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Yesterday — May 29th 2020Your RSS feeds

How startups can leverage elastic services for cost optimization

By Walter Thompson
Joey Lei Contributor
Joey Lei is director of service management at Synoptek, a global systems integrator and managed services provider. Prior to joining Synoptek, he was a lead product manager for Dell EMC’s Data Protection Division and was a founding product manager for Dell EMC PowerProtect Data Manager, Dell EMC’s newest generation data protection and data management solution.

Due to COVID-19, business continuity has been put to the test for many companies in the manufacturing, agriculture, transport, hospitality, energy and retail sectors. Cost reduction is the primary focus of companies in these sectors due to massive losses in revenue caused by this pandemic. The other side of the crisis is, however, significantly different.

Companies in industries such as medical, government and financial services, as well as cloud-native tech startups that are providing essential services, have experienced a considerable increase in their operational demands — leading to rising operational costs. Irrespective of the industry your company belongs to, and whether your company is experiencing reduced or increased operations, cost optimization is a reality for all companies to ensure a sustained existence.

One of the most reliable measures for cost optimization at this stage is to leverage elastic services designed to grow or shrink according to demand, such as cloud and managed services. A modern product with a cloud-native architecture can auto-scale cloud consumption to mitigate lost operational demand. What may not have been obvious to startup leaders is a strategy often employed by incumbent, mature enterprises — achieving cost optimization by leveraging managed services providers (MSPs). MSPs enable organizations to repurpose full-time staff members from impacted operations to more strategic product lines or initiatives.

Why companies need cost optimization in the long run

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The Dipp, a subscription-only entertainment news startup, is springing to life despite the pandemic

By Connie Loizos

There is no shortage of coverage about the sprawling entertainment industry. There is a shortage of coverage for die-hard fans of reality TV shows, according to Kate Ward and Lindsay Mannering.

That opening in the market is why the two — former colleagues at the women’s website Bustle, where Ward was the founding editor-in-chief and Mannering ultimately became the SVP of editorial strategy at Bustle’s parent company — decided to take the plunge earlier this year and start their own company.

Called The Dipp, the nascent, Brooklyn-based media company describes itself as a “personalized subscription website for TV’s biggest fans,” and the idea, says Ward, is to zero in on the “niche fandoms that are being created every day — especially now [that everyone is at home and online]. We want to focus on certain franchises that are underserved, then scale.”

They say they know what it takes. Both joined Bustle back in 2013 when it was itself a fledgling startup, and both say they helped grow the company on a variety of fronts, from writing to organizing the site to helping with PR and sales, to immersing themselves in its scaling strategy.

It was so exhilarating, says Ward, that when the company ballooned to 80 million unique monthly visitors across all its publications, the two found themselves missing those early days.

They also seemingly decided what from that experience they did not want to replicate, including to build a property that’s solely reliant on sponsored content and other advertising. (Like many other ad-driven media properties to grow quickly in recent years, Bustle has also been ratcheting back on staff dating back to last summer, with its most recent round of layoffs announced early this month.)

Of course, building a media property in the midst of a pandemic would seem to come with its own challenges. The Dipp was fortunate on the funding front; it just locked down $2.3 million in seed funding led by Defy Partners, helped by Ward’s previous relationship with Defy cofounder Neil Sequeira, who was formerly a managing director with General Catalyst and who sat on the board of Bustle in that role.

On the other hand, its founders — who live several miles apart —  can’t work together right now owing to the coronavirus.

It’s a big change from the early days of Bustle when “we sat shoulder to shoulder together on a sofa,” acknowledges Ward, adding that the hardest part so far has been having to celebrate early milestones remotely. “Normally, something good happens and you go out to dinner or have a drink. Right now, it’s more like, ‘We got a term sheet, yay!’ over Gchat.” (Mannering sent Ward a bottle of champagne and Jell-O shots over the weekend, but it “doesn’t feel the same,” Ward says with a laugh.)

Luckily for both, hiring might not prove the same challenge as it might to other founders who are just getting a company off the ground, given that many journalists already work remotely. They also suggest they have an extensive network of people to tap given their own media backgrounds.

In fact, they insist that there are upsides to launching a new endeavor in these suddenly strange days.

Mannering notes, for example, that the two have more time to focus on what they are building, whereas before New York shut down, they were budgeting a lot of time for traveling and pitching —  and spending a fair amount of each day on the subway.

