Tag Archives: paypal

Bitcoin Is The New PayPal

Posted 14 hours ago by Eric M. Jackson and Christopher Grey
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Editor’s note: Eric M. Jackson and Christopher Grey are the co-founders of CapLinked, a secure collaboration and workflow solution for managing complex business deals and projects. Jackson was PayPal’s first senior director of U.S. marketing and wrote the book The PayPal Wars.

It’s been a bad month for Bitcoin.

On February 7, Mt.Gox — the once-popular exchange that hosted 80 percent of the world’s Bitcoin trades — informed users that they were temporarily halting withdrawals of the popular electronic currency from their service due to a technical problem called transaction malleability. This technical flaw allowed fraudsters to manipulate the unique ID of a Bitcoin transaction. They could make it appear as if the withdrawal never happened even though they would still receive the funds.

The news was followed by reports from Coindesk of a “massive and concerted attack” on Bitcoin exchanges. The DDoS attack exploited the transaction malleability flaw and temporarily caused Bitstamp, a Mt.Gox competitor, to also cut off withdrawals. While Bitstamp and the other exchanges have since started letting customers withdraw funds again, as of this writing Mt.Gox still has not.

How this eventually plays out for Mt. Gox in particular and Bitcoin exchanges in general remains to be seen. But if the experiences of the Web 1.0 online payments service PayPal have any bearing on the future of Bitcoin, fraud is an issue that won’t go away any time soon.

The early days of PayPal (which Eric witnessed as the company’s first senior director of marketing and later chronicled in his book The PayPal Wars) certainly suggest that fraud is going to remain a significant issue for Bitcoin. We think the PayPal experience may also provide some guidance on the types of fraud that could be in store for the Bitcoin ecosystem.

When PayPal launched in late 1999, the site was branded around “beaming money” to friends and even briefly employed Star Trek’s “Scotty” as a spokesman before pivoting to focus on e-commerce payments. The shift led to rapid growth as eBay users flocked to the service. As the site grew to 1 million users in just six months, the floodgates were also opened to a host of fraudulent activities.

Credit card chargebacks soared as buyers disputed transactions that went bad for a host of reasons, such as failure to ship or items showing up not as described. Even though third-party marketplaces like eBay were ostensibly facilitating the transactions, PayPal was left holding the bag if it couldn’t recover the funds from the seller.

Foreign organized crime rings began to leverage PayPal to cash in on stolen credit numbers obtained from the black market. They set up automated scripts that used the stolen cards to fund PayPal payments to accounts that they controlled, and then transferred the funds out of PayPal to a bank account.

Account theft surged in the early 2000s as sophisticated “phishing” attacks caught users unaware. In one early case, fraudsters registered the domain “PayPai.com” and sent around links asking PayPal users to submit their confidential information in order to resolve an account problem.

The ramifications for PayPal were severe. As the fraud rate on payment volume soared above 100 basis points, the credit card associations threatened restrictions and loss of access. PayPal’s first business model was built around the recirculation of payments within the system, meaning that initially it wasn’t equipped to deal with this kind of fraud. By the fall of 2000, the company’s monthly burn rate hit $10 million.

Salvation didn’t come overnight, and it didn’t come in the form of a silver bullet. Peter Thiel, Max Levchin, and the rest of the executive team took a multifaceted approach to tackle the problem using a mix of technological, financial and operational initiatives.

For example, Levchin and engineer David Gausebeck built one of the first commercial applications of CAPTCHA technology (dubbed the Gausebeck-Levchin test) to block automated account creation. The engineering and fraud teams built a complex analytics system named IGOR to help dedicated employees identify fraudulent behavior patterns. The product team tied withdrawal limits to account verification levels so only users “known” to us could make large withdrawals.

Cumulatively the efforts worked. Over the following year, PayPal’s fraud rates tumbled down into the 20-30 basis-point range. This improved the company’s financial performance, playing a large role in its IPO in February 2002 and acquisition by eBay later that year. As PayPal “hardened the target,” it drove fraud away to other competing payment services. By the end of 2002, Citibank, Bank One, and Yahoo had all either closed their payment services or were on their way to doing so.

We think PayPal’s experience contains several important lessons for Mt.Gox and the other Bitcoin exchanges.

Fraud can emerge on many fronts. Just as there were multiple types of “fraud” targeting PayPal, expect criminals to emerge with a variety of schemes aimed at Bitcoin services and their users.

