MochaTalk

I am very pleased to announce that Livemocha recently closed a $6 million in funding led by Maveron, a leading Seattle area venture capital firm. Maveron was founded by Howard Schultz, CEO of Starbucks and Dan Levitan in 1998 and has tremendous consumer and e-learning expertise that we hope to leverage. Maveron was also an investor in Capella University, a leader in the online education space.The irony of a Howard Schultz led venture firm investing in “Livemocha” is also not lost on us. Like Starbucks, we hope to create the premier international brand in multi-cultural language learning. The Starbucks phenomena is an extra-ordinary story and we hope to apply the many innovative strategies that Howard Schultz utilized to create an unparalleled experience for Livemocha users.

Maveron’s investment in Livemocha is, we believe, testimony to the tremendous opportunity offered by the language learning market. Based on various research reports that I have seen, this is a market that is well over $20 billion in size with over 350 million people all over the globe learning a variety of different languages. In many countries, people can double their income by learning English because they can get more attractive jobs in industry. And the need has become even stronger given increasing trends towards globalization, immigration and travel. The time is also ripe for a compelling online language solution given the widespread adoption of broadband internet access, VOIP and social networking technologies.

In the 3 months since our launch at the end of Sept 2007, we have seen a tremendous reception to the Livemocha concept. To date, we have signed up over 130,000 registered users on our site from over 200 countries all over the world. The amount of daily activity and interaction on our site has grown by leaps and bounds generating over 25 million page views a month. As a result, our Alexa rank has climbed quickly to between 5000 and 6000. In fact, in many countries, we are in the top 1000 sites. This type of interest shows that people are clearly hungry for to learn a variety of different languages and are looking for ways to build their language proficiency skills by practicing with other native language users.

There’s a lot of exciting work ahead of us to add more languages, make the site more fun and engaging and to continue to build a stronger global community. With the new funding round, we now have the ability to hire more engineering resources to further accelerate our product development plans. Stay tuned for more exciting developments over the coming months!

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Yesterday, John Cook from the Seattle PI posted an article in his blog about the Top Seattle Startups. It noted that Livemocha was the biggest mover in the list from last month. This is very exciting to see. However, the list is based on a 3 month average and we launched only at the end of last month. If you look at the weekly average (see screen shot below from Alexa), you will see that we are already in the top 10 sites. This is just one month after launch. What’s also great is the user interest that we are seeing from users all over the world. You will notice that we have also become a highly ranked site in a number of different countries. We now have users from over 140 countries. This is exactly what we wanted to see — a crucial part of our strategy is to build the world’s largest community of language learners and we are now making significant progress towards achieving that goal.

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Livemocha launched last week at DEMOfall in San Diego. Demo is a premier conference with a great reputation for showcasing the latest startup technology. You get essentially 6 minutes to make a brief yet compelling pitch to the audience which consists primarily of press, VCs and established companies like Microsoft, Qualcomm etc. who are hunting for promising new technologies. It took an amazing amount of time and numerous re-writes to put this together but the end result I think was pretty good (well, maybe you be the judge). We kicked off the demo with a video clip from one of my favorite movies “Lost in Translation”. There’s this classic scene where Bill Murray is filming a video for Santuri Time Whiskey and is getting harangued by the director who is speaking to him Japanese. But the only scraps of translation that he gets from the interpreter is “He wants you turn and look in camera”. We used this video to illustrate in a funny way the increasing importance of acquiring foreign language proficiency in this increasingly global world that we live in. Here’s a link to our DEMO presentation so you can see how it all came together.

DEMO turned out to be a great event for us. We were featured as one of the top 5 applications on Day 1 of demo. We also got a great press coverage in a number of major publications and blogs such as USA Today, Seattle Post-Intelligencer, Webware, VentureBeat, Mashable etc. What’s great is that these stories were then picked up by a large number of bloggers who then wrote about Livemocha as well. It is truly amazing how the PR game has changed since I did the PR launch for TeamOn in 2000. At that time, the only coverage you could hope for was the coverage that you got from the major print and online publications. However, it was very difficult to create the kind of “buzz” that you can get today in the blogosphere without much proactive effort on your part.

Thanks to all the PR and blog coverage, we have had a great first 2 weeks in terms of registrations. What’s amazing is that 60% of our users are coming from overseas which is exactly what we were hoping for. Some of our biggest countries include Germany, Brazil, Spain, Portugal, Canada and the UK. Clearly, there’s a real demand for foreign language learning all over the world. The other interesting data point is the high level of engagement of our users. People are spending a significant amount of time on our site and submitting a large number of exercises (writing and speaking) for review by others and getting helpful feedback from native language speakers.