Ward thinks the founders and VCs with whom they’ve talked have also been more earnest than they might have been six months ago, before the coronavirus struck the U.S. “There’s this sense that we’re all in this together now,” she says. “In the past, whereas there was a lot of puffing of chests and you might walk away thinking, ‘I hope I’ll be as good a founder as this person someday,’ everyone is sort of leveling with each other, including about what pitfalls to look for. Just trying to get through [this pandemic] kind of grounds every conversation, so you’re really getting to know people in that first meeting.”

As for next steps, stay tuned, say the cofounders. The idea is to launch their content this fall, with a snazzy user interface, an accompanying weekly newsletter and, later, podcasts. The Dipp also plans to focus heavily on community, says Ward. Comments will be their first area of focus, but subscribers can also expect online discussions and ask-me-anything-style forums with individuals from the franchises that The Dipp readers want to know more about, she says.

Users will be able to sign up for a free trial to start; after that, says Ward, they’ll be charged a monthly fee for an all-access pass, including, most importantly, to a home page that’s customized so members can see “only what you care about rather than rifling through shows and topics that don’t interest you in the least.”

Indeed, the secret sauce behind The Dipp will really be data, culled in part from social media, that informs what franchises and characters the outlet zooms in for its readers. As Ward notes, the Bustle was early to recognize that what tastemakers want to feature matters far less than what is playing well with consumers and what isn’t.

As a result, Bustle knows what many women, including millennial moms, are searching to learn in much the same way that Netflix knows what its viewers prefer to watch.

It’s a long way from here to there, but if The Dipp has its way, it will be an entertainment brand that knows better than most what its audience wants to read, too.

Google and Facebook must pay media for content reuse, says Australia

By Natasha Lomas

The Australia government has said it will adopt a mandatory code to require tech giants such as Google and Facebook to pay local media for reusing their content. The requirement for them to share ad revenue with domestic publishers was reported earlier by Reuters.

Treasurer Josh Frydenberg published an opinion article in The Australian Friday — writing that an earlier plan to create a voluntary code by November this year to govern the relationship between digital platforms and media businesses — in order to “protect consumers, improve transparency and address the power imbalance between the parties” — had failed owing to “insufficient progress”.

“On the fundamental issue of payment for content, which the code was seeking to resolve, there was no meaningful progress and, in the words of the ACCC [Australia’s competition commission], “no expectation of any even being made”,” he wrote.

The ACCC has been tasked with devising the code which Frydenberg said will include provisions related to value exchange and revenue sharing; transparency of ranking algorithms; access to user data; presentation of news content; and penalties and sanctions for non-compliance.

“The intention is to have a draft code of conduct released for comment by the end of July and legislated shortly thereafter,” he added. “It is only fair that the search engines and social media giants pay for the original news content that they use to drive traffic to their sites.”

As the technology of the digital platforms has evolved, so too has their market dominance.

By creating a mandatory code, we’re seeking to be the first country in the world that successfully requires these social media giants to pay for original news content. pic.twitter.com/vhMaQab2E4

— Josh Frydenberg (@JoshFrydenberg) April 19, 2020

The debate around compensation for tech giants’ reuse of (and indirect monetization of) others’ editorial content — by displaying snippets of news stories on their platforms and aggregation services — is not a new one, though the coronavirus crisis has likely dialled up publisher pressure on policymakers as advertiser marketing budgets nose-dive globally and media companies stare down the barrel of a revenue crunch.

Earlier this month France’s competition watchdog ordered Google to negotiate in good faith with local media firms to pay for reusing their content.

The move followed a national law last year to transpose a pan-EU copyright reform that’s intended to extend rights to news snippets. However instead of paying French publishers for reusing their content Google stopped displaying content that’s covered by the law in local search and Google News.

France’s competition watchdog said it believes the unilateral move constitutes an abuse of a dominant market position — taking the step of applying an interim order to force Google to the negotiating table while it continues to investigate.

Frydenberg’s article references the French move, as well as pointing back to a 2014 attempt by Spain which also created legislation seeking to make Google to pay for snippets of news reused in its News aggregator product. In the latter case Google simply pulled the plug on its News service in the market — which it remains closed in Spain to this day…

Google’s message to desktop users in Spain if they try to navigate to its News product

“We are under no illusions as to the difficulty and complexity of implementing a mandatory code to govern the relationship between the digital platforms and the news media businesses. However, there is a need to take this issue head-on,” Frydenberg goes on. “We are not seeking to protect traditional media companies from the rigour of competition or technological disruption.