Bitcoin services should look for multifaceted solutions, not silver bullets. Combatting fraud requires a company to leverage its technology, processes, and personnel across multiple fronts rather than just looking for a quick coding fix.

Fraudsters go after the weakest link. Regardless of the fate of Mt.Gox, don’t be surprised if other exchanges and Bitcoin services are targeted in the future. The ones that neglect security will be highly vulnerable.

With all the hype, it’s easy to forget that Bitcoin is still a nascent technology. If the issues it faces over the next few years bear any semblance to the ones PayPal experienced, then the discussion around Bitcoin-related fraud is only just beginning.


PayPal continues its push to be the payment platform app developers build upon.


PayPal continues its push to be the payment platform app developers build upon.

February 19, 2014 Mobile

PayPal is opening up its mobile software developer kit to the global community today, enabling app makers everywhere to more easily integrate the company’s payment solutions.

The PayPal mobile SDK will enable app developers to integrate PayPal in much the same way they already do on the Web. User accounts will be saved so they don’t have to log in every time they want to pay through and app and the interaction flow is simplified so users are not taken to a new page when they want to make a transaction. The new mobile SDK will allow developers to accept both credit card and PayPal accounts for payment.

The first company to integrate the PayPal mobile SDK was Uber last November. The trial must have gone well as PayPal is opening up the SDK today to more than 30 markets across the world.

PayPal has made a big move into making itself not just a plugin service for developers but a platform to build upon in the last year. PayPal acquired payments portal Braintree last year for $800 million and has shifted its developer relations and resources to the Braintree wing of the company. PayPal also acquired mobile backend-as-a-service company StackMob in December to fill out its developer platform and team. PayPal will be shuttering StackMob’s service later this year.

Top image: PayPal’s David Marcus and Braintree’s Bill Ready via David Marcus


Secret to Success: It Starts With Dog Food

Last week PayPal president David Marcus caught some flak for sending out an email to employees at the San Jose headquarters, strongly urging them to use the company’s own products. “[If] you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere,” he wrote in the controversial memo.

After reading in its entirely, I have to say I don’t think he’s totally off the mark.

Like David, I know how important it is to “eat your own dog food” when it comes to business. It’s a key reason why I believe HootSuite has gotten to where it is today.

Eating your own dog food—a phrase popularized in tech circles years ago for using your own tools—is absolutely critical in any startup. It means you don’t just sell your product, you use it too. You trust it with your own livelihood. You know it’s better than anything out there.

HootSuite was our own “dog food” from the start

The whole idea for a social media management tool came about in 2008 because we needed it internally. At the time, the digital media agency I ran had dozens of clients with hundreds of Twitter and Facebook accounts. It just wasn’t practical to be logging into and out of each of these profiles all day long. We needed a tool that would let us manage multiple accounts from one interface.

So we hacked one together. Nothing pretty, but it worked. Before long, our clients were asking us about this new web tool that could handle Twitter, Facebook and LinkedIn all from one screen. We launched an early version as a free app. Within a month, we had thousands and thousands of downloads. It had gone viral.

The benefits of homemade dog food

Over the next several years, our user base grew to the millions. We spent zero on advertising or PR during this phase. Our basic product was free and it turned out there was a huge demand for it. There were a few benefits to this approach. First, lots of these free users eventually became paid ones. But, just as important, our community of free users—who were all eating our dog food along with us—became an invaluable source of feedback. They were just as passionate about HootSuite as we were and helped introduce some of the most critical features of our tool.

All the while, we continued to make sure that all of us were using our own product daily. We also integrated social media across our entire rapidly growing business. If we were going to be selling social media solutions, we knew we had to be the best users of the technology. We had to live and breathe it. Through this process, we discovered something huge: social media can benefit every department across a large organization—from improving customer service to increasing sales leads, amplifying brand awareness and more.

As for PayPal, the response to David’s email rant has so far been mixed, with some praising the president for his passion and others criticizing him for intimidating employees. But one takeaway is clear. PayPal is not some aspiring startup. It’s a global powerhouse, with thousands of employees and billions in revenue. Yet the mantra of “eating your own dog food” is still deeply ingrained. This goes to show how important absolute faith in your product is to success, whether you’re just starting out or—as in PayPal’s case—vying for a share of the $410-billion mobile payments market with behemoths like Apple, Google, Visa and Mastercard.


