Johnnie Manzari: Subscriptions: The Third Wave

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May 15, 2005 Subscriptions: The Third Wave

Original Post: 15 May 2005
Updated: 17 May 2005

What Jim Allchin wants you to know

Subscriptions. When most people hear the word, they think about paid subscriptions for mobile phone service, cable, magazines, newspapers and so on. There are also a host of annoying subscriptions, such as those spam-like newsletters that get mailed to me from Classmates.com, which I assume are a result of me not checking or unchecking something years ago when I first visited the site. But for many people today who are at the front of the web technology adoption curve, the word subscription has come to mean something more. It also includes the idea of subscribing to feeds that are published by blogs, news sites, photo sites and other websites that have content that changes regularly.

In an earlier post I wrote that: "in his recent interview, Jim Allchin, head of the Windows project at Microsoft, said that syndication and subscriptions represent the third big movement for getting information on the web (the first was hyperlinking and the second was search)."

I'd like to revisit this and write about it in more detail. If the person responsible for Windows says that something is important, it seems like it would be wise to pay attention. The last time they had a focus such as this seems to be when it was around the web browser.

I believe that this isn't just Allichin's personal opinion, but is actually more fundamental and is shaping the direction of Longhorn, the next release of the Windows operating system. Two facts make me believe that Allchin has something up his sleeve. The first is that the Wallop team, responsible for social computing research at Microsoft, was moved off of the Wallop project and on to Longhorn. The second is that in the WinHEC 2005 demo, they mentioned a feature called, simply, Lists that would allow you to syndicate using RSS a feed of files on your drive (the idea being that co-workers could subscribe to this feed). Clearly with months to go before Beta, and a launch date that is more than a year away, we should expect to see more in this area.

If subscriptions are this "third wave", we should not only expect Microsoft to go after it aggressively, but for the competition to get ready for a battle. The first wave was defined by Netspace. Back in 1995, the company had a blockbuster IPO and went head to head with Microsoft for many years to see who would dominate the way people access hyperlinked web content. The second wave was defined by Google. In 2004 Google had a similarly spectacular IPO, and has, in many ways, challenged Microsoft more aggressively than Netscape had in the late 1990's. Who is the Netscape and Google of the third wave? Only time will tell. Subscriptions today are where web search was in 1998. Remember AltaVista? Excite? Google was good back in 1998, but it wasn't something you would point at and say "This should be a $100B company in ten years."

There is one company that stands apart from the rest... that seems to have learned the lessons from the previous generations. That company is FeedBurner.

FeedBurner

FeedBurner describes their service as: "an RSS/Atom post-processing service that allows publishers to enhance their feeds in a variety of interesting and powerful ways. By republishing their feeds through FeedBurner, publishers gain detailed feed statistics, maximum feed format compatibility, 'shockproofing' to absorb bandwidth spikes, and more."

Basically, that means that if you publish a feed, as almost every website will in the upcoming years, you can have FeedBurner do all the grunt work for you: compatibility, statistics, and other services. FeedBurner currently does this for free for lightweight websites. Bloggers have already started to use it, and recommend it.

As such, FeedBurner has positioned itself squarely in the same space that Google and Netscape had: the moderator between the publisher and the consumer.

In an interview with FeedBurner CEO Dick Costolo, he noted that: "If RSS popularity continues to increase, and it becomes less and less a vehicle for driving site traffic but more and more its own content-viewing medium, that presents an interesting situation to publishers."

FeedBurner is positioning itself strategically to do all the things that were great about Netspace and Google: making it the way you want to access web content. We'll see what happens.

Update

After I wrote this post, Om Malik broke news that Newsgator is buying Bradbury Software, the makers of Feed Demon.

Nick Bradbury explained why he wanted to join Newsgator: "the biggest request - by far - that FeedDemon customers have had is the ability to synchronize their subscriptions between multiple computers." And Newsgator now gets a Windows RSS reader client application.

What does this have to do with FeedBurner? Well, as I originally stated, the subscription market is heating up, and I believe FeedBurner is well positioned to capitalize on it. The consolidation is only beginning.

Dave Winer wrote: "the motivation was to allow FeedDemon to tie into the subscription-sharing network Newsgator is building. It seems inevitable that they'll buy a Mac news reader product, they would probably like to buy NetNewsWire, and it would be hard to imagine Brent wouldn't take a reasonable offer (I have no inside knowledge). This is venture capital at work, not sales revenue. I imagine that Newsgator will roll up with Feedburner (they share an investor), and Technorati may become part of this deal too. The goal? Get large enough to go public or merge with something going public (SixApart) or get bought by Microsoft."

