Lookery.com

Everyone’s sick of hearing Cancel, Sawicki, and me whine about being too early with Lookery. So here I finally am with a constructive update — six months to the day after the Couldery Shouldery post in which we surrendered Lookery to the Deadpool. In those six months, the rest of Lookery has scattered to hot shops like Performable, ICanHazCheezburger, Sweepery, etc.

Lookery was so 2012. Here in 2010, there are a maybe a dozen scaled, data-orthodox opportunities for horizontal Audience Targeting winners (e.g. Google, Facebook, … Collective, Blue Kai, and Exelate), but there are a few thousand opportunities to build Audience Networks, from Glam and Federated Media to Halogen Network to Dogster to a couple of orthodontist audiences that I’ve never heard of.  The Audience Networks and their vendors will use the big guys’ data, exchanges, and clouds as raw material suppliers, layer highly vertical and client-specific information on top, figure out the nasty data-sensitive creative issues, add a good ole dollop of human customer service, and serve.

Deadpool Lookery was very picky about what sort of Audience Network infrastructure we were willing to offer. Lookery Prequel isn’t. If you are a publisher network, category-leading publisher, brand, or agency, we’ll run through walls to help you become an self-reliant Audience Network. If you’re a vendor, we’ll help you conform your existing marketing product/service to what Audience Networks need and will pay for. We’ll start the conversation around building you a proprietary targeting system of your own, that lives on your AWS account and your content delivery network account, but if you need us to do business development, vendor analysis/selection, data acquisition, market positioning, investor positioning, or whatever, just speak up.

We already have Halogen Network and Sprout signed up. The tech side is handled by Cloudspace, which includes MyBlogLog co-founders Todd Sampson, John Sampson, and Steve Ho.

While Lookery Prequel is a consulting business and not a product company, we do need focus in order to build value. To get there, I’m constructing a handful of customer tenets that will form the core of our work. We’ll do all sorts of gigs, but they need to move the market forward in at least one of these five ways…

Thou Shalt Have No Other Follow Before Me
By popularizing Follow, Twitter fixed friending both for humans and businesses. One way Audience Networks need to grow is by adding followers. We’ll be helping.

The Best Privacy Policy is Authentication
Similarly, the output of Audience Network marketing will often be an authenticated relationship between marketer and ‘Net user, most frequently using TwitterAuth or Facebook Connect. Online marketing and explicit identity are going to become increasingly linked.

UX beats Dotcom
Creative matters. Data-driven and personalized creative matter more. At the same time, destination sites are no longer the end-all be all, hence the rise of APIs and Mashery. Site representation isn’t dead but it had better evolve. To wit, check out Disney’s Alice in Wonderland promotions (authored by Sprout). They sing, they dance, they might even screech — but they don’t give you a link to click back to disney.com. The campaign is completely self-contained.

Cookie Proliferation — You Ain’t Seen Nothing Yet
Diversity of marketing services vendors is good for everyone that we care about. That means dropping a heckuva lot more cookies than are dropped today. Get over it. For that to work well performance-wise, the infrastructure for dropping cookies has to be a lot better configured. The infrastructure doesn’t need to be replaced, but big publishers need to start imposing far stricter content delivery network (e.g. Akamai, CDNetworks, Internap) guidelines on their marketing partners. Once content delivery network approaches are correlated and guidelines enforced, we’ll find that the current infrastructure can support a lot more cookies and regular old publishers can start glomming a few strategies from  the big advertising exchanges. (Coincidentally, we’re offering content delivery network audits and related services to publishers.  ;)  )

Goosing Everyone’s Numbers with Owned&Operateds
What works for the goose works for the gander. Our clients on all sides of the table really should own some of their distribution. We should too. For our clients, that generally means owning content sites or having exclusive deals with publishers. In Lookery Prequel’s case, we’ll be creating a series of single-purpose publisher and advertiser tools delivered as Javascript. Each will stand on its own as a small freemium/e-commerce business when they aren’t directly boosting our clients’ results.

Please Get in Touch
In addition to Halogen and Sprout, this quarter we’ll sign another customer or two of the half dozen qualified leads in our pipeline. I’m out looking for another client or two beyond that as well as our first commercial hire so we can expand further. No matter what your agenda, the form below is for you.

*Prequels are what science fiction authors write when they either can’t see any further into the further or when their last story lacked context — or both. If it can work for Battlestar Galactica, it can work for me.

FormSpring - HTML Form Maker

Image by MrTopf via Flickr

If you are going to accept the live-or-die risk of being completely dependent on FB, please make some effort to understand their priorities. The effect of this week’s FB platform changes was completely predictable in October 2008.

Several people have called me in the last 48 hours asking, “Why won’t FB let us pay them for app notifications and are instead killing them off? Won’t FB’s traffic drop too?” Of course Facebook’s traffic will drop a little. Facebook knows and couldn’t care less. They don’t care in exactly the same way they didn’t care about the traffic drop that resulted from their July 2008 redesign. The traffic they will lose is traffic that does not increase the value of their enterprise. These changes are very smart and appropriate self-cannibalization for a company that is trying to take over the Internet. They no longer need to build more traffic at facebook.com. For now, all that matters is building a huge network of Facebook Connect sites.