While we have a lot of work still ahead of us to continue to improve the site and make it even more relevant and useful to our users, it has been very gratifying to get a number of kudos from our users:

• Just wanted to let you know, this is the most valuable website I’ve ever used. It’s just phenomenal! (Fargo, ND, USA.)
• Hi! First I’d like to say…amazing site! …that said, I’d like to request adding Finnish to your languages list. Personally, I’m a native speaker and wouldn’t mind this being known to anyone who might want to learn the language. (Finland)
• I’m so excited about Livemocha. I’m an experienced Italian and Spanish native speaker and teacher. I’ve been traveling to many countries around the world and, due to my huge interest in knowing people and other cultures, I needed and loved to learn the most important way to human knowledge: language. In my case I speak five foreign languages that allows me to share feelings, emotions, thoughts, dreams and information with fantastic people all around the globe. The way I learned English, Portuguese ( fluently ) and Romanian, French ( elementar ) is quite simple: 1) motivation and will to communicate with interesting people 2) massive listening to, talking to, reading and asking for native speaker’s help 3) I found wonderful people to patiently teach me. With such experience, I started to teach what I knew to others and now with Livemocha this will be fun and easy.(Marconisida, Italy)

Thanks for all your feedback! We are carefully noting the feedback that a number of you have provided and our team is working hard to incorporate your suggestions as quickly as possible.

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After many months of hard work, the time has come to unveil the fruits of our labor. Welcome to Livemocha — we are building the world’s largest community of language learners. The language learning market is a huge worldwide market growing rapidly due to macro economic trends such as globalization, immigration and travel. We estimate the market to be more than $20 billion in size with emerging economies like China and South Korea spending billions of dollars on English and foreign language training.

English, of course, remains the number one language for international communication. According to the British Council, the number of English language learners is going to soar to 2 billion people in the next 10 to 15 years. However, with globalization, there’s been a significant interest in learning other languages. French and German have always been popular languages but now Spanish, Chinese and Hindi are in demand as well due to the growing economic role of regions/countries where these languages are spoken.

While the market for language learning is growing rapidly in the new millennium, the existing self help tools on the market have remain stuck in the 90s relying on outdated CD ROM technology. As I have written in my previous blog post (Taking advantage of Platform Shifts), platform shifts such as the shift to internet computing and now to Web 2.0, provide the perfect opportunity for new companies to displace the existing incumbents by being the first to embrace the new platform. It is time to create such a platform shift in the language learning market.

How is Livemocha different? When we designed Livemocha, we built it on the beliefs that:
1. People want to communicate with and integrate into cultures; they don’t want to be linguists.
2. Most of us are capable of learning a second language and it can be a lot of fun, but it takes time and commitment. Having a learning environment that provides strong motivation is critical to success.
3. Self-study provides the basics, but to truly become fluent, you need to have on-going real life conversations with native language speakers.

We believe that we have built a strong foundation for an effective and engaging language-learning solution. It is a system designed from the learners point of view since we are language learners ourselves. Unlike other language learning systems on the market, we don’t make outlandish marketing promises to teach you a language in 30 days or some such guarantee. However, we do believe that through our unique motivational system and the support of the community that you will make significantly greater progress in achieving greater conversational proficiency than you have experienced before with other self help tools. Here are some of the key element of the Livemocha learning system.

1. Over 160 hours of beginner and intermediate self-study lesson content covering 6 of the world’s most-spoken languages (English, Spanish, French, German, Mandarin Chinese and Hindi). The content is presented in an immersive, engaging and game like fashion through careful sequenced set of images associated with text and audio. The user is challenged to deduce the meaning of the words and phrases that they see in each lesson. We provide a range of reading, listening, writing and speaking exercises to test your knowledge and understanding of the lesson content.

2. A social network that brings together a community of like-minded language learners from all over the world. The community runs deep throughout the application. For example, we allow members to augment lesson content with grammar tips, alternate phrases and colloquialisms so that learners can get a much richer understanding of how a specific language is spoken in various parts of the world. We have also provided a number of structured writing, speaking and conversation exercises and tools where they can get help from native speakers. For example, when you make submission for a writing exercise, native language speakers in the community get automatically notified so that they can comment on it and provide feedback. We encourage you, of course, to return the favor by leveraging your native language proficiency to review someone else’s exercise. Finally, we provide conversation exercises and a text,audio, video chat tool to practice your speaking skills with other native language speakers on the Livemocha network.