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Image By: BuzzFarmers

Posted by:Ryan Holmes

I Always Forget My PayPal Password

What a week for leaders! As I was writing yesterday’s “Dear Mr. Armstrong” post , I was watching PayPal’s Internet discussion regarding David Marcus. As you may have read, Mr. Marcus sent out an email to San Jose employees about using PayPal products and participating in a merchant referral program for business who do not currently accept PayPal for payment.

I would like to congratulate Mr. Marcus on his passion for the company’s products and services. In my view it is imperative for leaders to be passionate about the objectives of the business. I agree that it is also important for businesses to have employees with a desire to use products and services provided by the company. Everyone should understand the Customer experience and work hard to make it the best it can be.

Beyond these views, we then have a ton of differences in the approach. When employees are not using your products they can serve as the best focus group to improve your products. Instead of chastising them, why not learn from them and celebrate them? We are eager to tell our employees it is our way or the highway instead of simply engaging them to learn from them. We need to do a better job learning from each other, not just in business but in society as a whole.

In the first part of his email to the employees Mr. Marcus discusses the lack of merchant referrals, especially compared to other locations within the company. Are your employees familiar with how to sell the products to merchants? Has the company helped them with this or asked why they are struggling? Have employees tried to solicit referrals and merchants provided negative feedback? Have your leaders worked to bring action to that feedback? As you can see before taking the direction of blaming the employees, it is often best to look at the deeper questions as opposed to the simple metric. I would recommend asking the employees to help you understand, but that is just my personal opinion. There are a number of other pieces within the email that was sent to employees that I would discuss:

“Employees in other offices hack into Coke machines to make them accept PayPal because they feel passionately about using PayPal everywhere.”

  • If PayPal owns the machines then they can do what they want, but if not, I do not think it is advisable to encourage employees to break into equipment owned by another business. Breaking laws are usually not something I would want in the culture of my company.

“I know there are people on our campus in San Jose who are here to make a difference every day. So I’m turning to you passionate PayPals who are here for purpose more than paycheck. We need your help. I need you to make it clear to colleagues, who display these types of behaviors that we won’t tolerate these anymore. My intention is to make San Jose (and every location) a place that retains, and attracts talent that’s passionate, and engaged. We can do it together. By demanding more of each other.”

  • Creating division within your company does not seem to be the best approach to winning people over. Within business or anywhere else, creating an environment where people are coming over holding torches, or tar and feathers, would not be pleasant.

“We have much work to do to reach greatness. We’re not perfect by any stretch of imagination. But passion, and purpose will help us get there faster.”

  • I could not agree more that passion and purpose will help any business move forward much faster. This is not something that starts with an email, but rather the top leadership establishing the mission and culture. The key then is hiring the right people from the start. If you were not hiring for the right culture, then leadership is most likely to blame.

“In closing, if you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere.”

  • Well I do not work for PayPal, but I can tell you my feedback. I know apps are all the rage, but the reality is I do not want tons of apps on my phone. I want apps that I know I use on a regular basis, preferable daily. I have not tried the PayPal app, but if I do I would be happy to share the feedback with you. I can also tell you the reason I do not use PayPal as much is simple, I forget my password regularly. It is in a format that is different than other password I use. So for speed it is often faster for me to manually enter the information.

Too often we like to blame those around us instead of understanding the shortcomings of our business or listening to those around us who may have deep thoughts. I think it is important for all of us to live the passion we have at work and at home. It is not always possible or feasible, but I would recommend it if you can. I for one am passionate about the Customer, the Customer experience and the employee experience. I strive to live those in everything I do. I think the challenge lately, whether it is the Tim Armstrong example or this one, leaders are taking the easy path, instead of investing in listening to those at all levels in an organization. Leadership starts with listening in all aspects.

As a side note this week is random acts of kindness week, so if you have time, please do something nice for someone around you. Maybe a simple note to say thanks or buy a cup of coffee for someone.

Photo: Twin Design / shutterstock

Posted by:Frank Eliason

Bye-bye, StackMob: Platform shuts down following acquisition by PayPal

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Samsung Galaxy Smartphones - S, SII, Ace

photo: Samsung
Summary:In a not-very-surprising move, PayPal is shutting down the mobile development platform it bought in December and will focus those resources on — what else? — electronic payments.