“Rather, to create a level playing field where market power is not misused, companies get a fair go and there is appropriate compensation for the production of original news content.”

Reached for comment on the Australian government’s plan, a Google spokesperson sent us this statement:

We’ve worked for many years to be a collaborative partner to the news industry, helping them grow their businesses through ads and subscription services and increase audiences by driving valuable traffic. Since February, we have engaged with more than 25 Australian publishers to get their input on a voluntary code and worked to the timetable and process set out by the ACCC. We have sought to work constructively with industry, the ACCC and Government to develop a Code of Conduct, and we will continue to do so in the revised process set out by the Government today.

Google continues to argue that it provides ample value to news publishers by directing traffic to their websites, where they can monetize it via ads and/or subscription conversions, saying that in 2018 alone it sent in excess of 2BN clicks to Australian news publishers from Australian users.

It also points out publishers can choose whether or not they wish their content to appear in Google search results. Though, in France, it’s worth noting the competition watchdog took the view that Google declaring that it won’t not pay to display any news could put some publishers at a disadvantage vs others.

The dominance of Google’s search engine certainly looks to be a key component for such interventions, along with Facebook’s grip on digital attention spans.

On this, Frydenberg’s articles cites a report by the country’s competition commission which found more than 98 per cent of online searches on mobile devices in Australia are with Google. While Facebook was found to have some 17M local users who connected to its platform for at least half an hour a day. (Australia’s total population is around 25M.)

“For every $100 spent by advertisers in Australia on online advertising, excluding classifieds, $47 goes to Google, $24 to Facebook and $29 to other participants,” Frydenberg also wrote, noting that the local online ad market is worth around $9BN per year — growing more than 8x since 2005.

Reached for comment on the government plan for a mandatory code for reuse of news content, Facebook sent us the following statement — attributed to Will Easton, MD, Facebook Australia and New Zealand:

We’re disappointed by the Government’s announcement, especially as we’ve worked hard to meet their agreed deadline. COVID-19 has impacted every business and industry across the country, including publishers, which is why we announced a new, global investment to support news organisations at a time when advertising revenue is declining. We believe that strong innovation and more transparency around the distribution of news content is critical to building a sustainable news ecosystem. We’ve invested millions of dollars locally to support Australian publishers through content arrangements, partnerships and training for the industry and hope the code will protect the interests of millions of Australians and small businesses that use our services every day.

If enough countries pursue a competition-flavored legislative fix against Google and Facebook to try to extract rents for media publishers it may be more difficult for them to dodge some form of payment for reusing news content. Though the adtech giants still hold other levers they could pull to increase their charges on publishers.

Indeed, their duel role — involved in both the distribution, discovery and monetization of online content and ads, controlling massive ad networks as well as applying algorithms to create content hierarchies to service ads alongside — has attracted additional antitrust scrutiny in certain markets.

After launching a market study of Google and Facebook’s ad platforms last July, the UK’s Competition and Markets Authority (CMA) raised concerns in an interim report in December — kicking off a consultation on a range of potential inventions from breaking up the platform giants to limiting their ability to set self-serving defaults and enforcing data sharing and/or feature interoperability to help rivals compete.

Per its initial findings, the CMA said there were “reasonable grounds” for suspecting serious impediments to competition in the online platforms and digital advertising market. However the regulator has so far favored making recommendations to government, to feed a planned “comprehensive regulatory framework” to govern the behaviour of online platforms, rather than taking it upon itself to intervene directly.

Over 30K creators joined Patreon this month, as COVID-19 outbreak spreads

By Sarah Perez

Creative professionals whose livelihoods have been impacted by the COVID-19 outbreak are flocking to membership platform Patreon in record numbers, the company claims. During the first three weeks of March, more than 30,000 new creators launched on the site — a much larger number than usual. These creators are also acquiring patrons faster than ever and they’re expanding their earnings at a quicker pace, as a result.

Creators around the world are being affected by the COVID-19 outbreak, often indirectly. To cut down on the spread of the novel coronavirus, live shows are being canceled and conferences and other events are being postponed. Other revenue streams creators may have previously relied on may be drying up, as well.

