As a Founder, technology investor, CEO, Chairman and board member, I’ve seen a number of portfolio companies go through long, below-the-radar, rebuilds of their core product engines. It’s always a nerve-racking process as you invest for a long time without seeing the fruits ; you fear for what might emerge from all the market research and long nights of coding, the team growth in size, become more major and certain over time.
 
Great then, to see what the Pixsta Team (the Visual Search Engine for eCommerce company) have produced with our first branded launch EMPORA www.empora.com <http://www.empora.com> , a fashion service that allows is users to shop by style, shapes and colour from a very large pool of about 1000 brands and 100,000’s of products. 

It’s a big leap forward for Pixsta, from academic origins, our cloud display’s so many copied by other meto startups) to creating a user experience that meets its audience’s requirements. Most importantly, Pixsta seem to have solved key scaling challenges in the back-end that free them up for upcoming growth. The engine at Pixsta is most likely the highest throughput engine for visual analytics on pictures, which has been developed. I personal call this process “structuring of unstructured image data”. We have seen such developments in text, but as I predicted 3 years ago, by creating the company able to do it with images we would enable a new form of online monetization. In my mind the essentials of Pixsta is a Cloud Computing solution solving one problem: “Answering questions asked in the form of pictures in return with pictures”.

Myself and the team at Pixsta went through a heavy consultation period with our user base, finding out what people really wanted from Visual Search technology when looking to buy clothes online <http://www.empora.com/> . The KPIs I’m seeing now seem to justify those long nights and two years of constant efforts. 
 
It’s exciting to see Pixsta emerge as one of the most disruptive start-ups in eCommerce we have seen since a while. Even more exciting is that the business has taken much less capital then expected to develop such outstanding platforms, which will be essential for our future growth. 
 
We recently have seen a pickup of writing by the industry press, starting with Drapers <http://www.drapersonline.com/news/other-sectors/multi-channel/empora-shopping-portal-launches-online/5003210.article>, StyleBlogs and lots of Twitter remarks how pleased users are to have such an offering available. 

Alexander Straub
Founder, Strategy Director and Chairman 

Why only Twitter and maybe facebook can challenge Google!

Since quite some time I am wondering if the global giant in Internet Lead Generation Google is going to remain the only game in town for the foreseeable future.

In general I doubt it, as any industry in the long term has seen a three way split of the overall pie. Why is such a sharing of the overall marketplace so important for the evolution of the technology market space? Most of recent innovation on the web has been build around the advertisement driven industry enabled by Google. Ingredients of this drive between 2003 and 2008 have been quick setup and monetization, once an audience of size has been established.

Only now it is emerging that new online giants like facebook with very high daily re-login rates have a chance to change the status quo. Also facebook is still in need to find an appropriate business model, which cannot be the adaption of Google Search being build into Social Networks, as mySpace has shown in 2007.

Yes, I do agree the Social Networks have seen tremendous growth, but demanding sky-high double-digit multi billon dollar valuation will need more than just subscriber growth. It will need a monetization engine independent of Google and something much better than banners in smaller formats beside the website. This is where I like to start looking at what I call the Lead Generation Marketplace on the WWW.

While traditional media has been dominated by traditional advertising formats for as long as I can see, in the first 10 years of the Web we have seen a direct translation of such traditional advertisement formats into online via banners. The dominant player had been Yahoo with its massive audiences which are now reclining and only remain loyal on the mailing platform.

Lead generation as pioneered by Goto.com later called Overture and eventually taken to global dominance by Google is ultimately a new industry in a new technological enabled Internet based world. It is an industry, which is destroying the traditional advertising industry and therefore the established players unless they are able to change. The recession will most likely show that most publishers will never regain the same power base and advertiser base and most titles struck today from the lists, which have emerged in a last blip post the dot com bubble will never re-emerge. The reason is that we have entered a stage where lead generation will be king and traditional publishers understand very little, what this is, how to participate in it and how to turn the businesses around into a direction of survival in a lead generation driven world.