It was probably inevitable that things would change after PayPal bought StackMob and its mobile app development platform three months ago. Now that change has arrived. StackMob is shutting down and its people are being pulled into mobile payments, according to a blog post by StackMob co-founder Ty Amell.

Here’s the gist: The platform will stop working on May 11, 2014 and at that time, customers will lose access to their accounts. “This serves as our notice of termination of our agreement with you,” Amell wrote.

He continued:

“To ease the transition, we are launching a data exporter to help you get all your data out of StackMob in CSV format. If you would like the data you have stored in StackMob, please ensure you export your data before May 11th (the data will not be available for export after this date). If you have any specific questions about your apps or any requests about extracting your data, please email stackmob@paypal.com.”

Developers use these server-side platforms – typically known by the awful term “Mobile Backend as a Service,” or MBaaS — to speed development of mobile apps that hook into various cloud back-end subsystems. And that world is both narrowing and expanding: Facebook bought Parse last April and Amazon Web Services is gearing up its mobile development push, as is Salesforce.com. A handful of enterprise-focused MBaaS players — Kinvey, AnyPresence and FeedHenry – remain independent.

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PayPal chief reams employees: Use our app or quit

Original URL ARTICLE: http://venturebeat.com/2014/02/11/paypal-chief-reams-employees-use-our-app-or-quit/

The president of PayPal has had it with employees who don’t enthusiastically use the company’s products.

David Marcus sent a memo to employees working at PayPal’s San Jose, Calif., headquarters yesterday, scolding them for not installing the company’s app and forgetting their PayPal passwords.

“It’s been brought to my attention that when testing paying with mobile at Cafe 17 last week, some of you refused to install the PayPal app (!!?!?!!), and others didn’t even remember their PayPal password. That’s unacceptable to me, and the rest of my team, everyone at PayPal should use our products where available. That’s the only way we can make them better, and better,” he wrote in the email.

Update: Read the full memo from David Marcus to PayPal employees, along with Silicon Valley’s reaction.

In the email, Marcus also berated the San Jose PayPal employees for not keeping up with other PayPal offices with the volume of leads they submit for businesses that don’t support PayPal as a form of payment.

“PayPal It, our program enabling you to refer businesses that don’t accept PayPal has seen the least amount of leads in *absolute* and relative terms vis-a-vis ALL other locations. Offices with under 100 employees beat us by an order of magnitude (total PayPal it leads to date: 126,862, San Jose leads: 984…),” Marcus wrote.

Oh, and the San Jose PayPal employees aren’t hacking enough for Marcus.

“Employees in other offices hack into Coke machines to make them accept PayPal because they feel passionately about using PayPal everywhere. I don’t see these behaviors here in San Jose,” he wrote.

It’s a bit ironic considering that yesterday Marcus took to Twitter to say his credit card was hacked. So clearly not all hacking is acceptable in Marcus’ book — only hacking that supports the company’s business objectives.

When VentureBeat reached out to PayPal for comment, a spokesman said Marcus has been saying some of these things for a while. Marcus has been trying to make PayPal go in a totally different direction since he became president almost two years ago, the spokesman said, citing a shared office environment and faster product development.

“We’re getting back to our technology and innovation roots, and we really want to be driving the best customer experiences that are possible,” the spokesman told VentureBeat. “And part of that is having every employee be the customer and utilize our services wherever you can, and if you see a problem, highlight it and tell people to get it fixed. And that’s something we do a lot.”

Perhaps Marcus is getting a tad frustrated that his message isn’t getting across. His email ends with a stark choice: Get with the program or get out.

“In closing, if you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere,” he wrote.


The Past, The Future & What This Means For Our Developing World.

Peter Thiel SXSW

There are four quadrants used to organize the past and the future views of the developing world.  These quadrants are optimistic, pessimistic, determinate and indeterminate.


China is currently thought to be pessimistic/determinate meaning it has a clear view of where it would like to be in twenty years but at the same time China is worried about whether or not they will get there in this modern time frame.  China is more likely to save money, then invest money over the next few decades.

“China will be a somewhat poorer version of the developed world, people will become old before they become rich”  –  Peter Thiel, Co-founder, PayPal.