If you have a good app attached to a well thought out external web site that authenticates using FB Connect, then this week’s changes probably HELPED your business. I know of two specific startups where that’s the case. My description of which apps are supported by the changes is intentionally very specific. There are very few categories of developer that FB cares about right now — and the FB Connect sites is the only category they care about for new/raw startup developers. If you help FB spread their JS and Authentication out into the world, they will support you until their network is too big to stop. They are at roughly 20,000 publishers now. At ~200,000 publishers, watch out! Their priorities will change again and they will start taking cash out of the FB Connect network instead of providing it with free traffic.

Facebook obviously cares about the big game developers as well. Without Notification access, Zynga and the rest of the game companies will need to buy more and more media on Facebook. Probably a third of Zynga’s $200M runrate is paid back to Facebook in advertising now. Expect Zynga to start paying Facebook 50% or more of their runrate (which may drop) as a result of these changes unless Zynga makes some very fancy moves in the next month.

Facebook makes no empty moralistic claims about avoiding Evil. They do a great job of acting in their own best interest, seem to act ethically, and don’t try very hard to hide their motivations. If you want to do business in that ecosystem, please study the host on which you are dependent or find someone to do it for you.

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• Add Facebook Connect Features to Your Site in Three Steps (mashable.com)
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From the Truman Presidential Library by Marshall Astor

We’re commencing an “orderly shutdown” of Lookery. We made the decision as late as possible without forgoing our responsibilities to the various stakeholders, including and especially orderly disengagement from our customers. We’re honored by their attention and support and regret that we couldn’t have served them even better and for much, much longer.

I left Wouldery out of the post title as it’s not relevant. The only information of value is what other choices were readily available to us and which ones I look back on with uncertainty. This is probably not my last public postmortem on the lessons learned, but I owe everyone near-immediate disclosure on the things I can put my finger on now. I’m trying to keep a stiff upper lip during this process. Please avert your eyes if I falter.

As co-founder and CEO of Lookery, the buck stops with me and no one else. I hope to have the opportunity to work again with each and every one of the dozen people who worked at Lookery since it was founded in July 2007. I hope I did as well by them as they did by Lookery and by me. Please take this post as a recommendation of each and all of them and never hesitate to get in touch with me for details. The huge majority of them went well beyond the call of duty to try and make the company succeed.

So did Allen Morgan, the outside Director that represented the Preferred investors. There’s no way we could have gotten this far or known how to behave well in the face of adversity without his guidance. He represented a great batch of angel investors on our Board and was one of the main reasons that they were so supportive of the company whenever I asked for anything. In May and June of this year, most of them agreed to participate in an inside round to keep us running through the next series of milestones. I cancelled the transaction a month ago, as I could not be as confident of reaching those milestones as ‘good faith’ requires.

Before delving into our market and product choices, I need to address our fundraising overall. On forming the company, David and I decided to pursue a low-cap model, postponing institutional investor involvement for the foreseeable future. It really sucks to be here right now, but I think it was the right call. Resigning politely at someone else’s behest, as I’ve done twice before, did not improve any of the stakeholders prospects in either case. Unless Lookery reached an expansion stage, where the sales model was known and repeatable, I’m ever-more convinced that raising institutional capital would not have increased our chances of creating value for the existing shareholders. The company would have survived longer, but that’s not the goal.

Going low-cap, David and I were careful to create a parsimonious and headcount-spare operation. Operating virtually was not a problem, nor was cutting corners on travel, schwag, and office rent. And, I’ll still only work on cloud-hosted businesses. Those parts of Lookery were appropriate, repeatable, and did not bring us to this point. We did invest too much in building market share in the original ad-network business in the first half of 2008, but that error was a symptom rather than the disease.

Moving on to our specific coulda-shoulda product and market choices, there are three key moments at which a different and defensible decision might have made all the difference. In chronological order, the sins Lookery committed under my leadership were continuing our dependency on a large partner (March 2008), not knowing when to cut bait on a failing asset (September 2008), and building ahead of the market (December 2008). I and we made any number of other mistakes, but all the rest were correctable. Avoiding even one of the three big errors might have been enough to get us over the hump.

I believe David and I started Lookery in July 2007 in the right way and for the right reasons. Based partially on my F8-launch work for LendingClub (a company I’m thrilled to know) David and I decided to quickly offer a no-frills banner network for Facebook app publishers. We went from commitment to live service in well under two weeks using AWS and OpenAds, pulled in Rex Dixon almost immediately to manage the publishers and Todd Sawicki soon thereafter as we needed a real ad pro. Both David and I had been keen observers of, and vendors to, the online ad business from the outside, and Todd was the online advertising insider that completed the early team. By March 1, 2008, we were getting pretty close to a billion impressions a week, had moved the ad ops to Atlas, started spec’ing Lookery’s targeting technology, and closed out a $1M convertible note financing that had been rolling in since October.