3. A motivational framework to keep language-learners engaged and making progress. Having a community has allowed us to offer some truly compelling motivational tools. First, we organize each course so that it takes roughly a trimester to complete. We assign lessons and exercises that you need to complete each week and tell you where you are behind. Of course, you are free to proceed at your own pace but you will make the most progress if you stick to the schedule that we recommend. We also let you create your “study buddy” system by inviting other learners to join you in your learning process. As they make progress in completing their lessons and exercises, you get notified through a Facebook like news feed. This way not only can you provide feedback on each other’s exercises (or benefit from feedback they have received) but it also likely will provide the extra nudge that you may need from time to time. Finally, there’s a fun competitive element in the form of a Leader Board that tells you how you are doing versus other learners taking the same course.

The Livemocha service is open now to any user interested in learning language. Please come and join us in our language cafe. Do send us your feedback - there’s a feedback link on the top of each page. We plan to carefully listen to feedback from our users and continue to make improvements to make the learning process fun, engaging and fulfilling.

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A number of people have been asking me lately about when they can expect to see LiveMocha in action. I am very pleased to say that we have now entered a “closed” beta phase of our launch. Our team has done an amazing amount of work to get to this stage in just a matter of 5 months and its great to finally unveil the fruits of their hard work. To participate in this beta, please click on the beta link here and enter your e-mail address — we will contact you soon.

I am also pleased to say that we have been selected to demonstrate our offering at the DemoFall conference in San Diego from September 24 to 26th. Demo is a premier conference with a great reputation for showcasing the latest startup technology. Many companies such as Skype, Salesforce.com, VMWare (which had an amaziing IPO recently), have gotten their start at Demo. Demo will be the launch event for our offering and we will make the site open to everyone at that time. If you are a press person and are interested in getting more information, you can e-mail us at press@livemocha.com. We started LiveMocha to ride one of the greatest macro economic trends of our time – globalization. According to Goldman Sachs, by 2025, the BRIC economies will account for more than half the GDP of the G6 economies and by 2050, they will be larger than all the G6 economies. Along with globalization, we have seen a tremendous boom in immigration and travel between various countries. In 2000, over 95 million people immigrated to other countries. International arrivals are projected to grow from 694 million to 1.6 billion by 2020 with East Asia and the Pacific expected to record the highest growth rates.

Globalization has created a tremendous need for people throughout the world to better understand and interact with each other. We have identified a multi-billion dollar market worldwide that is being under served right now by the current incumbents who have demonstrated very little innovation over the past decade. In fact, none of them have really embraced the web in any significant fashion, let alone Web 2.0 and Social Networking.

Like many other Web 2.0 companies, we believe we can disrupt the market and deliver significant new value by leveraging the latest trends in social networking to connect people in new and exciting ways and leverage their collective intelligence. As I have written in my previous blog post (Taking advantage of Platform Shifts), platform shifts such as the shift to internet computing and now to Web 2.0, provide the perfect opportunity for new companies to displace the existing incumbents by being the first to embrace the new platform. Often times, the current market leaders will dismiss the new platform as a passing fad but more importantly, they have an existing business model to protect that makes it impossible for them to adopt the change. By the time they realize what’s hit them, it’s too late because the new players have established the network effects making it difficult for copycat efforts to catch up.

Let the games begin!

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Since we started LiveMocha, I am often asked whether we are getting our software development done in India. People are generally surprised to find out that, in fact, all of our software development is done right here in Bellevue, WA. I guess given the fact that I am of Indian origin and outsourcing has become a very common strategy people expect that it would have been quite natural for me to have done the same with LiveMocha. However, it was a very conscious strategy, even while fairly expensive, to do all of the software development in the US. Starup companies like Like.com that established an office in India have recently shut down their office there and have moved their software development operations back to the US (see a recent WSJ article Some in Silicon Valley
Begin to Sour on India and the blog by Munjal Shah, CEO of Like.com Episode 26 - India grows up). As these articles point out, while the average cost of software development resources still remains significantly lower that experienced developers in India can now command 75% of the salary of a US developer. There are also many other issues in you face in working with an outsourced team that I will touch upon here.

