Remember when we told you that McAfee Recklessly and Wrongly Accuses Yahoo Store Owners of Malware and Spam? That situation was resolved, sort of. McAfee has at least removed the blanket flag on Yahoo Stores and now merely says "unknown" for most stores, even though many of those stores are paying McAfee for their security services.

Well, it seems that Trend Micro is up to the same thing. They were blocking Chris Lang's site. Not because of anything that he did, but because of a false positive.

Trend Micro will block your site in the browser, block your web traffic at the server level, your URLs in any emails and send your emails to the Trend Micro spam folder if you make the mistakes that I did. It was not Trend Micro%u2019s fault, my payment software or anything I did. Trend Micro blocked me because I was at the wrong place at the wrong time.

So why should you care about Trend Micro? Have you even heard of them?

They're the 4th most popular PC application software package, according to CNET. And getting flagged by Trend Micro makes it much more likely that a user will mark your email as spam, which then cascades through the various spam blocking services. Before you know it, you can't communicate with your customers who use Yahoo Mail, Gmail, etc. It's pretty devastating.

Why do they Get Away With This?

Chris was quite magnanimous when he said that it wasn't Trend Micro's fault. Frankly, I don't see the difference between companies like Trend Micro and McAfee and the person that stands in front of a bricks and mortar business with a sign that says "This business is a fraud!" and then claims that they were merely standing in front of the wrong business, by mistake. McAfee and Trend Micro have cost people that we know thousands of dollars. Why there hasn't been a class action suit against these companies befuddles me.

You remember that scene in Monty Python where the guy explainst that the parrot is not dead, it's just "pinin for the Fijords!"

Well, we went from posting daily (or twice/daily) to a few times a week to ... silence for a week at a time.

Well, two products in beta, a couple of unexpected PO extensions from existing clients (thanks guys!) and a nasty flu that someone brought in from a second grade hot lunch and some tasks had to get put on pause. 

But we're back now, thankfully, and it all looks under control.  Look for more posting goodness! 

I heard a story from a friend the other day that I've seen played out on the Internet dozens of times. A blogger who writes about restaurants wrote a post that was critical of the restaurant.

The restaurant owner's lawyer sent a cease and desist letter, claiming libel. In this case the blogger just folded and took down the post, but put up a copy of the lawyer letter with the offending lines redacted.

So the restaurant gets an article in the SERPs below the fold that indicates somebody was really unhappy, but they don't know why. That would be enough to keep me away...

Follow the Rules of Business

The restaurant owner, in this case, completely blew it. They violated several important rules of business:

• Never Take Business Advice From Your Lawyer. Your lawyer knows absolutely nothing about how to run a business. They went to law school and work in a law firm. That's about as far away from the business world as you can get. If you need advice on how to overcharge clients for working more hours than are in a day, then perhaps your lawyer is where to go. But for a PR situation, a lawyer is exactly the wrong person to call. The lawyer doesn't get to bill your hundreds of hours if you decide to just ignore something. Your lawyer wants you to outspend the other side with a big lawsuit. In the end, the only people that ever come out ahead in these situations are the lawyers. If you're fortunate enough to find a great lawyer like we have that understands the needs of a business, then you're fortunate. But most businesses are not, and they tend to defer to them.
• Make Love Not War. An angry customer is an opportunity, not a call to war. Some of your most fiercely loyal customers will be those people that started out with a complaint that you made right. Yes, there are some customers that are complete jerks that you just can't make happy, but you should at least give every customer a few chances.
• It Never Pays to Threaten Someone with a Megaphone. In this case the blogger just had a small following. But the lawyer didn't know that. It could have just as easily been a blogger with 40K+ subscribers. That simple cease and desist letter could have been plastered everywhere across the internet. As it is, the blog post is now below the fold when you Google for the restaurant's name. But if they had gotten someone who knew a little about SEO angry at them they could have ended up with a negative blog post outranking their city search listing (they don't have a site of their own).

