EntrepreneurshipWeb/Tech

What a Microsoft-Yahoo deal would mean for startups

Posted on by Ed Sim

The rumors of a pending Microsoft-Yahoo deal are out in the market again today (see NYPost and Techmeme).  Who knows if it will happen but rest assured if it did, Microsoft would be in a pretty good position to take on Google with Yahoo’s user and advertising base combined with Microsoft’s strength in development tools and aggressive strategy to go grassroots and emerge as the platform of choice to build next generation web sites and applications.  All that being said, let’s take a moment to think about what this would mean for entrepreneurs.

It is pretty clear what is happening in the market today – Google is dominating and the Internet advertising game is a game of scale.  The bigger you are the more opportunities you have to increase your lead – more users equals more data equals better targeting equals more money per click.  In addition with lots of inventory and excellent targeting, it is easier to attract more advertisers.  And as we all know, much of this whole Web 2.0 (yeah-I hate that term) world is based on advertising, advertising from Google AdSense and other partners.  Why not outsource your whole ad sales team as you can get a pretty good deal from Google without any operating expenses?  If you do the math, startups really do need a fair amount of traffic to merit hiring its own internal ad sales team.  Consequently, we have seen tons of web startups launch over the years as it is really cheap to build a web-based product and costs no upfront capital to start generating revenue. 

I am not sure about your own analysis but based on a number of portfolio companies, I can tell you that Google Adsense delivers the best results bar none in terms of generating revenue.  In a world without a combined Microsoft-Yahoo, it is pretty clear that Google will only get stronger leaving it with a virtual monopoly in the online ad game.  And as you know, monopolies over time take advantage of their position by changing pricing in their favor.  I am sure every company that is generating money from Google Adsense worries about the day when the revenue splits could change.  So on the positive side, a combined Microsoft-Yahoo would hopefully give startups another real alternative to Google Adsense as the combined entity would have real scale like Google and therefore the ability to deliver Google like results.  On the negative side, a combination would mean that there is one less aggressive acquirer on the market. So if the Internet ad game is one of scale, you can bet that in the future there will be a high likelihood of further consolidation. What this means is that entrepreneurs who are starting companies to be acquired better think twice as their chances of winning the lottery will diminish with time.  What this also means is that entrepreneurs need to start companies for the right reason and focus on building a real business versus the quick flip.

VOIP

Nice Try T-Mobile

Posted on by Ed Sim

OK, I am biased since I am an investor in Sipphone/Gizmo Project but this service from T-Mobile sounds pretty lame.  The "breakthrough offering" from this carrier is that you can make calls on your mobile handset and seamlessly switch between T-Mobile’s cellular network and your home network.  The catch is that you have to pay an extra $20 a month to use the service and you are locked in to using your home network or in the future a T-Mobile hotspot.  Unless you are making tons of international calls from home, that doesn’t sound like a breakthrough.  You are better off saving that $240 annually and using that to buy a Nokia n80 or n95 device which has dual mode capabilities but in a completely open format.  OK, it doesn’t offer seamless handoffs between cellular and wifi but it does allow you to make VOIP calls from any wi-fi network and all you have to do is buy minutes from GizmoVOIP which is integrated in the  phone.  In the near future consumers will be able to leverage the full power of web-based communications as presence, IM, and buddy lists get built into the device.  Once again, I know that carriers have to protect their huge investment in infrastructure, but how long will consumers stand for exorbitant pricing on closed networks?

Digital Media

Broadband video is hot…where are the advertisers?

Posted on by Ed Sim

There is an interesting interview in the WSJ today with Dave Rosenblatt, CEO of Doubleclick.  While talking about industry trends, Dave clearly lays out the fact that it is still early days in terms of broadband video advertising.

In general, video advertising as a trend is pretty firmly in motion. In spite of that, though, it is still very small. There are somewhere between half a million and a million search advertisers in the market, there are probably only a couple to five thousand graphical advertisers and probably less than a hundred video advertisers. There is no reason for that imbalance to exist. So one of our goals is to increase efficiencies with which people buy and sell video advertising and democratize access to the process in the same way that Google has democratized access to the search market…It is going to be easier to buy video advertising, and therefore many more people are going to do it.

