Why Amazon.com should buy Dictionary.com

They are clearly confused on the meaning of the word "startup".  Dictionary.com says that startup means "A business or an undertaking that has recently begun operation".  Sounds good to me.

On with the rant.

I mentioned briefly last week that we were not chosen as a finalist for the Amazon Web Services Startup Challenge.  We knew applying was a long shot — competitions always are — so not being chosen was a "meh" more than an "OMG, how could they" kind of experience. 

But I thought the idea of the Startup Challenge was cool — anything that helps early stage companies is okay in my book.

I got an email today from Amazon, suggesting I check out the finalists and place my vote.  So I did, and that inspired the rant. 

But first… some history on the competition itself.

From Amazon.com:
"Amazon Web Services (AWS) is searching for the next hot start-up that is leveraging AWS to build its infrastructure and business.  The AWS Start-Up Challenge winner will receive $50,000 in cash, $50,000 in AWS credits, and receive an investment offer from Amazon.

A bit of googling turns up the following:
In a press release, Amazon.com’s Adam Selipsky said the contest is "intended both to encourage more people to pursue their ideas and to give an additional jumpstart to the winners."

Unfortunately the original home page isn’t around anymore and I’m too lazy to find a cached copy.  But I think these two quotes make it reasonably clear that Amazon were looking for early stage startups that (a) would really benefit from the cash and (b) were doing something innovative that could be the "next big thing".

Stage is set.  Let’s look at the finalists…

#1:  Brainscape — "an engine for measuring the networks in the brain."
Okay, this is interesting stuff.  These guys use EC2 (the processor-on-demand stuff) and S3 (online storage) to crunch some nifty new algorithms relating to MRI scans of people’s brains.  They seem to be a University based project, so they’ve probably had some grants, but that money probably doesn’t include
$$$ for commercialization.  I get it — this makes sense to me.  Could it be the next big thing?  Well the market is mostly neurologists and neuroscientists, which are hardly a dime a dozen.

My verdict:  a real startup that would benefit from the cash, but unlikely to be huge.

#2:  Commerce360 — "uses advanced mathematics and statistical analysis to optimize search campaigns."  This too is interesting stuff, and again I think they’re using EC2 and S3.  But a startup?  The Amazon video shows a nice big office, lots of employees, a bunch of VPs and C-level execs.  Their customer list includes: Advanta, Boingo Wireless, Edgar Online, Franklin Mint, Motricity, PBS Kids, Phelps and Fordham University.  Not to mention that they already have significant VC investment from four different VC firms!!!

My verdict:  while they may have a lot of potential, $50k barely pays their VC golf tab at this point.  They are as close to being a poor startup as I am to being a young girl named Dorothy (sorry, been watching Tin Man on Sci-Fi as I write this).

#3:  Justin.tv — "operates a massively scalable live video platform serving about 500,000 video
streams per day."
For once, I’ll keep my mouth shut as far as my personal feelings about a company — that’s not the point here.  But there is a tiny bit of competition in the video market and IMO, a revenue model is always a good thing to have.  Or as Venturebeat put it:

"Justin.tv got previous funding from YCombinator. It has benefited from hype and entered bubble territory more than most companies. The other problem with a network is that anyone shooting 24/7 cams of themselves are unlikely to want to fork over any ad revenue they earn to Justin.tv. Few people are likely to spark with viewers as well as Justin."  Venturebeat, May 22, 2007…

Here’s the thing… You can’t serve up 500k feeds without some kind of bandwidth bill that doesn’t fit on your Mastercard.  Lo and behold, not only did they get $50k from yCombinator plus money from other Angel investors, they also secured an as-yet-undisclosed amount of funding from Alsop Louie Partners.

My verdict:  poor startup?  Not so much.  The VC firm sound as though they’re in it for the long haul.  And next big thing?  Hmm.  I’d lean more towards next best-example-of-irrational-exuberance…

#4:  Milemeter — "an innovative insurance start-up that will offer ‘auto insurance buy the
mile’ ".

They use Amazon payment services to make billing easy.  Oh, and they put some documents on S3 and might even use EC2 to do things. <sigh>.  It has hot high-tech break-out written all over it, doesn’t it???  At least they don’t have a bunch of investors already…

My verdict:  poor startup? Sure.  Next big thing?  They’re just now getting over the regulatory hurdles for a small part of Texas.  Scaling that nationwide has to be a huge challenge.  And I just don’t see how they can be competitive in the broad insurance market.  So no, not the next big thing.

