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garage to gorilla

Continued, page three of three | Previous page | First page

Future Internet Markets

Ms. Swisher: A question from the webcast audience. Do you foresee the development of an Internet E-commerce services industry to support organizations that do not want to develop this expertise in-house?

Mr. Leonsis: We have done that. Netscape, Sun and AOL, the virtual partnership. That's what it's set up to do. The really interesting thing about Marc and Netscape is that they invented three businesses. A lot of people say Marc invented the browser. I say, they did more than that. They invented a client-based delivery business that's changed software and, frankly, may make the Web a little passé because the battle is going to be fought on the browser or up on the desktop. That's a big change. Second, they enabled E-commerce so that everyone can now be in the E-commerce business and build servers and architecture to do that. Third, they were really the first Web portal.

It's interesting. I know when we merged with the company or, as we can say now, acquired Netscape—this is another thing you should know: whenever you are courting it's a merger until the deal closes. Now that we have acquired Netscape. . .

Ms. Swisher: One quick question. What do you think is the biggest, most promising area right now for entrepreneurs?

Mr. Leonsis: If I were going to quit and do a startup, which I'll never do. Startups are a young person's game. There's something I have a passion about, and I'm surprised by the fact that this is what my life is like. I came back from vacation and people asked where I went. I went to Nevis. I went to the Four Seasons in Nevis. It was great. You ought to go. Next thing I know, six of my buddies rent the house and they go to the Four Seasons. Someone asks, "What kind of car are you driving?" Oh, I just bought this car and I really like it, or I went to this great movie over the weekend, you ought to go. I'm an influencer. It seems my entire life, that I'm an affiliate. I am an affiliate. It seems to me that a concept like what has done where they have 100,000 affiliates . . . if someone can figure out how to make 20 million people affiliates so that if Marc asks me if I know any good restaurants in DC, I say, "Yes, you ought to go to DC Coast, they have a really eclectic menu." And if he goes, I get some kind of credit for that.

It's like what Kara mentioned about the popup screens. I will have a multi-tiered marketing pyramid scheme for the universe. I do think there is something very big in that idea somewhere.

Mr. Andreessen: I think, I would look at in the general category of how the Internet enables groups in a very interesting way, and it's something we take it for granted because a lot of the early stuff on the Internet and around AOL was chat rooms and discussion groups and so on. But a lot of the business around the Internet today is E-commerce or email-oriented or Internet services or content. The interesting aspect of the Internet is as a unique medium that allows groups of people to come together who share common interests—whether that common interest is in buying something, where they can maybe aggregated together into a buying club and get a much better price through negotiation, or whether it's a group of people who want to discuss something and share information. The ability to aggregate these groups is something that I think is an untapped opportunity still.

Ms. Swisher: There are two I have seen recently. One is Deja News which just became, where people rank things, and Mercata, which is owned by Paul Allen and is a buying club. There are several others now like it, and some others that are in that area if you want to take a look at them.


Creative Paranoia

Mr. Hecht: Hello, Lawrence Hecht from Public Policy Network. As netpreneurs, what companies and industries should we be worried about? What old-guard companies and industries can be market leaders in the new Internet economy?

Mr. Leonsis: You should worry about everyone, and I mean that sincerely. There are no rules in this business. I worry about companies that have loyal customers and have big brands, but who I worry about most is who I don't know. I don't fear what I know; I fear what I don't know. Who haven't I heard of? I mean, I remember when Netscape went public and I said, "Who are these guys?" and when Yahoo! came out of nowhere and Amazon came out of nowhere. I fear more the people I don't know than what we see today.

Mr. Andreessen: I think I worry less about other companies over the long term than I do about factors, specifically whether we're actually going to be able to eventually get everyone on the planet able to use this stuff. We are still so far away. As Ted mentioned, we have another 70 million households to go in the U.S., and we have another 97% of the world population to reach with all of this technology. We're still, as an industry, largely providing toys for the rich. We're not yet out there reaching the entire world, and there's so far to go. The growth of this industry could be severely constrained at some point, not right now, but at some point, by its inability to outgrow its inclination to provide things that require almost a Ph.D. in MS-DOS to figure out how to use.