A Better and Less Expensive Outcome

So this restaurant owner, who probably doesn't understand anything about Web 2.0 or that whole intarweb thing, probably spent $300 to have a big name law firm bully a blogger into taking down a negative post. Worse yet, the lawyer probably found the post by "policing their trademark". That's when you pay your lawyer $300/hour to Google your company name and send nastygrams to anyone that dares talk about you in a negative light. My guess is they lost several hundred customers because this guy has a pretty good local following.

Here's how it could have been done differently in a Web 2.0 approach. Instead of launching the sharks at the blogger, the restaurant owner could have engaged his customer and called or emailed him and said "I see that we didn't live up to your expectations. How about giving us another try, lunch is on us?" At the very least the blogger would now have a real human face to associate with the restaurant rather than an institution. He might very well have written another post along the lines of "Well, this food isn't my cup of tea, but the owners sure are nice people and a lot of people like this restaurant." Or better yet, the blogger might have had some valid criticisms that the restaurant could have addressed. That could easily have turned things around and they might have gotten good PR out of the situation. Instead of alienating several hundred people, they might have gained many new customers.

Whatever he did, using the lawyers wasn't the right move. It would have been much less expensive and effective to go comment on the blog and tell their own side of the story. They probably could have found a few dozen customers that would have done the same thing. If the blogger wouldn't move, the story could have become about how the blogger totally missed the point. Instead of a negative, they could have generated a big buzz for themselves.

Old and Busted or New Hotness

Their way cost them $300 lawyers fees and probably thousands in lost revenue. It's a very 1980s approach to business. It's like having your secretary print out your email so you can read it. The Web 2.0 way would have cost about $10 for the free lunch, and might have gained them several thousand in revenue from new customers.

Is your customer retention strategy Old and Busted or New Hotness? Your choice.

The otherwise very very smart Don Dodge posted this gem that gets some bits right:

I talked to a Facebook App developer at the ReMix conference. He told me his app is generating 300 million page views per month. Wow! Then I asked what kind of CPM (Cost Per Thousand) ad rates he was getting. He shrugged and said somewhere between $0.02 and $0.05 per thousand. That pencils out to between $6K and $15K of advertising revenue per month for those 300 million page views. Pretty good for a couple of young hacker/coders with very low overhead, but not the kind of business that commands million/billion dollar valuations.

Basic Assumptions

What I don't know about Facebook could fill Wembly Stadium with just enough room for a Flock reunion, so let's assume:

• This is app is at the median of the top 50 Facebook apps
• The actual income is at the top range of $15K/month
• The top app earns 10X what the bottom app earns and it's a smooth distribution

So, the total revenue for all 50 companies is around $12M a year.

No Money In the Ecosystem

Take these three data points:

• I have a friend who runs a three person shop that supports Cisco routers for a fairly large school system. He billed $3M last year. That is $600K/person.
• We work with a small Oracle outsourcing shop (5 guys in the US and 25 in India) that billed $7M last year. That is $230K/person, but if you cost average that by salary dollar the number is $700K/person.
• There was a local business paper article about a 12 person company that does custom Microsoft VP/Apps/whatever programming and just broke $7M in total revenue or $580K/person.

What's the point?

There is a LOT of money in the Cisco, Oracle, and Microsoft ecosytems. I'm sure all three of these remora companies are too small to even barely come to the notice of Microsoft/Oracle/Cisco.

If any of them were doing Facebook work they'd be #1 with a bullet.

But I bet the 25th largest Facebook Widget Maker can get some 1:1 time with whomever they choose.

Let's review: $12M/year in the Facebook ecosystem and, what, a couple billion for each of the big three? Hmm, well, there may be a network effect from the users of Facebook, but the outside world is starving to death.

Wiser Words

Let's parse one particular part:

Pretty good [$15K/month] for a couple of young hacker/coders with very low overhead, but...

It may sound good to make $15K/month, but that is only a buck eighty a year. Take 50% out to pay for taxes and basic health insurance and you're making $90K. Hope you don't have any hosting or other costs....

So, really, it's krep income, even when you come near the top.

Valuations

The next bit is even more interesting:

... not the kind of business that commands million/billion dollar valuations.

