August Capital’s David Hornik On Social Media

February 18th, 2007 |
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David Hornik is a general partner at August Capital. As early-stage investors in companies like Microsoft, August knows what makes great companies, and Hornik serves as its social media expert. He sits on six boards including Six Apart. Hornik was also the first VC to blog and to produce a podcast, so he knows all about the implementation of social media.

Transcript:

Host: Jennifer Jones – PodTech

Guest: David Hornik – August Capital

David Hornik – August Capital

The reason I should care is that this is the new television. I just am absolutely convinced this isn’t a fad, no. There will be changes in the landscape. I do not think that it is a case that because MySpace is the winner now that it will always be the winner.

Announcer

This is PodTech.net. Welcome to MarketingVoices featuring the fresh perspectives of innovative marketing leaders and examining how social media is changing marketing throughout the world. Here is your host, Jennifer Jones.

Jennifer Jones – PodTech

Hi, this is Jennifer Jones and today on MarketingVoices I have a gentleman who I adore whose name is David Hornik. He is the leading VC in social media. He is here or I am here with him at August Capital. He is a partner, he is very well known for all of his work with his blog and he was just telling about video blog he does that I am going to let him talk about in a second but without anymore ado, David, welcome to MarketingVoices.

David Hornik – August Capital

Thanks. Thanks for having me.

Jennifer Jones – PodTech

So tell me about Venture Investing in Social Media. That is basically who you are, what you do is, well, not all of what you do, but a lot of what you do and you are on a lot of boards, six to be exact, why and what is hot and what is not about Venture Investing today in Social Media?

David Hornik – August Capital

Sure. Well, it is abundantly clear that Social Media is hot and so the big question is, is there something hot in social media that is worth investing and those are very different questions and so there has been lots of discussions up and down Sand Hill Road what I refer to as the ‘VC Ghetto’. Lots of people trying to figure out “Okay, all these companies, lots of excitement, what is that excitement about?” And I think the answer is: the excitement is about hundreds of millions of users on social networks that are broad like MySpace, or are specific like a Dogster or a Flickster where huge numbers of likeminded people are getting together to engage in a conversation and that, to my mind, that is what is so exciting about this space and it is why marketers and advertisers and venture capitalists and entrepreneurs alike should all take note because to my mind, the entire web is sort of migrating to two paradigms.

There is a search paradigm and there is a social networking paradigm and Google is showing that there is incredible money to be made, incredible opportunity in search because when people are looking for something, guess what, there are looking to do something and then there is a social networking piece which is people are interested in engaging with each other in some interesting way within the context of the Internet and these social networking companies, and I use that very broadly, then allow them the context to do that. And in some instances it is around a particular thing. I think that we will see increasingly specific social networks. Recently Maya’s Mom launched which is doing Moms and in particular not just moms but moms with young kids. That is the focus having been the dad of young kids when you are a mom or a dad of young kids, it is all you think about.

And suddenly, that is your social network and then guess what? When your kids are in middle school, I suspect there will be a social network of kids with middle schoolers because I am not so interested in the diapers any more, thankfully. I am now interested in Gee, hormones and my kids hating me these that — it did not seem relevant at that time so I think that that is what is interesting and that is what we are seeing and that is what I am trying to calibrate as I see all these companies being created and lots of energy and lots of users and lots of growth which are the meaningful businesses, which are the meaningful channels for marketers, which are — and what is interesting in the space?

Jennifer Jones – PodTech

Okay, so taking off on that point, so what is interesting to marketers? So why should marketers care about this? I get this question about “Oh, it is a passing fad,” which I definitely do not think it is. Obviously neither do you, but help me help them understand why they should really care and what they should do about it.

David Hornik – August Capital

Well that is – I think the reason they should care is that this is the new television. I just am absolutely convinced – this is not a fad now. There will be changes in the landscape. I do not think that it is a case that because MySpace is the winner now that it always be the winner. That is not going to be the case and in the same way that ABC used to have a great Friday night line up that everybody watched and suddenly everybody watched CBS and ABC was in the dumps. I think we will see the same sorts of things in the social networking space and this new media space where different companies come and go, they are dominant — there is dominant platforms, they incorporate other things I mean I think that is what we are going to see but if you look at what is happening with people’s minds here, if you look at what kids in particular are spending their time on, they are spending their time on the web.

They are not spending their time watching television and so if you want to get at these people and if you want to get to the thirteen-year-olds who are going to be ones making their decisions about what toothpaste they have, what deodorant they wear, what clothing — how they are influenced? All of these things that are important marketing questions. You need to be in the social networks. It is where the kids are and it is not just where they are in the sense of okay, well, advertise cigarettes in the playground, I do not mean that. I just mean this is what people care about.

And so you get brand credibility by associating yourselves with things that are meaningful and reflect well upon your brand and what these social networks now represent are the things that kids, and increasingly adults, find meaningful and by associating your brand, or by focusing your brand on those sorts of experiences then you have a very high impact. I will give you one quick example to that fact. There is a company called Dogster. Dogster is a social network for your dogs, I mean literary you —

Jennifer Jones – PodTech

So, you are not an investor in this, right?

