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Currently, when one sets ad rotation to “rotate evenly,” Google serves up the ads roughly evenly, regardless of click-through rate. This even rotation is useful for A/B testing of ads with different copy by the same landing page. After you’ve gathered enough enough traffic against the ads, the one with the higher CTR is the new A ad, and the one with the lower CTR is the new B ad, and you can start testing ad copy anew.

The enhancement to ad rotation will automatically optimize ad serving for clicks after 30 days, and, even though the ad rotation is set at the campaign level, the 30 days will be tracked at the ad group level. The clock is reset whenever an ad in the ad group changes.

Assuming 30 days provides enough meaningful data for your A/B test, this feature is a nice improvement, because it will automatically start serving up the more effective ad, as measured by CTR, after 30 days, just in case you forget.

However, one improvement this new improvement could use would be to allow the campaign manager to control the automatic switchover by something other than 30 days, say, by amount of total impressions or clicks in the ad group. For some low-volume, ad groups, 30 days may not be enough time to gather enough meaningful data for an A/B test; for high-volume ad groups, 30 days may be too long.

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The bill became effective as soon as the President signed it into law, but many provisions—especially those that allow so-called “non-accredited” investors to buy stock in startup ventures (more about that in a few paragraphs)—will wait until early next year and SEC regulatory rule making to be completed before they will open up to practical fundraising.

So what can a founder do right now?

• Read the JOBS ACT and obtain competent legal and accounting advice before doing anything. In the spirit of full disclosure, the following suggestions are my personal observations, not a substitute for legal or accountancy counsel:
• Understand that the JOBS Act applies to emerging growth companies that had total annual gross revenues of less than $1 Billion and that cap will increase due to adjustments for inflation over time. So no problem for startups there (at least for the first few years…
• Upon election, the Act also reduces SEC obligations and key compliance requirements pertaining to shareholder actions, FASB accounting standards, financial disclousres, audits, and Sarbanes-Oxley provisions. So simpler and fewer filings of costly reports and less oversight. All good so far.

What becomes most interesting to startup founders, of course, is Section 301, the ‘‘Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012’’ or crowdfunding provisions when raising equity of $1 million or less. This is the section of the Act that permits shareholder numbers to increase from the prior 50 maximum to 2,000 persons (or 500 persons who are not accredited investors. So watch for those SEC rules to emerge in early 2013—possibly as early as January—when the field of potential investors no longer applies to those meeting the SEC’s accredited investor definition.

On July 4, 2012, however, founders may take advantage of the Act’s provisions to increase their investor numbers from the pool of accredited investors, making it easier to fund a startup using crowdsourcing methodologies and paring the amount necessary from each investor.

So, just who are these accredited investors? Here’s my paraphrased summary of the SEC’s definition:

An “Accredited Investor” is a natural person (not a corporation or other legal entity) with a net worth of at least $1,000,000, excluding, however, the person’s primary residence. The net worth calculation does not include indebtedness secured by the person’s primary residence, unless that residence is underwater (the residence’s mortgage is greater than fair market value of the residence).

In the San Francisco Bay Area and Silicon Valley, the SEC definition encompasses a fairly broad pool of potential investors; your jurisdiction may vary.

Let the crowdfunding begin.

Robert Dolezal, Consultiq’s CEO

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David and I looked at one another, then asked, “No. We meant, what did they think of your price and offer to enter beta as your partner?” Silence ensued. Crickets chirped.

David and I have had this conversation several times before. It used to be uncomfortable and, in the past, we frequently talked around the issue for awhile before addressing it. Now, we’ve become more direct.

It turns out that the customer wasn’t really clear what they were paying for, what it cost, and what the set-up charges would be if they said yes.

With a few more questions, we learned that they asked our founder about each of these things, but he was more comfortable talking about his software’s advantages and features, so discussion of the three most important questions a customer can ask went begging. These were buying signals—and they were ignored.

Unlike his customer, we bored into our founder and uncovered some uncomfortable facts. With respect to how the sale was structured, he had never considered it from the customer’s point of view. On price, he was thinking his cost plus an adder, not a value proposition vis-a-vis his competition. And he really had never considered how the venture would respond to requests for custom installation or set-up costs.

People, people, people! This is your business, for heaven’s sake. You can’t let yourself be defined by your customers or competitors any more than a presidential candidate can allow the opposite party to define him or her. This is important, up-front work. If you haven’t done it before, it’s a poor time to improvise or try to read an ebook or search-engine link about it.

Businesses stand on three legs, like a stool. The first is technology (product development). The second is Marketing/Sales (Revenue volume and profit). The third depends on the type of business you are running: it can be distribution, manufacturing, or customer relationships—for our client founder, it was distribution. You need a plan for all three areas, and you need it before your first customer pitch meetings. You can’t wing it when it comes to marketing/sales or distribution any more than you can assume that your technology will take care of itself.