Good lord, Facebook is "worth" $15B to Microsoft and a host of other people and it's certainly going through money like this bubble will never pop.

Let's look at the valuations of our ecosystem companies for a second:

• Oracle - Market Cap=$112B, Rev=$20B, Operating Margin=34%
• Microsoft - Market Cap=$280B, Rev=$58B, Operating Margin=40%
  
• Cisco - Market Cap=146B, Rev=37B, Operating Margin=25%

(By the way, if you aren't impressed with a HARDWARE company like Cisco having a 25% operating margin, you should be.)

So, Facebook is worth 10% of Cisco or Oracle and 5% of Cisco? I think we know that is crazy talk. But if that is the talk, then why is Dan dissing the 300M page views of a Facebook widget maker? Isn't Facebook just a bigger aggregator of page views?

Do Some More Facebook Math

What did Zuckerberg have to say about Facebook revenue on a con call in January of this year:

Revenue for Facebook for 2007 will be $150 million, as has been widely reported. But for 2008, Zuckerberg projected revenue to be increased to $300 million to $350 million.

Currently they have 450 employees, so this year their revenue was $333K/employee, which is not bad.

Next year they plan to have 1,000 employees ... yes that keeps their revenue/employee pretty much flat.

Remember the 25th most popular widget maker pulling in $180K gross/year? He's not looking too stupid, relatively.

How does this math work again?

Summary

There aren't very many people making money adding value to Facebook, it monetizes it's users poorly, and management plans to ramp staff and keep revenue/employee flat this year.

I was reading a very sad, frank, and wise notice from Russell Beattie about the death of Mowser, his mobile browser project. I know, and you know, that most startups die young, the ones that don't mostly become zombies living on consulting, and the small remaining percentage are bought for peanuts by larger companies lusting after their IP and management team.

But it is still sad.

And before anyone misconstrues anything I am about to say, I've been there, so I am very sympathetic.

The Aftermath

I think Russell can say it better than I can:

Seriously... A salary will be a good thing to have again. I'm *thousands* of dollars in debt to my family and friends, maxed out on every credit card (all of which are in collections), on my last chance for my apartment (if I bounce one more check...), had my car repossessed *twice*, electricity turned off, cellphones switched off, landline canceled outright, and on more than one occasion (this weekend in particular) eaten little more than buttered macaroni as I waited for an overdue PayPal deposit to arrive (3-4 days? Come on!). Having a steady income will be a welcome mental break, believe me.

So, here's the thing, did he make a mistake or, even in hindsight, was this the right way to fund his company?

VC or Credit Card Debt

Well, that's the question, unless you're Guy and have been rich and famous for so long you forget why.

There is no answer. I know that's all very Yoda, but there it is.

The Third Way

Jeff Bezos is supposed to have sat down and gone through all the different items that could plausibly be purchased via the internet (pet food: no) and settled on books.

My last startup we went though a host of things we could startup that had serious FY money potential and that could be started while we were still consulting and earning our basic dough.

You see, we'd both done it the VC way and the credit card way and, since we didn't like the outcome of either, we went for the third way.

India

If I wanted to start a company without going into debt and without selling my soul to a VC, I'd go live in India and insource my project. 

A good mid-level manager who was willing to move to India could easily make $50K USD, which is the equivalent of $400K in SFO.

Take your partner with you, share an inexpensive room. You now have $70K to play with to hire technical people.

Which, in the good old US of A might get you a semi-palatable Flash programmer, but in India one can get a very good technical programmer for $15K.

Bootstrap four or five good programmers and be there to supervise them.

Plus, should things go badly, as they likely will, you now have an impressive resume to take home to the US.

You can rinse and repeat this process in China or Vietnam if you like, but I prefer curry to eel.

Keep A Stiff Upper Lip

Personal advice to Russell and everyone else swimming in the dead pool - it's all very survivable, and likely you'll take another run at the brass ring. I did, and I believe you can catch it if you work hard enough.