Simpler Is Cooler

Ms. Mathieu: Tracy Mathieu. I asked this question last year at a Netpreneur event, and I want to hear what you think. The year is 2005, and you're looking at your computer. You say, "Wow, that's cool!" What is it that you see?

Mr. Leonsis: When you're trying to get into every household, my reaction would probably be, "Hey, that really looks cool. Take it out." For us, the industry has moved from community, to a medium to, now, a necessity. The things that are cool will be cool, but the things that will gain traction and help us to get into those 70 million homes will be those applications that help you live your life online better than when you're doing something offline. Those will tend not to be cool, but very pragmatic. I think that in five years you will see more pragmatism and more functionality, and less "gee whiz," high-tech stuff.

Mr. Andreessen: I think there are two categories of people. There are those like us, and then there is the rest of the human race. We all look at the greatest whiz-bang thing, the Java applets and all the rest of it, and we go, "Wow, that's cool." Everybody else, just ordinary people using the Internet, when you watch them, the things that they go, "Wow, that's cool," about are inevitably things that touch their lives—their family members are online and they can exchange digital pictures, or they've always liked collecting antique watches and now they can go bid on them at eBay. Things that really touch people's lives are the most important. That's why, at the end of the day, I think that, 10 or 20 years out, the Internet is going to fade into the background like electricity and we won't talk about it so much any more.

There was a New Yorker cartoon of two people standing in the kitchen and one of them says to the other, "Wow, that's an evenly browned piece of toast. Who is your Electricity Service Provider?" We are kind of at that stage, and we're going to move beyond it.

Ms. Swisher: I think they are both right.

Mr. Leonsis: It reminds me. I was once in a meeting with Bill Gates, and someone questioned something on Windows, and he said, "Hey, it's like oxygen, get used to it."

Ms. Swisher: That's an interesting quote. When I started my book, someone was insulting AOL, which was typical. I got insulted for AOL quite a lot, even though I kept saying, "I don't work for them; I'm writing about them." One person came up to me and said, "AOL is so vanilla, so middle class." I thought, "You know what? I'm going to do very well with this book because that's the most popular flavor, and most people are middle class." It's going to be a lot simpler than you think.


New Media Life Forms

Mr. Baladoo: My name is Mark Baladoo of Ted, I notice that America Online acquired, a free online calendar service. Where do you see that kind of content in five years as more and more Web sites are empowered by people like yourself telling your friends to go and do things through word of mouth?

Mr. Leonsis: We bought for $300 million.

Mark Baladoo: Right.

Mr. Andreessen: Yahoo! was really interested.

Mr. Leonsis: You know, I don't know who made up this word "content." It's just a terrible . . .

Ms. Swisher: I think you did.

Mr. Leonsis: I didn't.

Ms. Swisher: I think it was you.

Mr. Leonsis: It's just a terrible, terrible word. There is this separation between content and context, and then there is community, and there is commerce, and that's where the convergence is going to be. I don't know what to call Is it a client? Is it a Web site? Is it functionality? If people are programming their chats on it, is it a directory? I think that's what we'll be seeing more of, "new media life forms." Things that you didn't see coming that help you to manage your life better and faster and easier. I don't think that what the world will be seeing is another magazine online or another newspaper online or something that you have in the real world simply re-purposed into the digital world.

Ms. Swisher: Recently, I was doing an interview with some Internet people and they felt that eBay was entertainment. If you think about it, it is people entertaining each other, so the way we think about entertainment is going to change dramatically.


The AOL/Netscape Merger

Mr. McLaughlin: My name is Scott McLaughlin from The Adrenaline Group. Even before the acquisition of Netscape, you had a lot of core competencies under one roof at AOL. Now you can mix software development, software distribution, ISP-style infrastructure and surfer-style infrastructure. What are the synergies in mixing all those things under one roof, and where are the synergies not so strong?

Mr. Leonsis: That's a good company name. A cool name. That's worth $100 million.