America is thought to have fell in to a quadrant called indeterminate optimism.  Presently, the United States is believed to have both a low amount of investment and a low amount of saving, this is arguably the most unstable position for a country to be in.

“One of the strange things about indeterminate optimism is that its the quadrant that has low savings and low investment.  Is it possible for the future to be better when no one saves and no one invests? Because no one is thinking and everyone is outsourcing all of the thinking to other people.”  –  Peter Thiel, Co-Founder, PayPal.

Both Japan and Europe are thought to be indeterminate/pessimistic meaning the future does not look bright and no body is sure what to do about it.

10 of the best growth hacks of all time

#1 Paypal’s friend referral bounty

By paying $10 cash to each new customer and $10 to the customer who referred them, Paypal was able to hack early growth to tens of millions of users before no longer offering the bonus.
Read more here

#2 Hotmail’s Tagline

In Hotmail whenever a user would email another user, the email would have a message saying something similar to “This email sent with Hotmail, Join Hotmail now” and “Get your free email at Hotmail.”
Read more here

#3 Airbnb’s craigslist integration

By reverse engineering the craigslist posting process and automating it to the point where it became dead simple to cross-post your airbnb listing to craigslist, AirBnb was able to hack early growth to 10’s of millions of users.
Read more here

#4 Mailbox wait list

By creating an incredibly compelling launch video combined with a very cool interface that showed users how many other users were in front of them on the app’s waiting list, mailbox created a large amount of social chatter and blog attention. Within six weeks, Mailbox had a million users signed up and eagerly waiting for the service. Read more here

#5 Dropbox Incentivized Referral Program

Roughly based off of Paypal’s invite system, dropbox allows users to invite their friends for more space. This worked to help dropbox grow from 100,000 users to 4,000,000 in under two years.
Read more here

#6 Twitter’s suggested followers on-boarding

Once Twitter found that users who followed more than 30 people were most likely to become active. They optimized the user experience to encourage this behavior.
Read more here

#7 Instagram cross-posting

By deciding to play nice with other services like twitter and facebook, instagram was able to leverage the distribution of some very large existing platforms to help accelerate the growth of its service in the early days.
Read more here

#8 Pinterest auto-follow

Upon signing up for Pinterest you are automatically following a select group of high quality users. This in turn helps alleviate the cold-start problem, where you have to go looking around the site to find boards and people to follow. Instead they present a sampling of high quality content immediately filling your feed.
Read more here

#9 Youtube’s liberal interpretation of dmca

YouTube tried many tactics to gain differentiation over it’s competitors. In the end, YouTube’s growth hack was the only metric that mattered, conversion of viral buzz into users.
Read more here

#10 Mint.com content/seo strategy

Mint focused on building out a unique personal finance blog, very content-rich, that spoke to a young professional crowd that we felt was being neglected. Eventually the blog became #1 in personal finance, and drove traffic to the app. The infographics and popular articles became regular hits on Digg, Reddit, etc.
Read more here

Adam Breckler is Co-founder & VP of Product at Visual.ly

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Internet Professional, Co-founder & VP Product Visual.ly

3 Myths That Are Killing Literary Culture

and why you should care

1. Writers just want to be read.

I recently heard a young woman at a party say that writers don’t mind when their books are downloaded for free on the internet, because “writers just want to be read.”

As a working writer who pays my mortgage and buys groceries and sends my kid to summer camp with the proceeds from my books, I can tell you that this isn’t true. While I do want to be read, that isn’t my primary concern. My primary concern is making a living.

2. Writers don’t need to be paid for their work.

Let’s say you design and produce a T-shirt. Let’s say you sell the T-shirts for $20 each, and with the proceeds from these T-shirts, you pay your rent, buy coffee, pay off your student loans, pay the electric bill,go to the movies, buy a beer at the corner bar, etc.

Now, you may give your shirt to a few friends in order to drum up business. That’s called marketing, and it’s not much different from when publishers send out review copies of books to newspapers, magazines, and influential bloggers. You’re willing to give away a few shirts in the hopes that it will lead to sales.

