of the most expansive visions for the impact of the tablet.  Some excerpts provided below:

Don’t think of them as tablets….  Think of them as windows that you carry.  This portable portal will peer into anything visible. You’ll be able to see into movies, pictures, rooms, Web pages, places, and books seamlessly. Many people think of this sheet as a full-color, hi-res, super ebook reader, but this viewer will be about moving images as much as text. Not just watching video but making it. It will have a built-in camera and idiot-proof video-editing tools, and it will also serve as a portble movie screen, eventually enabled for 3-D. You’ll “film” with the screen! It will remake both book publishing and Hollywood, because it creates a transmedia that conflates books and video. You get TV you read, books you watch, movies you touch. Kevin Kelly

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And it’s not just for bed. Would you have ever imagined how many people walk around looking at one hand? Texting is replacing talking, and thumbs are replacing lips. Laptops, meanwhile, are not mobile. They are nomadic. You have to sit down to use one and do battle for a connection. Standing with a laptop is entirely unsatisfactory.

Tablets are therefore the new frontier. They are the new book, the new newspaper, the new magazine, the new TV screen, and potentially the new laptop. Something you carry — and, yes, something you can lose.

The real beneficiaries, however, are not you and me or the thousands who will soon queue up to buy the iPad. The undeniable beneficiaries of tablets will be those who have no alternative, those who have no books, no libraries, and in many cases no schools or electricity. I mean the nearly 2 billion kids in the developing world. Nicholas Negroponte

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The iPhone shows that loads of people want rich-media networked devices with them everywhere. Like a tablet, the iPhone is a one-app-at-a-time full-screen experience, where the interface is determined as much by the apps and the device itself as it is by the OS. By dint of its bigger screen, a tablet is immersive enough to spend hours with — and yet it’s still intimate. A laptop is a work device, an arm’s-length, lean-forward experience. A tablet, in contrast, is a personal device, something you cradle and lean back with. Chris Anderson