I agree with the fact that buying and selling video advertising needs to get easier, but how do you monetize all of that user generated content?  On the making it easier part, I am sure Microsoft has been thinking long and hard about this market as it recently launched Silverlight, a cross-browser and cross-platform plug-in for rich media apps.  In addition it is offering 4gb of free hosting and streaming for its development community.  Think about how easy it will be for Microsoft’s developers to plug in Microsoft Ad center and some broadband video ads into their streaming content especially via an integrated offering tied into the development platform.  I am sure this fact is not lost on Microsoft as it looks to take on Adobe and also vie for leadership in the broadband video advertising market.  Sure Google has locked up search thus far but all of that potential broadband advertising revenue is still up for grabs. 

BTW, these stats on the number of advertisers is not all that surprising as it usually is the big advertisers with the huge budgets that will jump in first and explore new opportunities.  These numbers are also not all that surprising to me since my fund is an investor in Visible World.  As mentioned in previous posts, Visible World is bringing the power of Internet targeting to television:

While I have always been bullish about broadband video advertising, I have never believed that the $60b television advertising industry would disappear overnight.  In fact, before the Internet dominates all advertising why couldn’t one bring the tools of the web to the television world making TV advertising more effective, targetable, and measurable – in effect changing it from a mass media to a more targeted dynamic one.

What this means is that our advertisers who use Visible World can deliver dynamically changing television commercials based on any number of variables including the content, zip code, demographic, weather, etc.  Sure, lots of technology partners have continually stressed the broadband and mobile opportunities which are clearly building, but as Willie Sutton did, we are going where the money is today – helping that $60b spent on television advertising become more effective.  Sure broadband is in our sights and we can deliver that same video commercial or asset over any pipe whether it be broadcast, cable, satellite or broadband but the reality is that broadband can’t pay the bills right now.  In addition, I am of the viewpoint that the broadband video ad itself will have to be much different and shorter than your typical spot today.

So I agree 100% with Dave from Doubleclick (see Valleywag for more commentary).  For other evidence of the early nature of broadband advertising, I suggest doing some analysis and looking at where the bulk of revenue from other ad networks are generated.  Yes, you guessed it – banner display ads and search engine marketing.  Sure broadband has really high CPMs and trust me if these ad networks could build a huge business off of that today they already would have made some acquisitions but there just isn’t enough demand from their advertising customers.  As you guessed it, what that means is the market is still early and there are plenty of opportunities for innovative companies to help move some of that $60b spent on television ads online.

EntrepreneurshipWeb/Tech

From Web 2.0 to Business 2.0 – MySpace pulls Photobucket videos

Posted on by Ed Sim

The alarm bells are ringing in the web world (see the Techmeme discussion) – one of the gorillas in the space is flexing its muscle and protecting its turf as MySpace is preventing Photobucket photos and videos from appearing on its site.  As Om Malik mentions, this happened once before and I am sure the MySpace folks have done some hard thinking about whether or not their users will vote with their feet and leave, and if they do, what kind of impact it will have on its business.  I guess they figure it won’t be too large of an impact for them.  Anyway, all of this is not a surprise as this is the way business works.  Forget about Web 2.0, this is Business 2.0 (ok, someone else already has the trademark).  The world of openness is only open so much because if you get to0 big and threaten someone’s turf and livelihood, guess what…they will fight back.  I put a timely post up two days ago titled "Why Startups Must Control Their Own Destiny."  The point is that the only person you can really rely on is yourself and in this world of mashups, widgets, and open APIs, distribution is easy…getting money is hard.  Well guess what-distribution via widgets on MySpace was relatively frictionless, but now that Photobucket is a serious player, the Gorilla is fighting back and that is just the way the world works.  I am not saying that you should not leverage free distribution, but that you should prepare yourself for the day that it may disappear.  In one of my portfolio companies we have a saying, "Google giveth and Google taketh away."  The point is you should take a hard look at your business, and if you are too dependent on any one partner or distribution method, you should stay awake every night thinking about how to diversify your business.  And for those who built their business off of one partner and think they are worth hundreds of millions or billions of dollars, I can assure you that if that one partner is not buying you, there will be appropriate discounts paid to your business based on the fact that the acquiring company’s competitor could shut your lifeline off tomorrow.  Yeah, this is nasty stuff, but this is business and companies need to make money.

