Ideal startup

Posted on May 7, 2007
Filed Under Venture News |

If I were asked what is my idea of an ideal startup, I would say that Sphere.com is the one. Just like Google, its main functionality is expressed in one stripped down to basics page. Actually Sphere’s website is not even essential part of its popularity. What counts is the widget and backend supporting the widget.

Why have we added Sphere’s widget to our site? Two reasons: it enhances content by providing references to relevant articles and it increases exposure of our site - just as we see links to other sites, somebody will see ours on other sites. Simple geniality of this concept makes Spere’s appeal irresistible. Without spending fortune on promotion, startup has found its way into the most wanted pages on Internet almost instantly.

Sphere’s development has taken $200,000 and very short time. The company is still staffed by only 8 people, even after intake of $3.75 mln of venture funding.

To summarize what features make Sphere an ideal startup:

What about revenue model? Sphere’s widget has already established itself firmly on zillions of webpages. If Sphere will decide to add advertising to the widget and share advertising revenues with publisher, Sphere become overnight an advertising/media company with outreach in the league of Google. By the way, I think that Google, Yahoo and Microsoft are already salivating over Sphere.

Sphere: Related Content

Comments

5 Responses to “Ideal startup”

  1. tony conrad on May 7th, 2007 12:00 pm

    Thx for the kind words - I really like how you summarized some characteristics of an ideal start-up. We’ve been very frugal to date as we believe it’s important to make sure dollars spent are against the right approach - the widget has become quite popular so look for more versions and features to be added.

    Thanks again for adding Sphere Related Content to Venture Itch, great to have you in the ‘Sphere :)

  2. jordan nash on July 6th, 2007 1:04 pm

    Sorry to be a spoiler here, but you said it yourself, “Sphere’s development has taken $200,000 and very short time. The company is still staffed by only 8 people” Very limited barriers for others and they do not have a proven revenue model. Technorati had placement on some of the same publishers, and they were booted out by Sphere. This could happen to Sphere too. Sphere’s “presence” is a link at the bottom of the article, not exactly premium placement. I am curious about how many people actually click the link. Your comment “with outreach in the league of Google” is a real stretch. Remember, it’s a widget!

  3. Venture Itch on July 6th, 2007 5:53 pm

    Jordan, it’s not about small staff, short development time or low budget. It’s about results that Sphere has achieved. Here is link to recent post of Michael Arrington

    http://www.techcrunch.com/2007/07/05/sphere-quietly-nailing-its-business-model

    Michael Arrington writes: “They have also been closing deals with some of the biggest news sites in the U.S. Deals with The Wall Street Journal, CNN, The New York Times (Tech & Science sections), AOL News, TIME, Dow Jones Market Watch, CBS News, AOL Entertainment, NBC Access Hollywood, Media General Affiliates, AOL Sports, ZDNet Blogs, DWELL, About.com and others were all announced recently on the Sphere blog. These news sites and 20,000 blogs all have Sphere results included on story pages. That’s well over 1 billion page views per month with Sphere links and results.”

    If this is not primary placement, I wonder what is. The fact that Sphere has achieved this with small staff, short development time and low budget makes it even more impressive. Google model is actually based on a widget as well - ubiquitous AdSense is a widget. So where is a stretch? In 1 billion page views per month? You can play with numbers, assumptions, CPC, CPM, clickthrough rate and get different results, but the results would still be impressive, because 1 billion page views is enormous figure.

  4. jordan nash on July 8th, 2007 12:50 pm

    Getting link placements on a page (large site or blogs) is not a huge biz dev effort. There is little risk, space allocation etc. from the publishers perspective. Remember, as was pointed out on the Tech Crunch blog, they are showing 1 billion links, not pages; and they have not produced any significant revenue. The success of the model will be their ability to monetize the placements.

  5. Daniel on July 9th, 2007 1:51 am

    Actually Google also shows links, not pages, which does not prevent them from being profitable. You are absolutely right that the success of the Sphere model will be their ability to monetize the placements. On the other hand, you can’t measure success by monetization only - Youtube has not earned even one dollar. Online presence on billion pages is also worth something. I’m sure that the current valuation of Sphere is already at least $20 mln, assuming $4 mln of funding for 20% equity.

    Here is revenue estimate in one of comments to techcrunch post:

    # Dr. john
    1) 1 billion LINKS
    2) .005 ctr to get to the content widgets = 5M pages
    4) Divide that number by 1000 (cost per thousand)
    3) A generous $3 cpm
    4) Equals $15K
    6) 60% rev share equals $9K

    and here are answers of Tony Conrad, Sphere CEO:

    # Tony Conrad
    “A few inputs.

    1) Our CTR is much, much higher than your estimate, higher than industry norms for links including Google AdSense.

    2) Advertisiing is only a small piece of our model. We also receive subscription fees for data services and related article links we do for a number of partners. We’re doing fine revenue-wise and we have been super careful in how we spend money.

    3) CPM’s are higher than $3 because the majority of our impressions take place in high quality branded site publisher sites that charge premium based cpm’s. Given that the user actually clicks on something and there is only one ad in the plug-in that they see (vs. several on a typical page that also competes with all the content for attention).

    I find the dialog here helpful but also a bit critical in absence of all the data. Bottom line is that we’re trying to do something innovative, something hard - if it were easy, everyone including big players would be doing it. It doesn’t always work the way we want but overall, it’s producing high quality results and our partners are very supportive and happy.

    As a result, we generated over 200 million links to blogs last month from a mainstream internet user base and hopefully that plays a small role in the blogosphere reaching a much broader audience.

    My email is conrad@sphere.com if you have any inputs. Thanks.”

    # Tony Conrad

    “Dr John - long term, subscription fees will be a small/ medium piece of the equation. In the short term, they’re a highly strategic recurring revenue source that enables us to manage our costs and focus intelligently. Ad revenue will grow in importance but it’s not a focus for us right now. Turning on ads doesn’t make sense at this stage b/c we’re focused on distribution and creating an additive user experience for our partners by connecting their readers to conversational media. We are big fans of blogs. We believe everyone has a voice, and our mission is to create broader exposure for each the individual voice. If we maintain that focus, we’ll continue to add partners while evolving our product.

    BTW, your methodology is correct but your performance assumptions were way off. We’re in good shape”

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