There are several reasons why doing software development for a startup makes more sense in the US. Today time to market with a kick-ass product offering has become even more critical. If you have an interesting idea, you have to get your idea developed and launched into the market in no more than 6 months. Very likely, someone else has a similar idea and even a few months head start can give you perception of market leadership and allow you to quickly build network effects before someone else does. Also, there is no better way to prioritize features than to get your offering into the market and see how real users are using your product. Doing rapid software development in another country (India or otherwise) across a 12 hour time difference is just too difficult even if the costs are significantly lower. Anyone who has worked in a startup knows that development process is very fluid — you are not likely to find detailed specs and even if the specs are fairly detailed, things change very quickly as you exchange ideas with your team members or learn more about your market.

With an outsourced team in another country, it can be extremely challenging to get across the vision of your offering — the only communication medium you have are documents and phone calls. Besides the communication issues, there’s also the issue of market understanding/appreciation. Your team here is much more likely to understand the vision and direction that you are headed in vs a team in another country where people may not be exposed to the latest trends and offerings. More importantly, your team here will have lots of great ideas to make the original offering significantly better because they are living and breathing the vision and strategy everyday. The daily give and take of ideas that you experience with a close knit team is simply too difficult to achieve with a geographically dispersed one.

Working across a 12 hour time difference can also be extremely challenging and inefficient. As Munjal Shah points out in his blog, it means that your group over here has to work late into the night to be able to have live conversations with the outsourced development team which can be difficult to achieve on a sustained basis. Even with the live conversations, the outsourced team often times cannot quickly get their questions answered and have to wait until the next day which can significantly affect productivity and motivation. Over here, our developers simply have to look over their shoulders to talk to our Product Manager to get their questions answered about the feature they are building.

Perhaps the most important issue to consider is the quality and the cohesiveness of your startup team. The team that you hire initially sets the tone for how the company evolves. If you are lucky enough to hire a bright, highly motivated and hard working experienced team, as I have, it sets the tone for the culture of the company and who your team hires as the company grows. It just too difficult to establish an A+ team and create the right set of dynamics if you relying entirely (or even partly) on doing the development in another country.

Now, I will admit that our strategy of building a team in the US was possible primarily because we had sufficient funding to hire developers in the US. You may, however, be operating on a much more constrained budget so you may not have a choice but to seek out less expensive development resources. If you do decide to outsource development, make sure that you interview every developer who has been assigned to your team. Don’t make the assumption even if you retain an InfoSys or a Wipro that you necessarily getting the best resources since they are all desperately hiring developers (experienced or otherwise) at a furious pace to meet their growth objectives. They simply don’t have the depth of resources to staff your team with developers with the experience that you are used to in the US.

There will also be times where an outsourced team will have a specific expertise that you lack in which case it may make sense to retain their services. One of the companies that I had invested in had a need to port and test their mobile application to variety of handsets. I did encourage them to consider hiring a company in India that had done this for a number of mobile developers in India. I felt it would be much more cost effective and faster path for development to hire the services of this firm than to try to do this on their own. Of course, all of their core mobile development was still being done in the US.

I would be interested in hearing from others on the strategies that they have employed in getting their startup off the ground (or from those who have worked at startups) and how well an outsourced strategy has worked for them. Let me know.

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April was a month of great progress. We added 3 additional team members to our team reaching a total strength of 7 people. One more person will be joining us in early May. We have folks from a great array of companies including Microsoft, RIM, Opsware, Revenue Science and Amazon.

Development is well under way this month. We have a development milestone every 2 weeks with the team giving a demo on what they have completed. It was great to see the quick progress our team was able to make and demonstrate the major pieces of the functionality. We also made great headway in building the overall UI for the site and are actively looking for a great web design firm to make UI even more compelling and easy to use.

On the funding front, the news about the launch of our company allowed us to attract attention from a number of prominent investors. While we were not looking to raise additional funds in the short term, we decided to take in some additional funding to give ourselves more flexibility with our launch plans and resources. In a matter of a few weeks, we closed funding from a number of very prominent angels including some from the VC community who have invested their own personal funds in the company. The additional funds has allowed us to add more development resources as well as expand the scope of our initial offering. In addition, our investors will be very helpful in making introductions to top tier VC firms both in Pacific NW and the Bay area.

Another item of note is the coverage we received in the Washington CEO magazine. The article will be in the May issue of the magazine and covers our company along with 2 other Seattle area start ups (Zoodango and Mixxer).

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We got off to a great start in March! We moved into our office space on March 1st and did some intense recruiting. Our office is located in downtown Bellevue with easy access from 405 and 520. There are number of good restaurants close by and Whole Foods is within walking distance. Here are some pictures of our office and our team including our first champagne toast to celebrate the opening of our new office.