Web/Tech

Second Life for Kids

Posted on by Ed Sim

As a VC that invests in early stage companies, part of my job is to discover new opportunities and business models.  While much of today’s online and social networking growth is being driven by teens and college students, very rarely do I get the opportunity to learn about interesting companies through the eyes of my young children.  It started about 6 months ago, when my son came home from school talking about a build-your-own penguin site.  He did not know the web address, but said it was a cool place to create your own penguin, play games online, and earn points to further dress up your penguin.   He also said that we had to sign up and pay to become a member and kept asking me to visit.  After doing some diligence, I found ClubPenguin, created my own penguin, and discovered that it is basically like second life for kids – a virtual world of penguins designed for kids to interact in a safe manner.  While the stated target demographic is for 8-14 year olds, I suspect that the user base is much younger.  To its credit, it has built in some nice safeguards for privacy with the ability to limit chat to precanned menu items and parental involvement in the signup process.  If you log into the site right after school, you can see a number of overloaded servers where penguins are living in a virtual world, earning points to decorate their igloo, playing games with others, and socially interacting.  Luckily most of my children’s time is spent doing their own things and less on the social networking aspect of the community.

Within weeks of that discovery, the next big thing in our house became Webkinz.  Webkinz is another virtual world for kids but with a twist.  You have to buy a stuffed animal and on that pet there is a special code you enter to bring your animal to life on the web.  I must say that Webkinz is also brilliant and well done.  My kids wake up in the morning asking to log on to feed their pet before they go to school and to also earn some kinzcash to decorate their rooms.  Kids can earn kinzcash by answering math and educational questions, playing games, and answering surveys.  In addition, you can add friends to your buddy list and invite them to your room to interact.  So far Webkinz strikes the happy balance between being a fun and entertaining place for kids without too much marketing.  I could envision down the line branded items for sale through the W Shop but for now the site is just selling generic stuff. 

Together both of these sites have become the hottest destinations on the web for young kids.  As a VC, the big question I have is what is the staying power of sites targeted towards young children as we all know that children are fickle and trend-oriented.  In addition, I am paying close attention to the revenue model as it has been notoriously hard to extract dollars from kids.  For now, ClubPenguin earns cash through the premium model having free users pay a monthly or annual fee for the special privilege to customize and buy items for their penguins.  Webkinz seems to make its money from selling the real stuffed animal which has a virtual equivalent. It also manages its product line and inventory closely by constantly developing new pets so kids can have multiple pets/adoptions.  In fact, to further encourage purchasing of new pets with every 10 adoptions kids earn a "priceless" prize for their room.  All I know is that based on an informal poll I have taken amongst my children’s friends that the penetration of these services is quite high and most users are paying users. And so far through the eyes of my children I can see that the more time they invest in these services the harder it is to extract them.  So from this standpoint there may be some staying power for both services. As a parent, the big question I have is are my kids too young to be on these virtual worlds and what am I socializing them for in the future.  Where do they graduate to after they tire of ClubPenguin and Webkinz?  Being a technology VC, I would be a complete hypocrite if I did not let my children try these services.  While I do question how early is too early, ultimately I have come to recognize that this is the world that my children live in and the best thing I can do is monitor closely, teach them what is real and not, and make sure to constantly educate them in terms of safe web practice.  In addition, there are some educational benefits as well pushing my kids to read and do math.  I know their world today is much different from mine when they tell me to go to Answers.com (full disclosure-I am a board member) or Google to get more information.

Given these factors, it is pretty clear that there will be more virtual worlds for kids created.  From an exit standpoint, I wouldn’t be surprised if one or both of these web properties eventually gets bought by Fox Interactive Media or Disney as a way to reach this young, impressionable demographic, develop brand relationships early in life, and upsell them on various social networking options as they get older.  It is also important for us to realize that we are still just in the second inning when it comes to new advertising models.  All of the groundwork we are laying to reach today’s teens and young adults is just the beginning and my question is how will the world look 10 years from now when today’s 5 year olds are 15 and todays 10 year olds are 20.  What will be the best channel to reach them and with what kind of message and in what medium?  I can bet that wireless will definitely be one big component of that.  Striking a balance, the parent in me will ask how will we be able to protect our children (to the extent that we need to) from overcommercialization and other security issues (this is a huge topic that can be addressed at a later time)?  I don’t have any answers now, but trust me I have a vested interest in monitoring this space carefully for multiple reasons.  I would love to hear your thoughts and opinions on this as well.