Mr. Andreessen: There are a couple of aspects to that. One is that when we did the merger of AOL and Netscape, we were pretty careful in how we structured it and what we chose to do. We actually did this interesting thing where it was a three-way partnership with Sun Microsystems. The net result is that Netscape was carved in half. The half of Netscape in the software business entered into a partnership with Sun, which is not a joint venture, but sort of a virtual organization or an alliance. It's got its own management and it's running pretty independently. We stay involved in it, and it's very important because what they are doing is necessary for E-commerce, but it is not something that the AOL management team on a daily basis has to spend a lot of time on because it has a very good management team with people from AOL/Netscape and Sun.

The thing that people underestimated about AOL for a long time, and probably still do, is its core competency. I don't want to put words in Ted's mouth, but AOL has always been very good—and continues to be very good—at putting the whole experience together. When you look at a business like AOL, it's not a technology-forward kind of thing where they say, "Let's invent a browser and figure out how to build a business around it." Instead, it's saying, "Let's get lots of consumers online and make it an important part of their lives. Then let's fill in all the pieces." That's the main thing that AOL did so well for years and no one else figured it out at the end of the day. That, more than anything else, determines the success of a company that wants to be at the level of scale that AOL is now.

Mr. Leonsis: After we bought these guys, we realized that Netscape's NetCenter is a daytime business and AOL is a nighttime business, so we could share a lot of the same infrastructure. The hidden story of AOL right now is that we have truly morphed into a multi-brand company. We built this bionic infrastructure for the AOL brand; now all of these new brands can take advantage of it. The infrastructure was paid for by the core brand, so there is an incredible amount of synergy. Netscape had great teams of people. They had great management, with Marc a shining example of that, and, at AOL, we are relentlessly pragmatic.

If you take a look at the process of integrating the two companies, we did not look at tenure or longevity. We looked at who is the best person for the job. My favorite example of that is a division called AOL Products being driven by a gentleman named John Paul, who is a Netscape employee. We were relentlessly pragmatic. The hidden assets in all acquisitions are the people. It's not just the brands, but it's how you take the people, leverage up and give them a bigger stage so they can work on bigger, more important projects.


ICQ And Anti-Brands

Ms. Gibson: My name is Melinda Gibson. Given all of the old-media bashing tonight, I'm not going to tell you what I do, but I wonder if you could tell me where you are going with ICQ. My son, who is 15, is on ICQ every night from 10:00 to 11:00 with his band. I don't know how you sell that, but the other anecdote is that I got my first dirty spam off ICQ a couple of weeks ago.

Ms. Swisher: Congratulations.

Mr. Leonsis: ICQ is just the poster child for the benefits and the power of the network effect of the Internet. The more people you personally add to your Buddy List and to Instant Message, the more it cranks up. ICQ brought innumerable benefits to the company. The first of which is, if you can believe it, that we used to be cool at AOL. We used to be an anti-brand. We would make presentations and say, "Prodigy and CompuServe are big companies. We are this young, fresh, new company." We were an anti-brand.

To move up the value chain, especially for our investors, we had to go mass market. We left open a position for another anti-brand, which Yahoo! rushed in to fill. Yahoo! now is going through a similar metamorphosis where, for them to grow into their valuation, they have to move up and be more like AOL. That leaves a position for ICQ as this brand that's funky. It's aimed at young adults who are more technically astute. Now, from a brand management standpoint, AOL, Inc. can say ICQ is here and AOL is here, and Net Center is here and DCI is there and moving and we can manage that grid. Monetizing ICQ is the next challenge. It has a lot of momentum—35 million people have downloaded it and 14 million people are active users. Almost eight million a month use it every month, and last night we did almost as many simultaneous customers as AOL did. People ask me, "Why would you pay $400 million?" I say, "Because this is the next AOL. I saw the first movie and I think this is the next AOL."

Speaking of movies, someone asked me the other day if I had read Kara Swisher's book. I said, "No, I lived the movie."

Ms. Swisher: I had breakfast with the guy who sold ICQ to AOL the other day. He is an older Israeli man, and he said, "You think I sold it too cheap, don't you?" I said, "Yes, actually I do."


New Internet Devices

Mr. Woodel: My name is Mark Woodel with Proxicom. Where do you see the next place that we can access the Web? We typically access it from a desktop. Where would you like to see the ability to access AOL or the Web in a device mode? Marc talked about the clunky phone, but I'm talking more about washing machines and gas pumps.