It is amazing how recruiting has changed these days. Being a startup, we didn’t want to spend money on expensive recruiters. We advertised on a number of sites including Craigslist, Monster, Jobster, Seattle Times Online, a number of PHP and Java bulletin boards. We also used LinkedIn to reach out to software developers with strong resumes at leading web companies in the Seattle area. And, of course, we tapped our friends and former colleagues for referrals. Referrals from friends are, of course, ideal. Other than referrals, Craigslist and LinkedIn have turned out to be the best sources of strong job candidates. Not a good sign for Monster and the like!

Overall, the pace of recruiting has been great. The article in the Seattle PI cleared helped in getting us good visibility. We have already hired 4 team members and a contractor and are looking to hire one more full time person on the development team. See the Careers section if you are interested in applying for one of these positions.

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Very few companies nail their value proposition in their first try. Apple with the iPod, of course, a great example of product that was very successful in its first iteration. The BlackBerry today is also another successful device with its own iconic following – the so called “Crackberry” addicts. But few people know how even in the early days RIM did a great job of delivering a compelling value proposition despite facing many hurdles from an infrastructure point of view.

The first BlackBerry came out in 1999. The original hardware was a pager style device with a small screen and ran on a very slow Mobitex network. Despite some of these limitations, BlackBerry soon became a hit in the financial community. Hindsight is always 20/20 as they say. But here’s a little bit of history on why RIM became a standout in the wireless e-mail arena whereas many others including Palm (with Palm VII) failed.

Focus on E-mail
RIM focused on a single application with a compelling value proposition – email. They didn’t try to compete with Palm on their terms by building a full fledged PDA style device. They knew that they had a sizable target market of corporate users for whom e-mail access on the go was very important.

Keyboard vs Pen based Input
With the success of the Palm device, an obvious choice would have been to go with a stylus based input. In fact, RIM salespeople had to deal with this objection in the early days. But RIM made the right choice to go with the thumb style keyboard. A stylus is fine for small amounts of data entry but you really need a keyboard to write even a short piece of e-mail. Even the Palm founders eventually abandoned the stylus with the Treo.

Another key hardware innovation that RIM introduced was the trackwheel. It was conveniently located with respect to the keyboard and made navigation through the BlackBerry menu structure very quick and easy.

Push E-mail
Push e-mail was a key RIM innovation (despite the NTP lawsuit) that made the BlackBerry standout from its competitors for a very long time. It was key to its addictive quality since you could engage into an instant messaging style dialog with a colleague thousands of miles away. Push e-mail was also key to hiding the latency of the network and improving the BlackBerry’s battery life. Even though the original Mobitex network was very slow, RIM could deliver e-mail in the background (and that also the first 2K of the message) and then have the device notify the user giving the impression of instantaneous delivery. Also, by using a Push strategy RIM could minimize battery consumption because the device didn’t have to use precious battery checking for e-mail at regular intervals.

Bullet Proof Security
As we all know security is key issue for corporate IT. Without the support of the corporate IT organizations, it would have been very hard for RIM to make any real progress in the enterprise space. Unlike other solutions on the market that utilized simple POP or IMAP interfaces that lacked security, RIM focused on building an enterprise server that provide end-to-end security based on triple DES encryption. Over time, it also introduced many useful administration features that made it fairly easy for corporate IT to control and manage the large number of BlackBerry’s being deployed to throughout their workforce.

All you can eat pricing
While many of the other solutions were based on variable usage based models, RIM made a very smart move by introducing a $40 per month all you can eat model. There were many benefits to this approach. The pricing was simple to understand (you didn’t have to understand MBs), it encouraged high usage and created a very profitable model for RIM that eventually got the wireless carriers interested. The risk for RIM in implementing an all you can eat model was fairly low given that they utilized data bandwidth very efficiently (by downloading only portions of your e-mail or attachments).

Of course, early success is no guarantee of long-term success. Will BlackBerry continue to be leader in the future given all the new competition in the market? Let me know your thoughts.