Dave Winer, as usual, is circling around the right ideas, but I don't entirely agree with him. In fact, I think Fred Wilson and Brad Feld have a better perspective:

Fred Wilson of Union Square Venture Partners noted, "It appears that Brad's (referring to Brad Feld) convinced the team at Newsgator to do a venture rollup. Its a smart play because the big guys have figured out how important RSS is and are coming after the early entrants."

Brad Feld of Mobius Ventures responded by saying: "I’ve seen a couple of posts speculating that Feedburner and Technorati are next in line to be acquired by NewsGator since they share an investor (me). While Feedburner, Technorati, and NewsGator are all complimentary and are discussing a variety of ways to work together, I think it would be a dumb idea to combine these companies. As an investor, I’ve placed my bets on three companies that are the current leader in each of their segments (Aggregator: NewsGator; Feed Management: Feedburner; Search: Technorati). You can argue about how you define the specific segments, but these are mine (the one I missed that I wish I had an investment in is the CMS segment.) I’d much rather try to create three separate platform companies that are complimentary then jam them together into one big mess and fight the battle on three fronts."

This is a critical component that Dave Winer missed. Yes, consolidating anything and everything that has to do with subscriptions in to one company may sound reasonable, but as an investor it is wiser to allow elements to grow organically. There are also too many conflicts of interest and organizational problems with mega-mergers that are easily avoided by having separate, but collaborative, entities.

Jeff Clavier, another venture capitalist, agrees with me: "Anybody checking (FeedBurner) RSS referrer logs sees that there is a page long list of aggregators out there, in a very fragmented market... Dave [Winer] predicts the acquisition of a Mac aggregator, like NetNewsWire - which would make sense, especially given the popularity of the product (based on my stats). However, like Tony, I am not really following on FeedBurner or even Technorati. Both for cap table/deal/integration/execution issues (even if these companies have both DFJ and Mobius as investors), as for 'impedance mismatch' from a product/commercial standpoint. Brad Feld actually dismissed the concept of piling up these three cos as 'a dumb idea' in his post regarding the acquisition."

The references to Dave Winer and Brad Feld are those I've already included above. As for Jeff's reference to Tony, here is what Tony Gentile had to say: "FeedBurner could certainly join the growing Newsgator empire, but that would be tying up with the wrong end of the micro-content stack. A more logical move would be backward integration with a publishing platform, or forward integration with a marketplace owner; of course Dave doesn't care for ads in Feeds, so if you're a fan of his, chalk his comment up to a clever, low-key dig. ;-) Regardless, unlike other components, FeedBurner is best served by achieving escape velocity as a standalone player providing a network service ala the collapsing Overture model of old."

One thing that hasn't been mentioned yet is Microsoft's own plans to build syndication and subscription tools. Would they need to buy Newsgator? I doubt it. My bet is that Microsoft will roll their own solution as part of Longhorn and the version of Office that follows. This is why I still have my money (figuratively) on FeedBurner. They can be, potentially, much harder to shake.

Posted by johnnie at May 15, 2005 11:57 PM

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Comments

I would make a case that Microsoft might be interested in NewsGator's talents and assets, having built a reasonably consistent product line which integrates rather well with the Information Worker business. Question is how much could they sell for, related to the $10M+ they have raised.

FeedBurner is definitely very cool. The question is whether they have real differentation against a Six Apart, a Moreover or someone else developing a similar feature. Obviously Typepad users have the problem of handing over their URL, but MT/WP users can switch to another service through a simple redirect.

Posted by: Jeff Clavier at May 18, 2005 12:21 AM

Jeff, good points. Dave Winer also recently came out advocating that people should not use FeedBurner because it's handing over too much control, and instead develop and open source solution (not sure how that would even work). It'll be interesting to see what Movable Type chooses to do next regarding syndication... especially since I'm using their technology.

Posted by: Johnnie Manzari at May 18, 2005 01:10 PM

Hi Johnnie

great post - i agree that "subscribe" is the next wave.

feedburner are a great company - however they dont have deep market penetration (90k publishers versus 50 million blogs/feeds). They also only have over 1000 publishers using ads, so i guess they have limited revenues to date

Nooked and Pheedo seem to have taken a more solid business model line - where do you see those guys in this "feed management" space

Bill

Posted by: Bill Smith at August 17, 2005 05:04 AM