#5: Ooyala — "delivers a high quality interactive
video experience with specific tools for content owners, advertisers and
viewers."

This company, again in the video space (nothing else happens on the web, does it??) was founded by some ex-Google guys.  They’ve bragged about significant funding on several occasions, and several sites peg that funding at $10M or more. They already have offices in Mountain View, Los Angeles and New  York. Back in September, they fielded 18 employees in the 23rd Annual JP Morgan Corporate Chase Challenge (and a bunch more employees were there to cheer them on).

My verdict:  <sigh>.  Yeah, it’s me, Dorothy again.  Maybe it’s big, who knows.  But starving startup?  Hardly.

#6:  UserTesting.com — "provides quick and cheap website usability testing."
These guys make it easy for you to get user feedback on your website.  You pay a low price and they provide the feedback from a network of testers.  No idea what the quality of feedback is like, but the idea seems solid.  There’s very little info on the founders or the company’s background, but they don’t seem to be funded. 

My verdict:  Looks like a startup, talks like a startup…  Reasonable potential if they can sell the broader market on usability testing.  So maybe this is a real-deal contender.

#7:  WeoGeo — "creates a one-stop marketplace for mapping using Amazon EC2 and Amazon S3"
Okay, these guys also actually seem to be a startup without a sugar-daddie lurking in the wings.  And they seem to have a legitimate need for EC2 and S3 services.

My verdict:  Like UserTesting, they do at least seem to be a startup.  I’m not sure there’s a huge market for their product, but at least they seem legit.

So based on Amazon’s own criteria, only two of the startups even come close to qualifying.  Not to mention that three of the finalists should have been ineligible, as they’re clearly not early-stage startups.

So as I said at the beginning of this post, I thought the idea was cool.  But sadly Amazon seem to have really dropped the ball.  What could have been a shining beacon for early stage funding (like TechStars) has turned into the same crap you see everywhere else:  "early stage" means "well established", "in need of funding" means "already has funding from others so we don’t have to worry about due diligence" and "next big thing" means "whatever the herd is doing".

And as a final note on this ridiculousness, I just voted for UserTesting (the only finalist that seems to meet Amazon’s own criteria).  Here’s the breakdown of votes so far:

Aws_votes

So there you go.  The front-runner is a funded bubble-baby, followed by the guys with $10M in their pockets.  The best candidate is dead last. 

Welcome to the joys of early stage funding!!!  Bah humbug…

3 comments for “Why Amazon.com should buy Dictionary.com

  1. December 3, 2007 at 10:53 am

    Just an FYI on MileMeter…

    MileMeter has regulatory approval for the whole state of Texas, which is an $11 billion market. We can also expand to other states fairly quickly, since we did all the hard prep work as part of the Texas approval process.

    We can compete very effectively against the established insurance industry, but the details are inappropriate for a blog post.

    While we don’t have the computational demands of a media-streaming services, we do use EC2 currently for our app servers, databases and load balancers.

    From a programming standpoint, you might find it interesting that we wrote all of our applications in Ruby.

    Thanks for checking us out.

    Sincerely,
    Chris

  2. December 3, 2007 at 11:15 am

    And we qualify as a “startup” by your definition 🙂

    -Chris

  3. DisMonkey
    December 3, 2007 at 4:23 pm

    Hi Chris

    I agree that you qualify as a startup, and I do think you have a chance to be a bigger business than either Weogeo or Brainscape. Milemeter and UserTesting were the two companies I was referring to as the only ones to come close to Amazon’s own criteria.

    Can your business be bigger than UserTesting? I have no idea. But you do have to deal with regulatory hurdles before you can reach your customers, which is a risk factor UserTesting does not have to deal with.

    While I’m sure that there’s a good market for Milemeter, it would also seem that the $11B number you mention is for all auto insurance in Texas, not just the low-mileage drivers your service targets.

    Regardless, as I think the post makes clear, my real issue is the fact that 3 out of 7 finalists have already raised significant funding, and of the four remaining contestants, at most two meet Amazon’s stated criteria.

    Good luck with the competition. Hopefully the winner will be one of the groups that actually needs the money…

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