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It is very interesting to look back to 1999 when I started TeamOn and compare how different things are today compared to the late 90s. The internet has evolved significantly in the last 7 to 8 years. According to Neilsen/NetRatings, overall Internet penetration in the US reached 74% at home in February 2006. Broadband penetration is now at 68% of active internet users making internet access much more compelling. A whole new generation of users (the “MySpace/Facebook” generation) has emerged that is much more actively engaged in the internet compared to the generation in the late 90s. As broadband penetration has increased, internet users are devoting much more time on the web. According to Neilsen, since February 2003, the average PC time per person among active Web users has increased approximately five hours from 25.5 hours a month to 30.5 hours a month. As this cuts into TV viewing time, it’s no wonder that advertisers are increasingly diverting a bigger chunk of the advertising budget to the web.

Lower Startup Costs
It is a lot cheaper now to start a company. There is a lot more open source software that that you can leverage to get a jump start on getting your service out. It allows you to focus more on building your core value proposition rather than spending time building the plumbing. Many startup companies are also reducing their costs by outsourcing their work to India or Eastern European countries. However, unless you are really constrained with respect to your funding, I would not recommend this option until you a more established development team. With a startup, team building, cohesion and rapid execution is very important and that is much harder to achieve if part of your team is half the globe away.

Hardware, hosting costs, bandwidth (thank god for the Telecom bust) are also much cheaper. I recall that for TeamOn that we were paying $5000+ per month for hosting costs and bandwidth. We had to purchase expensive Sun servers to host our database.

Lower startup costs mean that a lot more companies can get started with lower personal investment. A lot more angels can get involved since the commitment they have to make is much lower and it may even be possible to take a company all the way to a reasonable exit just on angel funding.

You can deliver a higher quality experience through the web
The original TeamOn service delivered a complete web based online e-mail/groupware experience. However, we were ahead of our time. Broadband penetration was much lower. DHTML was around but majority of users were still using older generation browsers and performance was a big concern. As a result, it was much more difficult for us to compete with the Outlook and Outlook Express experience that users were used to. Today, the combination of Ajax and broadband speeds is enabling web based applications to successfully compete with the desktop incumbents. For example, companies like Zimbra are now able to compete effectively with Outlook/Exchange.

Customers are looking for your services
In the old days, you had to invest tens of millions of dollars doing distribution deals. In fact, this was a major source of revenue for the major portals like Yahoo, AOL etc. before the Dot Com bust happened. These days customers come looking for your services using search engines. For example, whenever I personally have a need for services, I go straight to Google and type in my search knowing that there will be some service provider who will address my need. More importantly, I don’t pay as much attention to the natural search results as I used to before – I go directly to the paid search results. Why? – because I find them to be a lot more targeted and I figure that they probably have a real business model to support their ability to pay for the Google AdWords. Increasingly, more and more users are behaving in this fashion. This means that your marketing dollars are not being wasted as with traditional display advertising. You are only paying for customers who are actually looking for your services.

Customers are more engaged
Overall, as the internet community has become more mature and access has become much easier, users have become much more comfortable turning to the web to leverage a multitude of services that are becoming available. As I mentioned earlier, a whole new MySpace/Facebook generation has emerged for whom the internet has become an integral part of the social networking experience. Users are much more open to trying new services and, if they are successful, the ramp up rate is much faster as we have seen with MySpace, Facebook, YouTube etc. And users are actively contributing content to the community making the sites much more vibrant and relevant to user needs (not to mention reducing the content generation costs for the web site provider). The whole Web 2.0/Social networking phenomena is no longer an end feature by itself. Now even mainstream sites are starting to incorporate these capabilities to enhance their core value proposition.

Business models are more viable
Given shift of eyeballs from TV to the web, it is no surprise that TV advertisers are increasingly shifting their dollars to the web. The internet ad market is growing very rapidly. It is now projected to grow from $16.8 billion in 2006 to at least $20 billion in 2007. Advertisers also have a wider choice of ad inventory over what they had available. Ads are much more interactive and, with the success of YouTube, video advertising has now emerged as a new category providing TV advertisers a similar medium to what they were used to on TV (except with much better tracking). The larger size of the advertising market also means that the niche areas that various companies are targeting are also much bigger and can support healthy businesses.

Google has also made advertising market a lot bigger by making it a lot more accessible to small/medium size businesses to advertise on. They also made it much easier for smaller companies to leverage their ad network and generate a decent revenue stream from the get go. However, be forewarned that unless you achieve significant scale and targeted demographics, don’t expect that advertising (Google AdSense or otherwise) will be sufficient to make your business model work.

Overall, it is a great time to start a new company. The risk is a lot lower which makes it easier to experiment with new innovative ideas. And if your value proposition hits home with customers, the ramp up can be much faster and you have many more opportunities to monetize your customer base.

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