Entrepreneurship

Why startups need to control their own destiny

Posted on by Ed Sim

I was in a board meeting last week, and as we reviewed the results one item quickly jumped off the page – the company did a great job signing up a couple of Tier 1 partners but a less than stellar job driving results.  This was not surprising as what happens more often than not is that we can get caught up in the thrill of the chase, signing a big deal for example, but forget that the real work begins after the deal is inked and the press release hits the wire.  Signing a deal in and of itself does not bring on any new customers and the more successful startups understand that.  The teams that can drive successful relationships keep pushing its larger partner, putting together a plan with expected goals, driving implementation, creating product literature for the new partnership, offering new ideas, asking for marketing dollars, and coming up with new innovative campaigns to drive adoption.  They just make things happen and are just as relentless after the deal as they were before the deal was signed.  The less successful teams will let the big partner move at its own pace, dictate the terms, and wait for them to take the next step.   

This brings up another interesting point.  Even if you follow the steps above, this does not guarantee success.  Big companies move slowly and often change their minds.  A relationship with a big company will surely take time and cost you money whether in upfront dollars or expenditures on resources.  And while we would all love to build our business off the back’s of other brands and distribution, at the end of the day, in order to create a big winner, it is imperative for startups to control their own destiny.  This means that your business has to be able to grow organically and not have its fate fully dependent on its partners.  What this means is that first and foremost you have to have a killer product, one that people love, can’t live without, and share with others.  In this new world of mashups, open APIs, and widgets, startups can easily get distribution.  Getting customers and revenue is a different story altogether.  Remember, distribution doesn’t matter if people don’t use your product or service so start with the basics and figure out how to make your product a must have that someone will pay for.

EntrepreneurshipVenture Capital

Microsoft VC Summit 2007

Posted on by Ed Sim

The day after Microsoft’s TellMe aquisition, I was at Microsoft’s eighth annual VC Summit.  Unfortunately, I missed Steve Ballmer’s opening discussion, which in my opinion, is always one of the most entertaining and informative sessions of the event.  For the last few years, Steve spoke at the end of the event but for some reason they switched it on us and had him at the beginning.  Anyway, I am waiting for some other bloggers to summarize his discussion.  Notice the picture I link to from Paul Jozefak’s blog titled "Expanding Platform to the Cloud."  I must say that I came away quite impressed by Microsoft’s progress in its cloud and Windows Live strategy.  Last year, all of the Windows Live talk seemed quite rushed, disjointed and forced and seemed it was more of a response to the market saying that Microsoft did not get the SAAS thing.  This year the strategy seemed much clearer and well defined and the executives knew how the Internet and cloud fit into all of the various business units.  In the end, Microsoft has made some huge strides and will certainly be worth watching over the next year.  In addition, as with each year, I did find the Microsoft executives more willing than ever to network with startups to fill gaps in their product line and to be a more open, gentler Microsoft versus years ago.  There is nothing like real competition to get a company to change its mindset.  Sure, they didn’t tell us much in the public sessions as sometimes you can come away with the impression that Microsoft is doing everything and the only opportunities for startups are niche verticals built on Microsoft’s platform.  But truth be told, if you actually did get a chance to spend some one-on-one time with the executives, you will find a much different story. Reflecting on that point, Microsoft made a little over 20 acquisitions last year and plans on doing a similar amount this year.  One sure way to not get any partnership done is openly ask the Microsoft executives, "How do I get my portfolio company acquired?"  The real point is to find and network with the key executives at the summit and figure out how the individual business unit’s process works on a partnership discussion and get that started.

The consumer mobile breakout session was one of the more informative discussions that I attended.  Basically as the world moves to three dominant operating systems for wireless (Symbian, Windows Mobile, and Linux), Microsoft will look to increase its penetration by leveraging an extensive development platform to allow third party partners to develop new consumer services which can be easily deployed via its worldwide carrier partners.  Naturally, one of the questions asked was if these apps only worked on Windows Mobile or across the various operating systems.  As you might suspect, these apps would likely work better on the Windows Mobile platform, but the Microsoft folks did stress that it does and has to work with other competing operating systems as well. The gaps that Microsoft was looking to fill through partnerships or acquisition were, broadly speaking: games/entertainment, location aware services, TV/video (although the one Microsoft executive acknowledged it was overhyped), ad management, mobile content mgmt, and billing and payments.  One of the value propositions offered by the Microsoft mobile folks was key relationships with carriers across the world.