Mr. Andreessen: Part of it goes back to the Internet as electricity. Looking at new devices, there are going to be hundreds or thousands over the next several years. You have to look at how they're going to get used in people's lives first and foremost. There are huge opportunities to do things on TVs. There are huge opportunities to do things on handheld devices such as pagers, cell phones and PDAs, but you really have to look at how they are going to be used in people's lives.

Five, 10, 15 years out, basically any device we have today that has a chip in it is going to be on the Net to do something. Maybe it's just to report status. "Hi, I'm a Coke machine and I'm out of Cokes." On the other hand, you just get explosive benefits from starting to do this, such as the next thing we'll have is a hand-held device that has a Global Positioning System (GPS) locator and knows where we are. When we're thirsty, we click on the button that says Coke and it will show us that there is a machine 130 feet that way, and it has Coke in it. The benefits of being connected just kind of seep into everything that has a chip today, and we are going to see huge amounts of experimentation over the next few years. There will be hundreds of products that come on the market as Net devices, and there are going to be hundreds that just flop. Then there will be a few that become enormous hits. Back to nobody knows nothing, I don't think anybody really has any idea what those are going to be yet.

Ms. Swisher: I recently did a story, and I thought it was a joke, about an Internet refrigerator that would tell you when you need milk and other things. It got a lot of funding. People were very excited about it, and about being able to shop right there.

Mr. Andreessen: Silicon Valley, right?

Ms. Swisher: No. The Japanese, actually. It was in Japan.

Mr. Andreessen: The Japanese have an Internet-connected toilet now. This is perhaps the ultimate killer app. Every time you do your business, it does a complete urinalysis and medical breakdown. If there's anything wrong, it sends your doctor an email saying, "Hey, you better know about this." They are bringing it to the U.S., so we're all going to have an opportunity.

Ms. Swisher: And Marc Andreessen has the first one.

Mr. Andreessen: I have always wanted a toilet that talks back.

Mr. Leonsis: This is what's scary about this business. A guy like Marc can say something like that with conviction and there will be five venture capitalists running out saying this is what they are doing in Japan and the idea is endorsed by Marc Andreessen, and they will get funded.

Mr. Andreessen: Absolutely. And Yahoo! is very interested in it.

Mr. Leonsis: He was only kidding.

Ms. Swisher: What you both said, which is very important, is that a lot of this is just going to become invisible. You're not going to be able to tell, and it's not going to matter what devices. I think a lot of Silicon Valley focuses on the devices rather than what is delivered and what people want to use.


Guerilla Marketing

Mr. Jacobsen: My name is Jim Jacobsen with I want to change the word "gorilla" to "guerilla" as in guerilla marketing. What suggestions do you have for doing innovative guerilla marketing and, Kara, how does someone stand out from the 10,000 emails that you get in your email box?

Ms. Swisher: Despite Ted's insults to The Wall Street Journal, I know he reads it. The Journal is very good on news, and breaking a lot of news is part of our value. We try to find companies that are up and coming and focus a lot more on them. The noise level has gotten huge in Silicon Valley, and what I try to do is not listen to it, but to go out and talk to people that I like, people who are smart—all over the country and as many places as I can.

Typically, if you have an idea, there are about 10 others with something similar. It's like the calendar space. I saw one and all of a sudden I saw 20. If you have a good venture capitalist, it tells you, okay, maybe they are not crazy. Sometimes that's the way you do it. I try not to do that because you can miss some terrific companies that aren't linked to AOL or to a venture capitalist or something else. I would suggest writing an email and saying, "I have this interesting product, just look at my site." I try to look at them all, but there definitely is a huge amount of noise. I wouldn't want to be in the position of trying to stand out. If you create a great product that people are using—I'm writing a piece right now on Blue Mountain Arts which is a Web site with seven million visitors. It's huge. They have spent $1.25 on the site and they've done no advertising. They do very few distribution deals, and they have grown to seven million. It's astonishing . . .

Mr. Leonsis: And they are for sale for $300 million.

Mr. Andreessen: And Yahoo! is very interested.

Ms. Swisher: Things that grow naturally we tend to start to pay attention to. But I guess you can start with the trade publications. Ted?