So far so good on using an ephemeral opportunity to create a company, but this is where I place Coulda-Shoulda #1. We exposed ourselves to a huge single point of failure called Facebook. I’ve ranted for years about how bad an idea it is for startups to be mobile-carrier dependent. In retrospect, there is no difference between Verizon Wireless and Facebook in this context. To succeed in that kind of environment requires any number of resources. One of them is clearly significant outside financing, which we’d explicitly chosen to do without. We could have and should have used the proceeds of the convertible note to get out from under Facebook’s thumb rather to invest further in the Facebook Platform.

Coulda-Shoulda #2. Predictably and reasonably, Facebook acted in their own interest rather than ours. Their Summer 2008 redesign supported Facebook’s goals elegantly but hurt our publishers and us in ways that became clear just weeks after we’d raised another ~$2M. At this point, we made a mistake endemic to startup people. We followed our natural inclination as problem solvers rather than getting out while the getting was good. If we’d sold the ad network the minute we understood that we could no longer make it successful, we would have saved a couple hundred thousand dollars in working capital. Plus, the ad network would have fetched three to five times its low-six figure sale price less than 60 days later. That’s a million dollar mistake I made in a very short period of time. I should understand sunk costs better than this.

To give credit where it’s due, Todd closed the sale of the Lookery ad network to AdKnowledge in less than two weeks from the moment we decided it had to go. I was off promoting Lookery’s targeting system to European demographic data sources and social networks and was not even in the country during those two weeks.

Coulda-Shoulda #3. Once we sold the ad network, I fell into a bad old habit — persuading my team to build something before the market was ready for it. Oren usually saves me from myself in this regard, but I didn’t pull him away from Mashery for the day or two necessary to diagnose the problem. Mashery is doing so well that I clearly could have. Lookery’s Profile SaaS/universal cookie mechanism is far more economic and effective than cookie exchange systems in a world where ad media and targeting data are separate commodities. That world is a year or more in the future.

This is the fourth blog post that I can find from a Lookery exec in which the primary theme is early = wrong. I felt pretty good when I wrote this one in December 2007 when Lookery was still doing all the right aka solely tactical things; the issue was weighing on me last month as I started to wonder if Lookery’s inside round was a bad idea; but it hurts the worst to read this post of Todd Sawicki’s from the day we met four months before Lookery was even founded.

Within the bounds of confidentiality agreements and showing respect for the many people who treated Lookery and me well over the past two years, I’m happy to respond to any questions that arise. My replies may sometimes take a day or two.

Figuring out Really Free vs. Artificially Free got me thinking about the Lookery’s discontinued Artificially Free* offering — our free demographic reporting. We built it to gather keyword search referrers and then sell keyword targeting just as we sell demographic targeting. Ending the service was unfortunately the right thing to do for Lookery, a low-capital startup in a down market, but I hated turning away a thousand publishers and the whole thing left a big question unanswered for me.

When will referrer processing become significant for content sites as it already is for e-commerce sites?

By Referrer Processing, I mean changing the content of the landing page based on what site the visitor is coming from. The information in the referrer is primarily a domain name (Digg, StumbleUpon, MyBlogLog), but also includes search keywords and other parameters in specific cases. Dogster’s welcome panel for StumbleUponers visiting Snuzzy is pictured below as an example. This mechanism raises site visits by 25x for certain sorts of referrers.

Dogster has learned out to get more visits using referrer processing, by increasing the degree to which Snuzzy is promoted inside StumbleUpon. We had lots of anecdotal evidence at MyBlogLog that we created longer visits than Digg, which is another lever to pull. I also suspect that visit value (i.e. conversion to revenue) could be increased as the system was refined.

Lookery hoped to accelerate referrer processing for content sites by making search keyword retargeting easily and inexpensively available. Beyond what Hittail and other companies in the sector offer, we were planning to create a keyword network across everyone running our Javascript. Today’s Quancast article in the WSJ touches on both halves of the issue, but no one vendor does.

David Zinman, Yahoo’s vice president and general manager for display advertising, says his company recently launched a new ad-targeting service that allows advertisers to show display ads to visitors who searched for certain search terms. “We have data that is only available to Yahoo, and are using it in a very specific and customized way” for advertisers, he says.

Still, some ad professionals are enthusiastic about Quantcast’s new service. “Yahoo can do many of the things that Quantcast can do, but they only see behavior on their own networks,” says Jacki Kelley, president of North America for Universal McCann, a media agency owned by Interpublic Group. She says one of her clients is testing the Quantcast media-buying program.

Quantcast is building the network but does not help marketers or publishers directly target individuals. Yahoo! targets individuals, but does not include its networks. Now that social referrers are seen as an real sector, the problem will get solved. I’d bet on Facebook Connect in partnership with Microsoft Search to walk away with it, though bit.ly** has a shot if they want it.

UPDATE: I should have noted that Lookery also stepped out the search keyword business as we believe that Google will stop including keywords in its referrer URLs. This will crush the ecology initially but eventually provide a boost to Yahoo!, Microsoft, and Ask.

*Lookery’s free demographic reporting was Artificially Free because the value creation was not simultaneous with the expense of the free service and because the value creation was speculative (though either condition would have sufficed).
** I’m on bit.ly’s advisory board.