Let’s say a bunch of people—a thousand, two thousand, ten thousand, half a million—come to you and say, “Hey, you should give us that shirt, because we’ll wear it, and when we wear your shirt, it’s going to be good for you.” What would you say? You’d probably turn them down. You’d probably point out that creating the shirt took time, effort, and resources. Maybe you studied graphic design to learn the skills that went into making that shirt. Maybe you worked at the mall for a few dollars an hour while you were figuring out how to arrange your life in a way that would allow you to do more fulfilling work. You’d probably point out that you didn’t make that shirt just to give it away. You need to sell the shirt, because that’s how you make a living, and the fact of someone wearing your shirt does absolutely nothing for you. It’s good for the person who gets the free shirt, but it is most definitely not good for you.

Don’t like the T-shirt example? Make it an app. Let’s say you spend time, money, and intellectual capital developing an app that you sell for $1.99. If thousands of people were to say to you, “Give me that app. I want to use it, but I don’t want to pay for it. If you give it to me, it will be good for you,” would you agree?

Authors make a living by selling our books. We write books that we hope will be good, books that we hope will be meaningful, but we also write books that we hope people will buy. We do not go to the store and walk out with a new pair of shoes or a new baseball bat or an ice cream cone without paying for them. We don’t expect the taxi driver to drive us to the airport for free, and we don’t expect the tech guy to fix our computer for free, and we don’t expect the piano teacher to give our kids piano lessons for free. We understand that when a service is provided, it is good practice to pay for it. We hope that others will show us the same courtesy.

When increasing numbers of readers decide they’re going to get our books for free by illegally downloading them, and when increasing numbers of libraries lobby for the “right” to lend digital copies of our books to anyone, anywhere,forever, without compensating the creators, authors don’t make a living.

In an opinion piece for The New York Times, The Slow Death of the American Author, Scott Turow points to the offshore pirate sites that offer illegal downloads of copyrighted books. Google and Bing serve ads to these pirate sites, and subscribers pay a fee to download content, so both the pirates and the mega-corporations are making big money off of the books they had no role in creating. Kim dot com gets another Rolls Royce, Google tops off its multi-billion dollar coffers, and PayPal gets a huge chunk of the pie. The only ones who aren’t being compensated for those books are the people who wrote them. The people who are downloading books and music illegally don’t mind paying the pirate, and they don’t mind sending a percentage to paypal; these entities are often praised as innovators. It is strange that the same people who happily to give money to the pirates believe that the writers and musicians who created the content are wrongheaded or selfish to ask for compensation. (The Trichordist has been writing on this subject for the music industry for some time now.)

If I stood on a corner telling people who asked where they could buy stolen goods and collected a small fee for it, I’d be on my way to jail. And yet even while search engines sail under mottos like “Don’t be evil,” they do the same thing. ~Scott Turow

The only people who can legitimately say, “Authors shouldn’t be paid for their books,” are people who happily go to their jobs for free. There’s a rallying cry among certain academics, librarians, and journalists that copyright is anti-culture, that all books should be free to all people, but I don’t know a single professor or librarian who doesn’t get paid to show up to the university or to the library. The same journalists who lambast authors are often salaried employees of newspapers and magazines that a)charge a subscription fee and b) pay the journalists for their content.

Traditionally, libraries purchase a hard copy of a book, which they then lend out to their patrons. I happen to be a longtime fan of libraries and the services they provide to the community. As an author, I have accepted the fact that I receive a royalty only on the copy the library purchases, not on the lending (although in Europe, authors do receive royalties each time their books are lent). It’s a model that American authors have by and large come to terms with, and, traditionally, there has been a friendly relationship between libraries and authors. Unlimited e-book lending, however, is an entirely different ballgame. For one thing, a physical book has a shelf life and must eventually be replaced, while an e-book may be lent forever from any location. By effectively ensuring that no reader will have any incentive to purchase an e-book, ever, it erases a huge chunk of the author’s royalties.

If you happen to be a professor or librarian who believes that information, including copyrighted books, should flow freely with no compensation for the creators of that information, or that publishers should offer books to libraries for free or next to free, or that soft copyright laws are essential to democracy, I urge you to put your money where your mouth is: the next time you receive a paycheck, return it. You are just happy to be able to go to work, right? You don’t do it for the money. (It also bears saying that libraries need content, and the content comes from somewhere, so when libraries lobby against fair compensation for authors, and when they remove the incentive to actually show up at the physical library to get a book, they are lobbying against their own existence.)