In the past 8 years while google with his simple advertisement format AdWords (three liners, 45 characters, followed by 160 characters), has grown from just $100m in revenue to having accumulated a cash pile of $14.4bn on its balance sheet within a very short period. It remains the only dominant if not monopolistic player in lead generation.

In this analysis I in particular do not differentiate between the per thousand advertising formats (CPM), the per click model (CPC, cost per click) mostly favored by google which makes a near 99 percent part of the Google income stream or the click per action (CPA), which we traditionally call lead generation. All three models, CPM, CPC and CPA are lead generation if monetized on a performance base. Clearly google has favored to stay away from a total performance based model as generated leads can convert with different efficiency independent of Google’s or others influence. Google is driven mainly by CTR, click Through Rate for this reason to maximize revenue and profit for its on sake.

However it is clear that different leads have different values. A lead generated from a Search is different to a lead generated by a performance and behavioral banner or any new ad formats called AdImages™, which one of our portfolio companies Pixsta is proposing. AdImages are very attribute-rich product pictures placed contextually into the right location at the right time, so the user can interact with them. However the underlying lead is all the same, only a global dominating standard can generate substantial cash for shareholders. Most startups do not understand that ultimately only an establishment of a lead generating standard can generate substantial income. Readers will now argue that MoneySuperMarket or Affiliate Networks and many other companies have shown otherwise. But I argue they have not, as they all have remained minor players on the sideline of a giant.

However what is clear is that different leads have different engagement matrices and values. The industry has shown very little differentiation between the leads generated to them. We have seen some differentiation but not to the level we could break down utilizing existing technologies.

Every owner of a product or service based website has seen such a matrix if he observes the visitors not just by CTR or conversion rates but ultimately how engaged users are with the website and in particular the product displayed. Higher engagement must lead to a higher potential visit to purchase ratio.

Now massive lead generation potential resides not only within today’s comparison shopping engines of the like of shopzilla, ciao or ebay’s owned shopping.com or the newcomers like Pixsta, like.com, theFind, become.com, twenga or myDeco, but equally in the social networks and short message platforms like twitter. Most likely two of them, facebook and twitter, have the greatest potential of all as they start to engage very targeted and large audiences.

If I would vote I would believe twitter, which is still relatively small and only known in the tech world, has the greatest potential to emerge as a new Giant in Lead Generation.

Why? Any timely interaction, location based, text readable and so simple in the form of 140 characters is ultimately powerful and what we have been waiting for such a long time. We have engaged in billions of these communications since SMS emerged about 15 years ago. But what is the same but ultimately different is an interconnected and networked IP driven 140 character string via twitter. The similarity of twitter strings and Google AdWords and SMS are obvious, but only emerge when put into this context of lead generation.

However it remains today’s dominant platform, the mobile phone followed by the laptop / PC as the perfect most powerful consumer device for such casual communications. Behind is the unlimited potential to generate a massive global lead generation engine. This has a potential to emerge as yet the most powerful lead generation engine we have seen, many times more powerful than google.

But going back to the more traditional lead generation, it is obvious that the web is yet in its early developments for product based lead generation. If you analyze the space numerous companies are fighting in comparison shopping for a meaningful position. Nobody so far has been able to achieve a substantial market share and brand loyalty like Google . All of them are purely driven by short term and are totally dependent on google’s search engine optimized traffic. The model is get in quick, build it quick and sell it as long as it lasts. Hopefully before Google regulates your traffic to the level where they believe it belongs. Mostly in the negligible 2 – 5% market share so no one is able to build an equivalent ad standard like AdWords into a challenger.

So far facebook or twitter have not been able to innovate in this field either and I doubt they can. The organizations of such companies are not able to innovate beyond the core DNA of the founders gene which are around functional drive for the existing social communication enabling platform.

Therefore companies with innovative ideas like our portfolio company PIXSTA, which is establishing the AdImage™ standard will play an important role as an engine of monetization in a world in which lead generation will emerge in a three way split between giants like Google, Facebook and hopefully the soon largest player called Twitter.

Update: Today both, JP Morgan’s Imran Khan and Barclays Capital’s Doug Anmuth have put the rising importance of performance based advertising on their respective lists for tech predictions for 2009, as noted by TechCrunch.