Many of these impacted creators have joined the Patreon platform in recent days to help with lost revenue and their fans have quickly followed.

According to Patreon’s internal metrics, average new patron growth across the U.S., U.K., Canada, Germany, Australia, and Italy is up 36.2% in March compared to February.

In particular, Patreon saw a shift in patron behavior and creator additions starting on Friday, March 13th.

Since then, creators have been joining the platform at a faster rate than at any other point in the company’s history.

In addition, the proportion of creators who acquire their first patron within 10 days of launching has also increased. This is one of the strongest influxes of memberships Patreon has seen, the company said.

Today, Patreon’s platform serves over 150,000 total artists worldwide who generate income by offering exclusive content and communities to a network of over 4 million patrons across 180 countries. To date, creators have earned over $1 billion through the Patreon platform.

However, it’s not all good news. Patreon also notes it’s seeing slightly higher patron deletions as some members are choosing to exit the site due to financial hardships related to the COVID-19 crisis. But overall churn rates are stable for now, Patreon says, and the deletions are not at a rate other businesses are seeing.

Patreon isn’t the only platform seeing significant growth due to the societal impacts of COVID-19.

Fundraising sites like GoFundMe have also seen increases in recent weeks as people ask for assistance with living expenses, food and other basics, small business support, healthcare expenses and more.

More than 22K coronavirus related fundraisers have been created on our platform in the past several weeks—collectively raising over $40M to support hospitals, local businesses, & organizations helping on the frontlines around the world.

— GoFundMe (@gofundme) March 21, 2020

GoFundMe recently said that over 22,000 coronavirus-related fundraisers were created on its platform over the past few weeks, collectively raising over $40 million to support hospitals, businesses, and other organizations. The company said it would commit $1.5 million to support communities impacted by the pandemic, as well.

SecondNature raises $16.4M for ‘healthy home’ subscription products like air and water filters

By Sarah Perez

After a confusing trip to the store to purchase an air filter back in 2012, two N.C. State University students, Thad Tarkington and Kevin Barry, came up with the idea to make this routine home maintenance purchase a subscription-based business. The following year, their startup FilterEasy had a few hundred subscribers. Fast forward to now, and that service — now called SecondNature — has grown its customer base to hundreds of thousands by expanding beyond its original direct-to-consumer model to also include industry partnerships.

Today, the N.C. Triangle-area company is announcing it’s closed on $16.4 million in Series C funding from new and existing investors, including strategic investor MANN+HUMMEL through its corporate venture group.

Other investors in the round include IDEA Fund Partners, Multiplier Capital, Lead Edge Capital, Arsenal Growth, One Better Ventures, Bonaventure Capital, NC State’s investor network WIN and UNC’s investor network CAN.

SecondNature began its life solving a common homeowner problem: helping people to remember to change the home’s air filter. Often, this is a forgotten task as there’s no built-in reminder or alerting system to signal when the filter’s time is up, unlike some other household products. Your smoke alarms blare when batteries are low. Lightbulbs go dark when it’s time for a change. But air filters just sit there, quietly collecting more dust as your air quality worsens and your energy bill climbs.

Tarkington says the idea to put air filters on subscription not only made sense as a way to remind homeowners to make the swap, but the model worked for retailers as well.

“It’s a product that’s not really well-suited for retail because they’re large, they take a lot of space and they’re easily damaged,” he says. “And generally, you have thousands of different sizes, so a retailer can only serve a certain percentage of the market.”

The founders soon left college and began to work full-time on the company. They later participated in The Iron Yard accelerator and raised $1.2 million in seed funding in 2015.

While the startup’s customer base of homeowners steadily grew, SecondNature found that it needed more channels than just direct-to-consumer (D2C) alone to increase sales. In the years that followed, the company began working with industry partners, including HVAC companies, real estate agents, utility companies and commercial properties. These categories have contributed to customer growth, but D2C remains the largest so far given its head start.

MANN+HUMMEL’s recent investment signals where SecondNature is headed next. The company no longer considers itself just an easier way to get your air filters. Instead, it’s now positioning itself as a “home wellness” brand that will eventually encompass a range of products that homeowners need to replace on a recurring basis.

For starters, this includes SecondNature’s newest product line: water filters.