3. Writers make so much money, they shouldn’t mind if their books are illegally downloaded.

Advances for mid-list authors—that is, the vast majority of authors—are far from a living wage. The advance for my first book was $2,000. As I wrote the stories in the collection over a period of eight years, I wasn’t exactly raking it in. My second book, which took a much more reasonable three years to write, received an even smaller advance of $1,000—or about $333 per year. My third book, which took me more than four years to write, received an advance of $25,000, as did my fourth book, which, fortunately, only took one year to write. Obviously, during those years of writing I was making a living in other ways—from wiping down the beds at a tanning salon to selling credit processing machines all over New York City to teaching creative writing. For my next two books, I received a much bigger advance, but this only happened after one of my books, through some alchemy of good fortune and good timing, sold half a million copies. (Obviously, I did not do this alone; my book sold well because I had the support of booksellers and my agent and my editor and publisher, the very entities that piracy threatens to put out of business.)

My point here is that very few authors are making the big bucks. There are the mega bestsellers, of course, but the vast majority of authors make far less per hour than the barista at Starbucks or the person flipping those admittedly amazing burgers at In n’ Out. So when you say, “If I download this book for free, it doesn’t really hurt anybody,” you’re wrong. It hurts the person who made it.

I assume that most of the people who read this post do not illegally download books, music, or movies. But if you are a person who does that, I ask you to do one thing before you download the next book or song from a file sharing site: take a moment to visualize yourself reaching into that author’s purse, or that musician’s wallet, and stealing money. Are you comfortable with that image of yourself? If so, go ahead; download away.

Why this should matter to you.

If you’ve read a good book in the past few years, if you’ve read a book that moved you,a book that enlarged your world-view, a book that changed you, if you have ever read a book that made you want to be a writer or inspired you to be a reader, then remember where that book came from: an author who lives in the same world in which you live, an author who cannot download lunch, blue jeans, or an apartment for free.

Michelle Richmond is the New York Times bestselling author of The Year of Fog. Her new novel, Golden State, and her new story collection, HUM, will be published in spring of 2014. Visit her website.

Written by

Author of the international bestseller THE YEAR OF FOG & the forthcoming novel GOLDEN STATE. Founder of Fiction Attic Press. Mom. Space geek. Fog lover.


As Marketplaces Evolve, Greylock Places Its Bets


Posted 2 hours ago by (@leenarao)
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The idea of marketplaces as a business model for technology startups isn’t new. We saw some marketplaces go belly up in the bubble, and saw a few, like eBay, grow into massive businesses. However, the marketplace model has experienced a renaissance of sorts lately, with companies like Airbnb, Uber and others gaining serious traction and becoming billion-dollar-plus businesses.

Greylock Partners held a conference in mid-November devoted to talking about design, product development, the economics and more around marketplaces, spearheaded in part by the firm’s newest partner and former eBay Motors creator, Simon Rothman.

4363v3-max-250x250As part of its new $100 million commitment to investing in marketplaces, Greylock assembled Reid Hoffman, Airbnb co-founder and CEO Brian Chesky, eBay CEO John Donahoe, Nobel Prize Laureate and marketplace expert Alvin Roth, and many others to discuss the rise of marketplaces and much more. I was able to sit down with some of the speakers to talk about their thoughts on why marketplaces are hot right now.

Hoffman, who founded LinkedIn and was an early investor in Facebook, sees many parallels between networks and marketplaces. On the similarities in both models, he says: “There’s a question of how do you identify people? What reputational systems underlie it? What kinds of information and signaling? What kind of transactions go public? There’s some differences, too, but it’s essentially a similar brain activity.”

As for why marketplaces are getting more attention now, Hoffman believes that it’s in part due to mobile and the progression in human behavior. “Now everyone is comfortable with the notion of, ‘Oh, I could actually find someone I don’t know and transact with them, either as travelers, hosts, sellers, buyer.’ Those that can actually work mean that I have some trust in these mechanisms,” he explains further.

Rothman agrees with Hoffman, and told me that trust is a huge element of why marketplaces have evolved, as well as the biggest challenge for these marketplaces. “They’re really selling trust. And until the web adds social identity, I think creating trust at scale is really hard. As we’ve heard, marketplace is about influence, and if you can’t control the experience, if you can’t control the product, you can’t control the fulfillment. All you can control is trust and you need to have that. And then mobile is an accelerant to that. If you are a local market, or a local business, you have to have mobile. There’s just no way Uber works without mobile,” he says.