Mr. Leonsis: I read all my email. I read every single piece of email because I know the next huge idea is there. The one thing that I can tell you is your email will get passed to someone and, as the network takes effect, the less interested those people are. I try to explain to people that you have to pitch us, and you had better get to the point right away.

AOL is in a maelstrom of deal flow now. We have an intake system, and, when you get something, you have to pass it to the person who should look at it. Think of us as being a movie studio or a TV network and that you have an idea. You can't go and say, "I have a great idea for a movie." "Yes?" "It's about cops." But if you came and said, "It's about MTV cops with this very hip director named Michael Mann," and you go scrape those dollars that the cable networks are doing, maybe you create Miami Vice and it gets on the air.

The advice I give is that you need to know what we do at AOL. You know what you do. Serve it up to us in a nice, neat package: "Ted, we have something that will allow AOL, ICQ, Net Center, to do this to the benefit of that." If you grab us right up front, you'll really get attention. If you make someone work hard to find out what the benefit is, or why it's good for our customers or how we're going to make money on it, it will just kind of go to email jail. I think it's just courtesy and also good business to get to the point quickly.

Mr. Andreessen: We talk about how much opportunity there is, but these markets are getting so hyper-competitive. As Kara said, there are 20 of just about anything that anyone is doing at this point. Increasingly, there really are only two sound business strategies for most categories. One is to be the biggest, which requires building an unfair advantage into the business model right up front. For the most part right now, those unfair advantages consist of exclusive distribution somehow to get out there and to block out competitors and to make sure that people are seeing your site and not somebody else's. That's where this huge amount of venture money is coming in. It has to fund that activity far more than it has to fund any of the other, the technology or the development or anything else.

The other strategy is to be the deepest. Just to go way into a niche and be the best on topic. That's a strategy that's going to be more and more viable.

The Net keeps growing. AOL is going through this metamorphosis from single brand to multi-brand strategy. The Net is big enough, now, where there are clearly definable segments, sub-segments, and sub-sub-sub-segments. There are going to be more and more categories and people are going to be able to go much deeper into those categories to build sustainable businesses. There you have to be the deepest, so it's going to be a very competitive environment for anyplace that has 10 or 12 companies trying to do the same thing.

Ms. Swisher: Definitely. I use this expression, "I may be dumb, but I ain't stupid." A lot of these companies are spending way too much money on PR and other things. Although there are some great PR people out there, you have to have a good product. If you have a good product, you will do well, and if you focus exclusively and relentlessly on your product, you will do well. You can't send me a fancy press release and make me think, "Oh, great, I'm going to write about this company now."


Keep It Simple

Mr. Merino: Nick Merino, with What role will micro-payments play in bringing down the PE of some of these Internet companies and, Ted, what's your email address?

Mr. Leonsis: My email address, oddly enough, is my last name ( Test me. Send me an email that does what I ask you, and I'll respond within 24 hours.

I think that micro-payments are very important, but I think that how they have been implemented is too hard. Henny Youngman says, "Doctor, it hurts when I do this. Then don't do that. That will be $50." I just see all of these schemes and I think, "That's difficult. No one will use it." Whoever breaks that code . . . we are working on it and lots of other people are working on how to capture small businesses. We just sold over a million tickets on MovieFone to Star Wars in the last week—$7.50 with a 90˘ service charge. We did it, not for the million dollars that we generated in revenue, but because it's nice to get people accustomed to ordering something at a low price and have them feel comfortable giving you a credit card. That's what we have to do as evangelists and leaders in the business—find real, easy, simple ways, one-click ways, no-risk ways to get people to shop. Once they do, we find that they come back. I think it's a big business, and no one has really done a great job yet.

Mr. Andreessen: I think there is a huge problem with micro-payments which is that people, for the most part, don't like to feel like they are being dinged every time they do something. They don't like to have the clock turned on. These are just personal opinions, because it's hard to say how this is going to turn out from a business standpoint. As a consumer, for example, I would much rather pay a monthly subscription fee to a music service and be able to download all the music I want than be charged every time I play a track or every time I download a particular song. AOL has seen an explosion in usage since it went from an hourly charge to a flat fee. If people have the feeling that they are being watched in what they do, that they are being dinged every time they do something or that they are being dinged for every little period of time, it tends to dis-incent usage. There is a tough row to hoe there in order to get people to actually use it—even once it gets easy enough to use.