“As we started growing, we found that people really appreciated the convenience of [our business],” says Tarkington. Plus, people were starting to talk about other things, like how filters helped with allergies and created a healthier home environment, he notes.

“We saw this big trend towards personal care — like what we put in or on our bodies,” Tarkington explains. “We spend a lot of time in our homes, so our indoor air quality and what we are drinking, from a water quality perspective, has become very important.”

It made sense, then, to expand the concept of a “healthy home” to also include water filtration.

In Q2 2020, SecondNature will launch its first two products in this water filtration space, which will include filters for your refrigerator water. One will be focused on improving the taste, quality and clarity of the water, while the other will be more about filtering out harmful particles from local water systems.

Going forward, the company plans to embrace anything that improves your home’s health, Tarkington says.

In the more immediate future, however, SecondNature may benefit from increased interest in home health products in the wake of the COVID-19 outbreak. For example, SecondNature’s MERV 13-rated “catch all” filter can reduce the odds of you catching the flu or a viral infection when someone in your home is sick. That’s because it’s able to catch about 87% of droplet nuclei that pass through. (To be clear, this is not a COVID-19 preventative; it’s about risk reduction — like washing your hands or sneezing into your elbow, for example.)

While some area’s of SecondNature’s business has been significantly impacted by COVID-19 — like commercial properties where rent may longer be coming in — Tarkington says business is good overall.

“Generally, demand for the product has gone up due to the nature of it,” he says.

It’s worth clarifying, though, that SecondNature isn’t aiming to market towards consumer fears due to the outbreak. Instead, it’s trying to help. The team has coordinated with hospitals to get them donated filtration media for masks, and it is now actively using its manufacturing facility and supply chain to get masks to hospitals in need. It has materials to produce around 800,000 masks on hand and plans to produce up to 2 million masks per month as long as it has the materials.

COVID-19 isn’t just impacting its production line but also how the business operates. The company today has around 150 employees, two-thirds who work in fulfillment and distribution. To address the threat of COVID-19, SecondNature reorganized its two warehouses (in Ardmore, OK and Wilson, NC) to keep staff separated — including by creating additional break rooms. It’s also working to ensure all processes stay clean and sanitary. A dedicated team is focused on cleaning the facility, including wiping down doors, handles and other surfaces.

SecondNature’s additional funding will go towards expanding the businesses and hiring to support its plans for new products, including forthcoming first-party products it has now in R&D. As for what those may be, specifically, Tarkington hints they’ll focus on products where the company can “innovate and make a product better or a process better — maybe more environmentally-friendly.”

To date, SecondNature has raised $18.4 million.

Chargify acquires Keen to bring event-based billing to its platform

By Ron Miller

Chargify, the subscription billing platform, announced today that it has acquired event streaming company, Keen for an undisclosed amount. One interesting aspect of this deal is that both companies are part of the Scaleworks private equity firm’s stable of companies.

Keen gives Chargify an event streaming business, and it has taken advantage of that by adding an event-based billing component to the platform.

Chargify CEO Paul Lynch believes that event-based billing is the next step in subscription pricing. Just as serverless architecture provides a way to pay for only the infrastructure resources you use and no more, event billing provides a way to pay for the software services you use and no more.

“It’s a unit-based kind of billing model where you’re paying down to the very last unit of what you’re consuming,” he said. That means that you are no longer paying a fixed monthly or yearly price for services you may or may not use. Instead, you only pay when you open the service and actually use it.

It sounds logical, but he says it’s actually a hard problem to solve without the kind of technology Keen provides. “No one is delivering event-based billing. So I asked myself why, and it’s because the Keen component, the event data management component is so difficult to build and to manage,” Lynch explained.

He says that having Keen in the same building, and part of the same family of companies certainly helped make the deal happen. “The fact that it was owned by Scaleworks is obviously an enormous benefit. Going out and buying a business, finding that business to acquire is super hard. The fact that Keen was sitting down the hall was an unbelievably surreptitious kind of benefit,” he explained.

That said, the acquisition still involved all the kinds of steps, hurdles and due diligence that would be required in any similar exercise. “You’re still going to the board. You’re still putting together board pricing projections. You’re still looking for Board approval,” he said.

While Keen’s technology becomes an integral part of the Chargify platform with the acquisition, Lynch said that the company will continue to operate as before servicing its 800 customers and building on its product set.

The event-based billing feature is available starting today.

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