Ad Age Digital: You are entrepreneur in action at Sequoia. What kind of startup do you see yourself doing next?
Jason Calacanis: I want something that helps a lot of people every day. ... I think one of the interesting things about the internet is if you make something that helps people and they use it, you will be able to monetize it because of advertising. And it's not even a question. It's known. You can put Google AdSense up or Tribal Fusion or Burst or any of these ad networks and you will make some money. The question mark is if you can get an audience. It's kind of making a TV show. If you make a great TV show, if it gets audience, even if it's not a critically great show but if it gets an audience -- could be a show like the dating shows or Cheaters or something like that -- it makes money.
Ad Age Digital: You mention that the challenge isn't advertising but generating an audience. Is one of the biggest problems with the space right now that it is not generating enough impressions?
Mr. Calacanis: Right. You have to have traffic. That was what we had with Weblogs Inc. We had some blogs that people would buy 10 million pages a month but they were only getting a million views. And we couldn't get it to 10 million. We'd get it to two and they hit the natural audience and that was the end of it.
Ad Age Digital: So scale is important and difficult to achieve. Do you believe the networks will become more important because of that?
Mr. Calacanis: Scale is important but scale is not important to the detriment of innovation and other things. When you look at the other networks that are out there, the Yahoos and AOLs and Microsofts, they generally are not responsible for the innovation. They generally have scale because of things that were innovative previously. So AOL has got the scale because of the innovative dial-up they did in the early and mid '90s. Microsoft is innovative online because of their browser, which they [introduced] 10 years ago, and Hotmail, which they bought 10 years ago. Yahoo is at scale because of search and directory and free e-mail ... which they all built 10 years ago. So the scale networks, while they have big numbers, they're sort of old numbers. It's sort of like old money. And so the newer things are growing quickly and they will catch up. MySpace has more page views than Yahoo but nowhere near the revenue because people are just getting comfortable with that platform. It'll take awhile but just because something makes more money doesn't mean they're more important.
Ad Age Digital: Google has scale but is considered quite innovative.
Mr. Calacanis: They're still innovative. However, I don't think they're invincible. I never subscribe to that invincible concept because when you look at when Google came into the market everybody was like, "Nobody needs another search engine." And of course people didn't know they needed it until they needed it. And when Apple came out with the iPod people didn't think they needed it. "Why would I need 10,000 songs in my pocket, that's ridiculous. I'm not going to listen to 10,000 songs; I can bring my CDs with me, it's more than enough listening." But, 70 million iPods later they've proven the point. ... I look at Google now as the operating system of the internet. They really are the platform and I think a lot of the best companies are the ones that can plug into Google the best, whether it's plugging into their ad network, plugging into their search engine, plugging into their news, plugging into their customization -- customized home pages, APIs, that kind of stuff. Google's like a big ocean and I think a lot of entrepreneurs are sailing in it. It's the same way a lot of entrepreneurs would sail in the Microsoft ocean. ... For most entrepreneurs they'll make more money using Google AdSense than building their own ad sales department. The first year or two of a company, why would you even bother?
Ad Age Digital: You talk a lot about all the mistakes marketers make when trying to play in the social media, consumer-generated space. At the same time, it's becoming more important that marketers do play in this space. What's a marketer to do?
Mr. Calacanis: You have to first determine how much your product is loved. If your product is really loved, if you're TiVo, if you're Southwest or JetBlue, the risks go way down. If your product is hated and some products people don't like -- like I hate my Time Warner cable box, I think the Time Warner cable box with its TiVo[-like] recorder is terrible and so does everybody else. And the Comcast DVR is terrible compared to TiVo. If you're Comcast or Time Warner DVRs you're not going to get the same response as TiVo if you do a viral video contest because people love their TiVo.
Ad Age Digital: Is there a blindness that clouds marketers' thinking when it comes to determining if their product is loved? For example, in your recent iMedia keynote you picked on Verizon for not being able to give a better window for in-home service and installation, and you asked whether there was anybody there from Verizon. Nobody wanted to own up to being from the company.
Mr. Calacanis: They can't even admit it in a conference with their peers -- as human beings. I wonder if at Thanksgiving their mom is like "Verizon's terrible" and they just go run out of the room. I don't think so. People know their limitations and the proper response is to be transparent. Say, "The reason we do that is because such a percent of people who set up appointments with us cancel without giving us a warning. Therefore, we are responding to that." They could come to a balance with consumers.
I just thought of something. What if Time Warner said to you, "We'll come anytime on Tuesday for no charge. If you'd like us to come at exactly a certain time there's a $20 cancellation fee if you're not there" ... You pay in advance on your credit card to schedule that and if you're there it gets credited. That'd be a compromise. But they're not even willing to come to the table and have a discussion.
Ad Age Digital: Is the problem that too few businesses are thinking outside their status-quo business model?
Calacanis: And talking to the customers, explaining their position. I've had somebody from Verizon explain it -- they get so many cancellations. People are like, "I don't mind blowing off the cable guy." Well, that's not fair to them. So engage the conversation and come to a resolution. Also, if you're loved, there are very few things you can do if you're honest and ethical that are going to blow up in your face. ... You have to know your audience. So if you're an SUV company, and you know there's a large contingent of people who think that driving an SUV is selfish behavior and that you shouldn't do it, and you put yourself out there, you know those people are going to be vocal.