Ms. Swisher: I think you're both saying simplicity is very, very important. You can learn that from AOL. Everyone made fun of them, but the fact of the matter is, they succeeded because of their ease of use. Recently, when I was talking to Steve Case, I asked, "What's the greatest new idea you have seen?" He said it was Amazon's One-Click. You can buy something very quickly. It was done very well. Any business that does that, I think, will succeed wildly.


On URLs and Branding

Audience Member: How important is the value of a particular URL? For instance, the value of the name versus Blue Mountain Art? Three syllables? Five syllables? You hear the venture capital people talking about that a lot. Also, how important is being first? When you look, for instance, at Idealab's, is it important being versus Does it matter?

Ms. Swisher: Idealab actually has Amazon has, and then there is and

Mr. Leonsis: You know, I think this is like a gimmick. "I'm going to go out and make a great business because I have a great name." What's an Amazon? What's a Yahoo!? We have the best name. How we were able to put America Online is truly remarkable. But I think the names and the URLs and all of that are going to be like phone numbers—someone will have 555-FLOWERS, but I still have to spell that out on my hand.

I think that the branding of the site is more important, and, to dovetail a little bit on the last question, right now this viral marketing concept, this ability to use the Internet itself and the members to propagate and push out your information, is very important. Off the top of my head, I can't think of any URLs that made a business. So, to answer specifically, I don't think it's a competitive advantage to own a URL.

Audience Member: I hear a lot from venture capitalist friends that there can only be one player in each market. There used to be a time when there could be a Yahoo! and an Excite; now you are Yahoo! or you are nothing. What do you think about that?

Mr. Leonsis: Oh, I think every category in every business has two or three big players. That's what Marc was alluding to. Just look at cable—one big news supplier, second news supplier and everybody else. Look at magazines—Sports Illustrated and then 10 other players. Every vertical, every category is going to have one or two mega-players. As Marc said, the next logical extension is to find a new category and become the number one biggest, or find a category that's big and fly under the radar screen to go really deep. Vertical portals now are the next big thing. At AOL, we can't do music really deeply, so we have to go out and buy Spinner because they have 70 people just doing music. We can't do calendars really deeply at AOL. We tried it for nine years. What did we do? We bought because they have 70 people just doing calendars. That's a decision—do you go for it big or do you go deep and try to get vertical?

Mr. Andreessen: Yes, I agree with that. I don't think you have to be first; I think you have to be biggest. And if you are not biggest, you have to be deepest. If you are neither of those, you are going to have a hard time because, as these businesses more competitive, you have to be unique in some respect.

I also don't think the URL issue is that important, although the URL has to be easy. George Bell tells the story of when he got to what's now called Excite, they were about to launch their service which they called Bull's Eye except Bull' had been taken by somebody, so they reserved Bull' They said, "Wait a minute, wait a minute, we're not going to do that." They certainly have to be easy, but the bigger issue is: are you going to have a brand that people are going to identify with and that they are going to want to come to. If they are getting to you by typing in the URL, they have to want to get to you. It's the difference between and may be a more obvious URL to get to a pet store, but a lot more people have heard of, so it's much more about the actual branding itself.

Ms. Swisher: With Blue Mountain Arts, the whole URL thing is kind of interesting. Netscape and AOL have both suffered because a lot of the porn dealers try to have slightly different name versions. With Blue Mountain Arts, unfortunately, they had a guy who renamed himself John Blue Mountin, so he was trying to make the argument that he should have bluemountin without an "A" in it. He was selling, you know.

I don't think URLs in the end are going to matter. There are all these Web sites and Web companies like where if you type in "F-O-R-D", you are going to get to the Ford site without worrying about who owns Things like that.


The Local Market

Mr. Goddard: Matt Goddard with A startup company builds a Web site, drops in a geographic area, 60 days later turns a profit, builds a business plan and now is faced with a decision of what to do next. Do we show it to someone like you? Do we drop into another area? Do we go the venture capital route? How much of this do we need to build and where does this thing need to be before we're in the best position to take it to the next level? I know that's a difficult question, but it's something we are facing right now.