David Hornik – August Capital

I am not an investor in Dogster

Jennifer Jones – PodTech

Yeah, so (Voice Overlap).

David Hornik – August Capital

Right, absolutely. I am a big fan of Ted who started it and the team, I think they have done really smart things. They were very early. They understood that it is not just about a social network that you talk about where you are out looking for a girlfriend, it is a social network and maybe frankly through your dogs you are still out looking for a girlfriend and it is a social network about dog lovers. And so you are looking for a dog loving girlfriend, not just a generic girlfriend and that is what this stuff is all about. You go and you create your profile of your dog and then your dog makes dog friends and friends you know so it is my Schnauzer and look it is your (Inaudible) friend and over a million users, I believe it is over a million users.

But more importantly, if you are a dog-food company or a pet insurance company, or in fact Disney when they were re-launching Lady and the Tramp or may be it is Lady and the Tramp 2, or Lady and the Tramp 7, I do not know — when they went to Dogster and spent a lot of money advertising in Dogster because it was unambiguous what people on Dogster liked. They liked dogs, now they may like also Lexus, but they definitely like dogs. So if you are IMs, started Dogster. So that is what I think is exciting about this stuff.

Jennifer Jones – PodTech

Okay so you mentioned that if people do not get there then — well you did not quite say it this way, but I have talked to enough people that are sort of sensible, if you do not get social media then you are really being stupid. So how do you get people over their fear of social media – I mean you have been a blogger, since you were the first venture blogger and you have been a blogger for I do not know what — five years?

David Hornik – August Capital

A little over four years.

Jennifer Jones – PodTech

Okay so you are not afraid but how do you — I deal with a lot of CMOs, how do you get them over their fear and just say “Look, do it, I mean get into it.” Which is what I say, but I would love to hear your advice.

David Hornik – August Capital

Well, I think that there are two different messages and I think that one message is what is scaring everybody and is wrong-headed and then one message is how I approach social media. It is how I approached venture blog when I started and why I now have VentureCast; the Podcast and which from the — and just as an aside, from the venture capital industry, and four years ago, it was heresy. You do not talk about the venture capital industry and remain sort of mystifying to many of my brethren in and around the venture capital industry as to “What are you — are you talking about this stuff?” Like “How is that to your benefit?”

So the one camp of marketing to social media says “This is all about authenticity.” It is unfiltered, you just let it all flow and you will get lots of goodwill from saying whatever you say. I think that is a huge mistake. I think it is a complete misunderstanding. The other version is: be authentic and genuine but understand that this is a marketing channel and like any other message, you have to understand your market, you have to understand those to whom you are speaking and then you have to create the message to reflect that.

So, my Podcast and my blog are intended for entrepreneurs. It is intended for technologists and people on — so I am talking about things that they care about. I am not — yes, I periodically, inevitably talk about my children in the context to that or whatever, but at least in theory, it is about stuff that they care about and ways that they care about and explaining things they care about.

So I think as a marketer, you just have to focus on these things from that context. If you look at a MySpace, it is not the Wild West, I mean it is in a certain sense, you have not seen it before, on the other hand, when we went from broadcast television to cable television, it was not as if the History Channel was some new beast. It is just that when you advertise on the History Channel for something that might relate to that market, then you need to focus your advertising on the thing that those people are watching, that History Channel care about and the same thing for CNBC or the Disney Channel.

So I just think that what has happened is, we have created these incredible networks where we know a lot about the people who are using them and we can segment them incredibly accurately and then focus our message to those people and then the question is what message is effective, and I do think that a more genuine and a more natural message, over a more fun and entertaining kind of out there message works better in the social networks but that does not mean that you are just sort of going out on a limb. It just means learn from the past. You do not produce the corporate spokesperson on the social network.

That does not work. You do not lie about what you are doing or pretend you are someone you are not, that does not work either. In the web, they find out. This is a bad idea, so find the right spokesperson who makes sense in the context of those new social media and use that person to get across a message that makes sense in the context of that particular demographic so…

Jennifer Jones – PodTech

So, do you think of yourself in that way, that is August spokesperson that we know not really — but I mean — but really — you are talking for August…

David Hornik – August Capital

My partners are wincing, “My God, David as spokesperson, God help us.” No, I think I am very happy to represent August. It is a great firm and has a wonderful history and I often talked about, but I always talk about, “Well, my partner Dave was the only private investor. Microsoft still sits on that board. He is a really smart guy.” I do not pretend that I did Microsoft, I mean I have been — just have not been in the firm that long, but do I represent August a lot? Sure, I think that the work — that people know a lot about August and know a lot about the things that are interesting to us, probably by virtue of me having spent a lot of time writing and talking and focusing on getting out the word.