Another engaging talk was Peter Moore’s (Corporate VP, Interactive Entertainment Business) presentation on Microsoft’s move into the digital home with its Xbox360.  Of course, after a long day, seeing a commercial for the yet-to-be-released Halo 3 was quite energetic and refreshing.  Interestingly enough, it is quite amazing to see that as these gaming machines get more powerful, the games themselves end up being the commercial (think about The Gears of War commercial on television).  Despite the fact that Peter could have spent hours demoing games, his presentation centered around the full featured entertainment capabilities of the device which included the ability to synch with other PCs in the home and buy movies, television shows, and music in a simple way.  Once again, it is amazing how much progress is being made throughout the many divisions at Microsoft and how the Internet and on-demand services are getting weaved into the very fabric of the applications and infrastructure.  For a large company, one year has made a huge difference.  Finally, one of the other recurring themes I heard throughout the day was the importance of advertising in many of its product lines ranging from mobile to MSN to the digital home and video gaming.  If there are other acquisitions to be done, I am sure that some interesting advertising related technology and services will be on their radar screen.

Just to be clear, this is not in any way, shape or form a Microsoft love-fest.  I am just pointing out that while so many people are counting them out that they have lots of cash, renewed energy, and a long-term view towards winning in their markets.

Wireless

Microsoft’s next battleground – wireless

Posted on by Ed Sim

I am sure you have seen the news all over the web and Techmeme about Microsoft’s purchase of TellMe, which is rumored to be around $800mm.  As you can see from this Microsoft press release, the big opportunity is for Microsoft to use the TellMe voice-driven user interface as a key component for mobile handsets:

We’ve made great strides in speech technologies, but have only scratched the surface of what is possible,” said Jeff Raikes, president of the Microsoft Business Division. “The acquisition of Tellme will bolster Microsoft’s existing speech capabilities, bringing both immediate and longer-term value to our customers and partners.”

“Tellme was founded with the idea that anyone should be able to simply say what they want and get it from any device, starting with the phone,” said Mike McCue, co-founder and CEO of Tellme. “Now, with Microsoft, we’ll be able to extend that vision to millions of businesses and consumers around the world.”

I remember when I started in the VC world over 11 years ago, the question we always had to ask ourselves before we made an investment was "what is Microsoft doing or going to do?"  As I reflect on the last decade, I never really did think that as an investor in software and the Internet that the question would become almost irrelevant and would change to "what is Google doing or going to do?"  Given all of the discussion about Microsoft being dead, I must say that while they are still a distant third in the search space, they did make a brilliant move in acquiring TellMe.  While most of the revenue does come from TellMe’s hosted speech applications for customer service, the big value in the long run will be Microsoft’s ability to incorporate TellMe’s mobile search and voice-driven search through the mobile handset.  In other words, it seems that while Microsoft is not conceding to Google in search, that it does recognize that the mobile opportunity is potentially much larger and that this acquisition will clearly give it a big lead in the mobile space.  Think about it – when you leave home, you grab your keys, wallet, and cell phone.  The opportunity to reach and market to this third screen is huge and just in the first inning.

Even Tim Berner’s Lee in this week’s Economist (sorry, password required) highlights the next wave on the Internet being around mobile:

Although he is somewhat sceptical of the hype around Web 2.0, Sir Tim is excited by three other areas of the web’s development: its spread to millions of new users via mobile devices, the growing interest in the technology’s social and political impact and the “semantic” web, in which information is labelled so that it makes sense to machines as well as people. “If you look at the number of internet-capable mobile phones, PDAs and so on, they are rapidly outnumbering the things we think of as computers,” he says. “As the price of these devices falls, large parts of the developing world will get web access. When you have a large mass of new users, you will get many new applications, written by people with other needs.”

The number of internet users reached 1 billion in 2005. But although about 70% of the population now has access to the internet in North America, the figure is just 11% in Asia and less than 4% in Africa. To the jaundiced observer who remembers the disappointment of WAP, the first attempt to bring the internet to mobile phones, Sir Tim’s enthusiasm for mobile-internet access may sound like déjà vu. But he insists that there are crucial differences. “WAP was not based on standard internet protocols, there was no competition for browsers, and operators had a stranglehold on access,” he says.

Maybe with this acquisition and Microsoft’s commitment to mobile, I and other VCs will find ourselves once again asking the question, "what is MIcrosoft doing or going to do?"

As an FYI, there should be more to come on this topic as I will be at the Microsoft VC Summit tomorrow learning more about their plans for the next year.
 