Reid Hoffman

Reid Hoffman

So how do marketplaces add trust? Hoffman advises to look at mechanisms by which you can essentially borrow some trust and add it to the product, such as using social networks or identities. He recalled a product development from his PayPal days, where an engineer developed a better way to authenticate bank accounts.

For years, in order to authenticate a bank account you had to send in a voided check, and a copy of your drivers license. PayPal realized that if they wanted to get to scale, the company would have to make it easier to create accounts. “If we can’t solve this problem, we basically don’t have an interesting business model,” he said. One of the early engineers developed a way to send two sub-dollar transactions to the account, to create a PIN of sorts for instant verification.

While friction is something most marketplaces want to remove, Rothman argues that some should consider “the concept of strategic friction” when it comes to trust and safety. He thinks it’s one of the only places where friction is not only tolerable but kind of desirable.

Of course, one of the marketplaces where trust and safety have been of the utmost importance is Airbnb. Hoffman recalled when he heard Airbnb’s pitch, he was in immediately. “When Brian and his cofounders pitched me, I stopped them a couple of minutes in, I said look I’m interested in investing. I want to hear the rest of the pitch and talk about it, but I get this already.”

Hoffman says that Airbnb was creating liquidity out of space. Even if the hosts didn’t own their real estate, the liquidity involved is “hugely valuable and motivating to them.” So, they’ll adopt mobile products, and go through hoops to make that happen. “There was no question that this is going to work,” he says.

But Hoffman recognized that there have been bumps in the road when it came to trust and safety–but he said that what made the difference was Chesky and his team’s hard work is setting things right. “Brian motivated the entire company within six weeks, and said We are revamping trust and safety, in the same kind of pattern he was talking about in terms of developing for mobile,” Hoffman recalls.

Separately at the conference, Chesky talked a bit about design, and how he approaches designs at the company. Airbnb launched a complete redesign of its mobile app in November, and Chesky was involved in every part of the three months it took to implement and create the new design, even forgoing hiring efforts. While it took three months end to end to launch a new version of the app, the actual design took place in a matter of three weeks.

Brian Chesky

Brian Chesky

When doing the design, the company put up a huge wall where they printed every single screen in the app and placed it on the wall. It amounted to around three hundred separate pages. Chesky learned at art school that you need to draw the whole canvas before rendering because you lose perspective. People tend to get stuck on one page in a design or redesign, and I didn’t want that to happen.

And because the design has to cater to two groups, the host and the guest, one team would design the pages from the guest point of view and another from the host point of view. Chesky also met with the designers every couple of days or even every day and that was really, really critical to the speed of design and overall success of the project, in his opinion.

One speed bump that many of these marketplaces hit is regulatory pushback. Every large marketplace of late, including Uber and Airbnb, have had challenges dealing with local regulatory agencies. In fact, Rothman says that “any interesting marketplace will hit regulatory issues…largely, if you’re not hitting a regulation issue, the likelihood that the marketplace is interesting is very low. Not zero, but very low.”

Hoffman is familiar with this, as even networks hit regulatory challenges. He explains:

“I think the simplest way to understand regulation is, there’s a bomb, there’s a fuse, you’ve lit the fuse. And you have to figure out how long the fuse is and how fast it’s burning. And you have to pay attention to that. And then depending on what you think the dynamics are, and there’s certain things you think that can accelerate this fuse or not.”

He advises that in the early stages of any marketplace that may hit regulatory snags, founders should figure out what their engagement strategy is. “You don’t want to pre-sell [regulators] on the benefits. You want to get to where they just look around at host sipping coffee and say, “Oh, how was it being a host? How was it being a traveler. Oh, great.” He says you shouldn’t stick your head in the sand, and ignore regulators but also going to them early may be futile as most regulators don’t want change.

“So you want to keep that in play to the point where you can build it out and make them go, “Oh, I get this.” And by the way, then, at that point you have a large constituency, if you’re being successful, that also is arguing in your favor and then that allows for regulation change. The regulators, legislators, other people need to figure out what the thing should be.”

Now that Greylock is allocating some of its new $1 billion in funding toward the marketplace model, we’ll be looking to see where the firm will be placing its bets. Rothman thinks that in the next five years there will be more $1 billion dollar marketplaces than there were in the past 20 years, and we already have quite a few that are rising fast. Stay tuned.