I am not a big fan of "top 10" lists because my teeny tiny dinosaur brain can only remember two or three of the points, which makes me feel like I'm treading water watching eveyone else evolve their way ashore and I've left my proto-feet behind somewhere. But someone recently sent me this ancient (1994 era) email that had Bonnie McElveen-Hunter's:

The Ten Commandments For Failure

• Thou Shalt Have Little Faith
• Thou Shalt Pick Thy Partners with Wanton Abandon
• Thou Shalt Make the Quick Buck
• Thou Shalt Have No Enthusiasm
• Thou Shalt Seek Easy Street
• Thou Shalt Do It Alone
• Thou Shalt Not Be Accountable
• Thou Shalt Have No Sense of Humor
• Thou Shalt Give Nothing Back
• Thou Shalt Believe Failure is Final

Wow, there is a lot in there, but let me divide this into three piles and then I'll pick the three that I need to remind myself to remember!

No Brainers for Business Success

I think that a few of these jump out at me as being really important and obvious:

• Thou Shalt Hav No Sense of Humor
• Thou Shalt Believe Failure is Final
• Thou Shalt Not Be Accountable
• Thou Shalt Do It Alone

Anyone out there who is overly serious, self-important, arrogant, and the Lone Ranger? You are so headed for a fall. I know guys like Steve Jobs like to be the famous front man, but it's not like he's actually designed or built or programmed anything that was famous. Sure, he makes decisions and micromanges and drives people to nervous breakdowns, wait, dang, don't work for him - it's a trap!

An Embarassment of Riches

But some of these are things that most startups have too much of, not a dearth:

• Thou Shalt Have Little Faith
• Thou Shalt Have No Enthusiasm
• Thou Shalt Make the Quick Buck

Have you ever seen a zombie startup that is running on denial, manic positivism and leaping from the last big thing to the next big thing? Uh, huh, you sure have and so have I. It's hard to write off your dream, but sometimes you just have to move on.

Remember these Three Rules for Success

I liked these a lot, not because I don't "know" it already, but because it's good to be reminded of important ideals in a new way:

• Thou Shalt Pick Thy Partners with Wanton Abandon
• Thou Shalt Give Nothing Back
• Thou Shalt Seek Easy Street

Now these, these are good.

When you're decideing on people to hire or companies to partner up with, take a deep breath, You've got to live with those people for a long time. Read our A Managers Hire A People article - it distills down 40 years of hiring experience in high tech.

And when things are going well you need to help someone else prime the pump. Take on an intern, pick an office charity, free your people up to do service work.

Finally, if what you're doing seems easy, well, you're probably about to step into an open manhole cover. Time to do some risk management!

Today's article at Bruce Clay was about avoiding a PR nightmare. He rightly suggests that the easiest way is to be smart and not get into one in the first place, which is easy advice, but then he knocks one out of the park by giving a 1-2 punch to the most human of impulses, retaliation:

1. Refrain from personal attacks. At all costs. There are no exceptions.
2. Refrain from responding to personal attacks. At all costs. There are no exceptions.

Not content to summarize a Dali Lamaesque ("We are not anti-China, we are pro-Tibet" - how clean is that?) truth clearly, he goes on to give you a good physical marker you can use to guide yourself:

As a general rule, if your hands are shaking after you have finished typing out your five page rebuttal to their argument, DO NOT PRESS PUBLISH.

Perfect.

Politics

Not the politics of the personal, which is what the above is all about, but the politics of, er, politics. For example, I was using Brian Schaler's Digg Status tool and got an interesting error message.

I'm not sure if he's kidding about how people complain about Bush on Digg or is encouraging people to complain about Bush on Digg.

It doesn't matter, but the possibility of offending a large number of people is certainly present.

Around here we have the usual mix of big-L and little-l libertarians, democrats, liberals, conservatives, and republicans. I think we even have a communist and an economist. But our ironclad rule is:

1. No politics while you're representing the company

If a client brings up politics we are polite (no matter how much we agree or thing he's crazy) and move right along.

I have an English friend (nu-Labor if you follow that stuff) who finds American's willingness to talk politics at work with customers appalling. I think I agree with him.