Web/Tech

Algorithmic technology on the web

Posted on by Ed Sim

Matt Marshall (amazing how he does it!) recently broke the news on my fund’s (Dawntreader Ventures) latest investment which is still in stealth mode.  Now that the news is out, all I can say is that there is tons of data on the web, most of which is unstructured, and that the company, Peer39, has some serious algorithmic technology which can help mine that information and boost "conversion rates" dramatically for advertising as Matt succinctly describes.  Matt correctly updated that Dan Ciporin, the former CEO of Shopping.com, is not a founder but a seed investor and board member of the company.  Amiad Solomon is the founder and my two colleagues, Ned Carlson (who will be on the board) and Sang Ahn (not Dan Ahn) were leading the deal from our end.  I know – having stealth companies is a pain, but we were truly trying to keep the company under wraps until we rolled out our beta system later this year.  What we love about the model is that with some proprietary algorithms we believe we can turn just plain data into real usable information to dramatically improve the effectiveness of advertising, and that as a fund we believe there are many more opportunities on the web to take unstructured data, apply some algorithms, and turn it into real valuable information.  The other beauty is that if we execute correctly, it is an extremely scalable and capital efficient business.  More to follow and thanks to Matt for breaking the news…

SaaS

Do it yourself (DIY) in the enterprise (continued)

Posted on by Ed Sim

Last year I wrote about the newfound productivity of the prosumer, the consumer who is bringing technologies into the workplace in a DIY (do it yourself) fashion.  If IT can’t or won’t get something done, users can simply check the Internet for the latest web-based service or software download to help them solve their problem.  In this month’s CIO Magazine which landed on my desk somehow, the cover article is titled "Users Who Know Too Much and the CIOs Who Fear Them."  The subtitle is "They’re smart, productive and using IT you didn’t provide.  How to manage the modern user."  I think we are at the very beginning stages now of IT’s recognition that the world is changing and like Jeff Nolan says the balance on the continuum of systems and people should move more towards a people-centric vision of technology.  What do the people want and how do we provide them the ability to get things done while at the same time balancing our need to keep a safe and secure environment?  Sometimes these issues are directly competing with one another.  It is still quite early in the CIO’s recognition of a user-centric IT world but the fact that CIO magazine is focusing on this means that it is becoming more critical to its readers.

Over the next couple of years, it will be interesting to watch how the battle between top-down, conservative IT and bottom-up DIY employees gets resolved.  IT wants control, security, and compliance while users just want to get things done.  As the article advocates, the smart CIOs will figure out how to balance the needs of their users and the role of IT.

This will require CIOs to reexamine the way they relate to users and to come to terms with the fact that their IT department will no longer be the exclusive provider of technology within an organization.  This, says Smith (Gartner analyst) is the only way to stay relevant and responsive.  CIOs who ignore the benefits of consumer IT, who wage war against the shadow IT department, will be viewed as obstructionist, not to mention out of touch.  And once that happens, they will be ignored and any semblance of control will fly out the window.

Whether or not CIOs get it, does not really concern me as the nature of sales for many of these DIY apps and services should be focused around the end user vs. centralized IT.  Given this, the sale should be much different, less costly, and with much less friction.  If a user wants to track his sales force productivity, they can go online and sign up for Salesforce.com or create their own through a SugarCRM download.  There is no on-site installation as the web helps deliver the product efficiently.  From a sales perspective, as these companies grow over time, much of their sales can be done over the telephone or through a WebX or GoToMeeting session with only the large accounts reserved for an expensive direct sales rep.  Given this bottom-up, web-based model of selling and delivering software, it will be interesting to see how the incumbent vendors respond.  For example will users adopt a collaboarion platform from IBM that IT has pushed down on them or would it be better for CIOs to figure out what their workers are using and standardize on that?  Does this mean that the smarter incumbent software vendors look to buy startups that already have bottom-up traction versus building their technology from scratch?  As I was writing this post, I just noticed that IBM just signed a deal to pipe Google gadgets through its Websphere portal. 

"These sites are not just valuable to consumers. Businesses want the same content. Why would we keep these two universes separate?" said Larry Bowden, vice president of the IBM Lotus division for portals and Web services.

While Internet access, and thereby Google Gadgets, may be easily available to consumers, many businesses restrict access to the latest Web applications for security reasons, to make network management easier and to limit employee distractions.

By allowing Google Gadgets to work within its WebSphere Portal, IBM is making it easier for companies to give employees access to popular Web applications while keeping control over how they are used. Companies can decide which Google Gadgets they can see.

"The end user decides: We no longer need to go off and call a technician," Bowden said. "The power has been turned over to the people who know best. You know best."

It looks like IBM gets it and is trying to help its IT customers strike the delicate balance between control and giving users what they want.  All I can say is that the intersection of the enterprise and the web-based platform will be an interesting space to watch over the next few years and it is clearly heating up.