Mr. Leonsis: If you are making a profit right now on a local area, you are doing a great job. You should be up here next time lecturing. You can count on your hand how many sites are actually making a profit, so I would be very interested in speaking with you.

Mr. Goddard: We actually did it in two areas.

Mr. Leonsis: You are twice as smart.

Ms. Swisher: And he will give you $200 million.

Mr. Leonsis: I think there is a lot of money in local. I think local is the next big thing. When you look at the development of all media, it's when the national and the local and the regional advertisers all start to come to a crescendo. That's what happened in cable. That's what happened in broadcast television. So, sure, I'd be interested in meeting with you.


Choosing Companies To Acquire

Mr. Lamars: My name is Yurmo Lamars from Detailing Software. I understand the ICQ deal, but, when we heard about the Winamp deal, we wondered how you came across that company. Did they approach you or did you approach them? Given that it's a desktop MP3 player, how did you value it? The larger question is, as a small company like Winamp with a large user base, how would one go about approaching a company like yours?

Mr. Leonsis: Winamp was triangulated in the company. I happened to use the product. Someone who is a friend of mine in New York uses music to express himself and he used to send me tapes. You know, "I got laid off from my job, I'm mad at the world." And he'd send you a tape. Now he uses ShoutCast and it's really cool. Every day I get this micro-broadcast. I know his moods. He uses music as a personal expression. I saw that and I liked it.

ICQ is the number one downloaded software on, so I go every Monday to see how ICQ is doing. All of a sudden I saw this thing called Winamp was number nine, then it was number seven, then it was number three and then it was number two. I said, "Wow, this must be a big company." It was a guy in Sedona, Arizona, who had figured this out. I said, "Well, this is the Internet. Brian Pinkerton got a million dollars, this guy gets $100 million."

But there is all the due diligence, right? I actually used it. We buy what we use. We buy what we like. That was just a case where if I liked it, I used it. People started to talk about it and it came out of nowhere. That's the thing about viral marketing.

I'd like to do something.

Knock, knock.

Audience: Who's there?

Mr. Leonsis: Amy Fisher. BANG!

That's what viral marketing is. You are shot before you even know it. Who was Winamp? You don't know who Winamp is, but all of a sudden it's the number two download. When you get on that list of top download sites, it starts to get people's attention.

Mr. Andreessen: Winamp was an easy deal because, if it's the number one way that people are downloading and listening to music online, and if online music is going to be a big business, that's it. This 19 or 20-year-old got kicked out of the University of Utah, which probably is not that difficult if you think about it, but, anyway, he is successful. He lives with his parents, lived with his parents, I think, until last week and had this really beaten up Volvo or something. There was a coat hanger he had to sort of wiggle to get the car to shift gears. He said he is trying to buy a new used Volvo with the money he made from AOL. He was able to achieve a large user base in such an important category before it was being taken seriously by everybody else. By the time that happens, the value follows from it. That's just going to be there. This whole cycle is going to repeat over and over again as these different categories appear.

Ms. Swisher: I want to thank both of you very much for some excellent advice.

One of the big messages that you can take away from tonight is that so much of this is bubbling up from below. For so many years, despite the insults to The Wall Street Journal, we have been trying to become part of what is happening here where you don't broadcast down to people. So many of these ideas are from small companies, millions and billions and zillions of ideas all over the world. That's what makes the Internet so exciting.

You can succeed in ways that you never could have before under the old media paradigm. It can happen from anywhere in the world, from Silicon Valley to Washington to Israel. I think the Chinese are now getting geared up. I'm hearing from a lot of interesting Chinese Internet companies, for example, as the strictures get taken up here. You can do that from a small company. You have more power than you think you do.

We are going to bring up Mario, who has been part of trying to solidify this region. It's a very important organization, trying to band together and create—I won't use the term "Silicon Valleys," although everyone seems to want to use Silicon-fill-in-the-blank. Mario has been integral to creating that sense of community here which is so critical to success. You all have to support each other in order to build; you can't just live by yourself. Without further ado, here's Mario Morino.


part 8: mario morino: a new wave of leadership

Ted, Marc, Kara, thank you for an entertaining and valuable event. It was a wonderful evening.