And, right now, our founder has some decisions to make:

1. Who is my customer?

2. What does my customer need that my product’s features satisify?

3. How does my solution stack up against my competitors?

4. What price should my product have?

5. How will I sell it?

6. What does a successful sale look like?

7. How will I provide service after the sale, and how much?

8. What features should I add first to make my product (a) more valuable to my customers and (b) more competitive?

There’s a few dozen more. But answering those right now—before the next meeting with a would-be beta partner—is a good bet for improving our founder’s outcome.

Consultiq helps our clients by anticipating these challenges, explaining the process for answering important questions, and helping our clients move their ventures foreward.

Everyone can’t be good at everything. Sometimes, it’s valuable to recognize where we need more strength and reach out for a helping hand.

Robert Dolezal, Consultiq’s CEO

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The winner, announced last night at the Berkeley campus, Calcula Technologies, has created a treatment for kidney stones that are smaller than 10mm in size; current therapies are indicated for stones larger than that. Calcula’s therapy can be provided in a doctor’s office.

The company hopes the win will enable it to raise a seed round to continue development and trials.

Buzz Bonneau of the Calcula team said, “We are really excited to have the money to complete an in-vivo study of our device next month. We hope the results of this study will help us raise a seed round to get to first in man with our technology. We truly believe Calcula’s technology will help 1.5 million kidney stone patients avoid six weeks of the worst pain of their lives.”

The final round of competition was judged by Carl Amdahl, DCM, Garry Little, Morgenthaler Ventures, Brian Monahan, MAGNAGLOBAL Intelligence Practice, John Steuart, Claremont Creek Ventures and Sven Strohband, Mohr Davidow Ventures.

Clcula Technologies: David Gal, Buzz bonneau, Dan Azagury, MD, Kate Garrett (UC Berkeley Haas School of Business)

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The recent decision of the U.S. Justice Department to file a criminal complaint against five publishers and Apple Corporation demonstrates the degree to which our supposedly free-market system has been stretched beyond recognition.

Long unique in the world of commerce, books were sold by publishers to retailers on a fully returnable basis to ensure that supply met demand when titles were first released—the practice elsewhere was limited to consignment sales. This, over time, indemnified retailers from their buying decisions—they were free to buy in as much inventory as they needed in case a hoard of customers appeared—and the publishers clucked and frowned because they frequently overprinted books and had to eat the excess inventory that was return unsold and, frequently,  unsaleable.

Many publishers sought to convert their customers to the more familiar model of final sales—you buy it, Mr. Retailer, and you own it. Others tried hybrid approaches, like “remainder in place,” a euphemism for deep discounting overstock inventory rather than shipping it back to the publisher. Over time, the number of retail outlets dwindled to a few major bookstore chains and a small and quickly shrinking cloud of independent bookstores.

As buying and display became concentrated in a few hands, the retailer became king, dictating what price and terms they would accept to stock and sell a publisher’s books. “Meet my demands,” they said. “Pay me for premium locations in my store,” they demanded. And, faced with a boycott against their merchandise, most publishers caved in and met the demands of the retailers. Grumbling grew louder on the publisher side and, incidentally, on the creative author side as well—authors watched with alarm as marketing and advertising budgets disappeared into low-net pricing, advances tumbled, and royalties were reduced.

Along comes the Internet retailer, and this shaky industry was rocked to its core. In a short decade, publishers and authors served a new master, Amazon.com. Add the inequity of eBooks, and you have concentrated in a single company monopoly powers to dictate terms and pricing on a take-it-or-leave-it basis that serves no public well.

Books became loss-leaders to entice customers into buying other wares, sold below cost, and Amazon gained market share. For eBooks, it’s said, they had over 80% of the entire market. Publishers and authors had a choice of one for selling their books to consumers online—and edicts from the monopolist quickly followed, stripping authors of their copyright protections, publishers of their profit, and the public of quality literature and non-fiction books.

Where was the DOJ when all this was taking place? Applauding—Democratic and Republican administrations alike sat on the sidelines watching a wholesale dismantling of main street and intellectual property in an industry central to our civilization.

There’s no doubt that Apple’s founder looked down at this mess with disdain, having observed the carnage of the music business precede it. He took a different model, the one used for newspapers and magazines, and said to the publishers, we’ll sell your books for a commission. We’ll ask a sales commission of 30% of whatever price you set for your merchandise. It’s the identical model you see in auto retailing and in scores of other industries. It works because costs and profits become predictable, and no one has enough market share to dictate or write edicts. If someone wants to compete on price, they change the commission rate—there’s nothing to stop Amazon from offering publishers 50% of the price of the merchandise…or 10%…as they compete with Apple or other retailers.

As I understand what happened, Apple approached the various publishers individually, making their case for a net agency business model for eBooks. A number of publishers looked at their offer and saw its obvious advantages, and accepted the offer. It’s even possible some publishers asked one another whether Apple had come to them, and what they said. Other publishers sought Apple out. The marketplace was free and working.