Jennifer Jones – PodTech

And I know it is true. Okay, so what about the future of all this stuff? What do you as a soothsayer, as a fortuneteller sort of look ahead and say “Okay, what is going to happen?”

David Hornik – August Capital

What is going to happen? Well I have been saying for quite some time actually that social networks, this idea of social networks where you show up and experience and say “These people are my friends” or “these people are my family” or “these are people I care about” where you put yourself in a social context, so in MySpace it is — and MySpace is actually very interesting because not only do you put yourself in the social context, these are my explicit friends – Jack, Jane, Sue whoever physical people, but what was interesting about MySpace and how it emerged was then you also created your friends, your “friends” that were Sony and Nokia and Bill Clinton and you name the experience – musicians and foods and those became your friends and they have really when and what is meant by that more than anything is this is part of my identity.

If you want to fully understand me then here are the people with whom I associate, here are the brands with which I resonate, here are the politicians for whom I would vote, here are the hair sprays that I would care to enjoy, you know, name it.

So I believe that that sort of infrastructure, this idea that you put, you contextualize yourself and — when you get to a web experience, will permeate everything, I just do not — I think that okay, maybe I do not want to be a absolute, but I think the vast majority of experiences you will come to and they will be better suited by having the context of your friends or your interests, or your likes and so social networking broadly speaking, will be the underpinnings of everything and maybe it is for picking movies and now you have Flickster which is a young person network of people talking about movies but frankly you know Netflix is trying to figure out this as well. Who recommends what movies, who are your friends and what are they like, so you can watch them.

So name the area. There are social networks now emerging around investing, there are social networks obviously the whole dating space has only been a social network, it just has not been described that way, so I think social networks are the underpinnings of all future experiences, non-search experiences and even search is becoming a social — there is social search.

So, I think that is the thing to look for as it emerges and then from a brand prospector or from a broad marketing perspective, then how does that impact your ability to spread the good word and does that mean you have to find the influencers or does that mean that you have to find the influential networks or does it mean that you have to create something so creative and fun that people embrace it and spread it themselves?

Jennifer Jones – PodTech

Awesome. Okay, final question is — I know you are a busy guy, a Second Life — what are your opinion as that? You have an Avatar of Second Life? Does August have a representation in Second Life? What do you think of Second Life?

David Hornik – August Capital

We are not investors. I do not — I have to admit I do not have an Avatar. It would be very interesting to see what happens in Second Life. I am still waiting to determine whether this is a mainstream experience. I mean, from an investor standpoint and from a marketer standpoint, the big question is one of either massive breadth where you can get to hundreds of millions of people and therefore the market is so large that getting a small fraction of it will be valuable, or you are reaching a vertical that is so valuable that you can get to a bigger chunk of it and extract more value from it and therefore it is worth chasing that vertical. I think it is an open question about Second Life. Is it a mass phenomenon? I do not — it is not yet, so there are indicators that maybe it will be and maybe you and I will have Avatars and maybe you do have an Avatar.

Jennifer Jones – PodTech

No, not yet. I am looking at it though.

David Hornik – August Capital

Right. Well my mom has an Avatar and then we will say “Okay, look, I am going to go (Inaudible) with my mom and Second Life, fine, it shall track me down.” But has not got there yet. So, is it that it is incredibly valuable vertical because the people who do it are fanatical about it, therefore by marketing to those people in that environment, you will connect that much better with them that it is worth it? Or will it cross the chasm, become this mass experience and then we will have brands that need to be represented and I say brands loosely but any marketer if you look at Larry Lessig is a law professor, he — who studies and focuses on digital media, he is very interested in Second Life and he has lectures in Second Life and he experiences — recently that have the Creative Commons Party and he was in Germany but he participated in Second Life.

So he missed the First Life but he was there in Second Life. If there are more Larry Lessigs out there then it could be an incredible emerging phenomenon. I will not opine, I am a big fan of the guys who are building it and that would be great for them if it happened and in many ways it would be great for all of us because it would give us another channel, another interesting way to interact both as people and as products and brands and marketers.

Jennifer Jones – PodTech

Very good, okay, so this has been David Hornik of August Capital partner and I want to make sure that he gives you his blog and his video blog addresses, so go for it.

David Hornik – August Capital

All right, well the blog is ventureblog.com. I have to admit it is still only audio. I have an ongoing debate. My podcast is called VentureCast and if you go to iTunes, you can search for VentureCast and find us or if you go to gruntmedia.com, you can find it as well. Craig Syverson who is my co-host on VentureCast is at Grunt Media and let me know if you like — give me feedback. This media is about feedback, so folks who are listening have things they want me to talk about or they want me to write about, let me know.

Jennifer Jones – PodTech

Yeah, know it is great because I — the only way that I have really been able to get feedback is through a survey that I have done instead of the old technology survey and it is really hard. I am always asking for feedback too, so again, thank you, David Hornik of August Capital and this has been Jennifer Jones and so until next week may all the voices you hear be MarketingVoices.

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