I'd like to acknowledge and thank our sponsors, AOL and KPMG. I'd like to thank TVontheWeb for the webcast tonight and all the support they've given us. I want to thank the volunteers who came out to help, and my most heartfelt thanks to Mary MacPherson, Fran Witzel and the entire Netpreneur team. Great job.

Now, let me express my admiration for something that is getting underway in this region, and I think you've seen it in action tonight—a new, engaged and caring leadership.

On June 15th, a new book will hit the shelves, entitled A Cathedral Within, written by Bill Shore, the founder of Share Our Strength (, one of the most remarkable entrepreneurial stories, and one that grew right here in our region. In his book, Bill talks of the wonders of entrepreneurs and describes them as people who "do things in ways that have not been done before." More to the point, he notes what we often don't really acknowledge, "that entrepreneurs break the rules."

Tonight, we were blessed with two of the best when it comes to breaking the rules. Ted broke the rules of marketing when he led the first new media marketing firm in Redgate Communications. Marc shattered the rules with the browser and forever changed an industry. They keep on breaking the rules as only the very best entrepreneurs can do. They, along with a growing cast of cohorts like John Sidgmore, Mark Warner, Steve Case, Russ Ramsey, Yeong Kim and Jim Kimsey, are continuing to break the rules and shake up a world that is only beginning to comprehend the magnitude of change we are experiencing as an economy and as a society. We are fortunate to have here in our region this growing band of brash, irreverent rule-breakers leading a wave of change that is sweeping this country and the globe. We are fortunate to be part of the Greater Washington Region experience as it continues to morph from its government-town roots of the past, to the epicenter of an Internet and new media explosion.

I suggest that we are also fortunate in ways that may not be as obvious to many just yet. This same band of brash, irreverent rule-breakers, also represents a new wave of leadership.

We are fortunate to have Marc Andreessen and Ted Leonsis for their remarkable success in business, but Marc and Ted symbolize a growing base of leaders that genuinely care about people and life. They care about the future of the region and our quality of life. They care that a transforming new medium is used to help our society, and, they care that others less fortunate, especially the children, are given the resources and chances to make something of their lives.

As Kathy Bushkin noted in her opening remarks, companies like AOL have moved beyond startup status to have the ability—and the responsibility—to give back, to share what they've learned and to help build a stronger regional ecosystem and community. They are doing so.

We've been blessed with the likes of other leaders from earlier times and we all owe them more than we may understand. But now things have scaled. We are on the threshold of very different times, a very different wealth, power and caring. Ted, Mark, Kimsey, Case, Joe Roberts, Ramsey, Warner, Raj Singh and Alex Mandl are but the tip of this new wave. Coming on strong are the likes of Michael Saylor, Raul Fernandez, Jack McDonnell, Rob McGovern, Chris McCleary and scores more on their heels.

We're lucky.

Dan Snyder buys the Redskins, a person who grew up caring about this team. Ted and Jonathan Ledecky buy the Washington Capitals and then talk about filling the owner's box with kids! Talk about a breath of fresh air. For those who follow sports, this is quite a pleasant departure from the likes of a Bob Irsay, a Robert Short or an Art Modell.

We're lucky.

In my first meeting with Marc, we discussed the growing disparities in our population and how we had to find ways to apply this new-found wealth and knowledge to the longstanding social challenges of our times.

We're lucky. We have people with money, building power, who care about other people and our quality of life.

Ted Leonsis, Marc Andreessen, thank you for all you've done, and thank you in advance for all you are going to do to make this region flourish and make it a better place to live for all our people. To all here tonight, as you leave this evening, tuck away a little piece of pride that you are part of a truly amazing time in history. And know it's your time. Something very big and special is happening before our eyes. We are a thriving economy, we have a vibrant community and we're going to have folks like you working to ensure that this only gets better and that all people have a chance to be included.

Thank you all for coming. Once again, our thanks to Marc, Ted and Kara for a great evening. Good luck, netpreneurs. Have a great night!

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