In a matter of a couple of short years, Amazon’s market share for eBooks dropped from a monopolistic 80+ per cent to somewhere near 60 per cent. Competition thrived. A variety of commission rates existed between various online retailers and publishers.

Then the shoe dropped, first at the European Union (which deplores free market economics) and then in the Obama Administrations’s Department of Justice. Stern warnings—the carrot—and promised punishment—the stick—were offered in outstretched hands. Amazon chortled.

We’ll see where this dust settles in a few years. But I am not comforted by watching an industry that I was part of for over three decades dismantled and handed over wholesale in a governmental bet on winners and losers by edict and threat of penal power. Equality? The consumer losing?

What loss will it be when quality literature ceases to exist, completely vetted for accuracy by the costly effort of fact-checkers, editors, and authors? Think it can’t happen? Who will write (or edit, or fact-check) when they can’t make a living wage because their wares are discounted so deep that their labor no longer rewards them for their work?

Government is increasing becoming the “visible hand” of our economy, stifling competition and innovative solutions to thorny problems in the name of serving the public. I, for one, long for the day in which the invisible hand of the market drove my decisions to produce or not produce.

Robert Dolezal—Consultiq’s CEO

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Read my full article here.

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When 108 Silicon Valley, Seattle, and Los Angeles capital transactions were reviewed in 2010-2011, it  provided some seed funding data that will give those founders a better understanding of the dealflow that was actually taking place in the recent past. The survey points out that important aspects of the seed financing picture is changing. Besides that change, it’s also growing at a rapid clip—news that many claim to want to hear:

• Dow Jones VentureSource (“VentureSource”) reports that venture capital seed round investments grew 52% in 2011 from 2010.
• VentureSource says that 500 Startups, SV Angel, and First Round Capital dominated seed rounds in Silicon Valley in 2011′s 4th quarter.

Looking back from the perspective 18 months gives us regarding post-seed investment at 52 startups sureyed in 2010, here’s their current status:

• 45% raised a VC first or first and subsequent round
• 12% raised more seed funding
• 12% were acquired
• 4% quit
• 21% were still operating but had not raised additional funding
• 6% fell into the categories of other or non-responsive

What was different in 2011 compared to the prior year?

• Seed funding using convertible notes increased 10% while use of preferred stock went down the same amount
• The median amount raised in convertible note deals jumped 51% year-to-year, while the median for preferred stock transactions remained flat—now, both are at roughly $1 million. Respectively, pre-money valuations for convertable note-based transactionsincreased $3.5 million (all transactions) compared to $0.6 million (Internet/digital media) to $0.8 million (software) for preferred stock-based transactions.
• For the convertible note deals, the percentage of notes that convert at discount to the next round’s valuation rose 16% to 83%

Most of these trends—with the notable exception of discount provisions for conversion—are generally believed to be more beneficial to entrepreneurs and may alternatively reflect either greater competition facing investors as they deal shop for the best opportunities or a generally higher-quality and more effective group of founders exercising their negotiation skills.

Some other highlights:

• The number of 2011 deals in the general category of Internet/Digital Media grew 4% to 75%, while software startups dropped 4% to 25% compared to 2010. It’s my personal opinion that most software development startups have become very capital efficient—many don’t raise early seed rounds at all but instead head straight to market tests of their low-cost apps and application software to generate working funds.
• Round leaders continued to be Seed Funds (up 3%), while deals led by professional angels dropped a few points and VC Funds stayed essentially flat.
• Amounts invested by leader category were lowest for professional angels, rising for Seed Funds, and highest for VC Funds.

What’s the take-home for startup entrepreneurs? Should they try to raise a seed round?

Those seeking a median $1 million seed round with each investor putting up a stake in the range of $150-250K will probably face a round leader that is a professional angel with more than a few notches on his or her belt. By comparison, those raising $400-500K per investor should identify Seed Funds or early VC Funds to lead their rounds.

Robert Dolezal is CEO of Consultq and is Program Chair of SVForum’s East Bay Series, a monthly educational program for entrepreneurs who work, live, or transit through the East Bay.

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“Valentine’s Day and the Super Bowl seemed to be the driving forces behind much of the online activity
in February as Americans browsed romantic gifts and checked out Super Bowl advertisers’ websites,
especially auto makers,” said Jeff Hackett, executive vice president of comScore. “In addition, Tax sites posted another month of gains as the filing deadline drew nearer.”

Web visitors streamed to flowers, gifts and greetings sites in early February, sparking a 28 percent rise in traffic for the category to 29.3 million visitors. Traffic to ProFlowers.com raced up 394 percent to the number one slot, with 5.4 million visitors.

Television advertising during the Super Bowl drove traffic to auto maker sites; more than 27 million people visited the website of some auto manufacturer or another, posting a gain for the category of 17 percent over January.

Among specific auto makers, Toyota came in number one with 6.4 million visitors, up 20 percent.

For all the numbers, visit comScore’s website.

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