The Summer of PerBlue

It's that time of year again. Yes, it's summer time. This is when it's so nice outside it becomes increasingly difficult to stay inside and do things like code. The summer ahead may not be quite like the Summer of George, but it will still be a fun filled (yet productive) adventure.

Of all places to spend a summer, Madison is easily one of the best. Between sailing and boating on one of the lakes, having a beer at the Memorial Union Terrace, picking up some amazing items at the Farmers' Market, hanging out on the Capitol lawn at Concerts on the Square, plus a whole host of other activities, there's plenty to do and it's an amazing place to be. For some awesome shots of Madison scenes, be sure to check out this slideshow.

Besides routinely ranking as one of the top places to live and play, last week Madison was ranked as the 7th Most Innovative City in America by Forbes. This ranking factors in the ratios of high tech jobs and creative jobs, as well as patents and venture capital investment per capita. Madison did very well in the ranking and was right up there with San Jose (aka Silicon Valley), Austin, and Seattle (while fairing better than Boston, Chicago, and New York).

The University of Wisconsin likely had a crucial impact (directly and indirectly) on Madison's rank through a combination of the Wisconsin Alumni Research Foundation (WARF) and spin off university tech companies. A strong bio-tech community as well as a good number of established information technology and medical technology companies most likely contributed to many of the high tech jobs. Madison also has a strong and growing start-up and entrepreneur community which will continue to have an increasingly positive impact on the city.

It's an exciting time to be in Madison, and it's an exciting time for PerBlue. We've also discovered that we might (once again and again) be helping to save the world. A recent article in the New York Times highlights a study that suggests video games may contribute to a lower crime rate. From the article:

"Video games can not only provide hours of entertainment. They can also give people — especially young men, who play more than their fair share of video games and commit more than their fair share of crimes — an outlet for frustration that doesn’t involve actual violence.”

In a recession there is typically a noticeable increase in the crime rate, but over the last year (the same period Parallel Kingdom has been out - hum...) the violent crime and property crime rates have actually fallen around 5%. So there you go. Feeling violent? Take it out on thy PK neighbor, not thy real neighbor. Not that we endorse violence (the real world or parallel world kind) or anything, but hey...

Saving The Earth, One Parallel World At A Time

Spring has finally sprung, and it continues to be a busy time at PerBlue HQ. All of us have been pretty occupied working on new and awesome things for you. It's definitely an exciting time. Though we're busy, we still manage to sneak in the occasional StarCraft game, so don't worry about that one. We've even managed to bust out the frisbee a few times. There are also rumors that a PerBlue volleyball team is coming your way this summer.

In celebration of Earth day, we've decided to do some pretty cool stuff. To start off, we've made the entire virtual world of Parallel Kingdom carbon neutral. That's right, through a partnership with Powered Green the PK world now leaves no carbon footprint in the real world. Also from now through April 29, every $3 spent on in-game PK Food will go to offset an additional 100 lbs of CO2. So go buy some Food and help save the world at the same time!

Speaking of saving the world, Justin "Fireman" Beck was recently named one of the Top 40 Executives Under 40 of 2010 by InBusiness Magazine. Congratulations Justin!

We'll also be making some updates to the PerBlue website. The About section has already received part of its makeover. Be sure to check out the new What We Do and How We Got Here sections on there. A bit more to come.

The Unintended Consequences of Harming Angels

There is legislation currently on the Senate floor with a small section that could have a huge adverse impact on how start-ups operate. The Restoring American Financial Stability Act of 2010 (we'll call it RAFSA2010), introduced by Senator Chris Dodd, is designed to protect consumers and the overall economy from future economic crises. While many of the provisions in the bill do add necessary protections and safeguards to the high risk financial world, three sections of the bill could dramatically limit the amount of capital available to small businesses and entrepreneurs.

According to the US Census Bureau and the Kauffman Foundation, start-ups and businesses less than five years old created all of the net new jobs over the last 25 years. Over that time, angel investors were responsible for up to 90 percent of the funding these businesses received. This angel funding allowed these firms to grow and create jobs. In 2008, angels invested $19.2 billion in over 55,000 companies.

Now what exactly are angel investors? These are high net worth individuals who invest their own money in start-ups and small businesses. Angels provide the necessary investments many small businesses need. These are not investments in trading risky derivatives (which do not provide a value add to anything), but rather they contribute directly to innovation and job growth. By the current definition, an accredited angel investor must have a net worth of at least $1 million. The RAFSA2010 bill would raise the net worth requirement to $2.3 million. This would eliminate at least 2/3 of all current angel investors.

In addition to greatly shrinking the number of angel investors, the RAFSA2010 bill would make it more difficult for the remaining angel investors to invest by introducing new regulations and barriers. These barriers will complicate and delay investments by requiring a 120 day waiting period for investments to potentially be reviewed by the Securities and Exchange Commission, as well as make it difficult to raise money from angels in different states.

This will greatly hamper the creation of new businesses, and ultimately reduce the creation of new jobs by potentially 60%. In addition to making it more difficult to start a business, current entrepreneurs would also have a more difficult time finding new sources of funding, resulting in more possible business and job losses. These businesses need this capital to grow and create jobs, and without it, many will fail.

The RAFSA2010 bill was not intended to hurt small businesses and entrepreneurs. But these particular 3 sections of the bill carry huge unintended consequences that need to be addressed. The language used in these small sections needs to be clarified, and the adverse impacts need to be addressed. This legislation could negatively impact businesses just like PerBlue. There are no reasons that justify the introduction of these new regulations, and no positive benefit will be gained from them. In a time when creating new jobs is such a high priority, introducing new barriers and regulations that hamper the creation of new businesses and jobs does not make sense.

*Data and stats from the Angel Capital Association

Update - On May 17 a bipartisan group of Senators passed an Angel Investor Amendment to the RAFSA2010 bill. This amendment directly addresses the issues outlined above and removes nearly all of the portions of the bill that would have adversely affected angel investing. See the Press Release about this here. The full RAFSA2010 bill was passed by the Senate on May 21.

More Fiber, Please

We need more fiber in our lives. Generally you would expect to hear something like this from a doctor or see it written on a yogurt container. Now there's another source: Google.

Google recently announced they will be launching an experiment to bring “ultra-high speed broadband” to a trial city in the United States. Now how fast is ultra-high speed? Well, it's 1 gigabit per second, or about 100 times faster than average broadband speeds available now. Those are some big tubes.

There has been a tremendous groundswell in Madison around this opportunity. People from all areas of the community realize the significance of this kind of project, including the mayor, the rest of the city government, the school district, businesses, and many dedicated individuals. The high tech and start-up community has been especially active since the announcement of the project. This activity has been lead in part by members of Capital Entrepreneurs (which PerBlue is a part of). The official central point of Madison's effort is being coordinated through MadFiber.net, which was put together by a group now being dubbed the "MadFiber Cabal".

"Madison is a perfect fit for Google Fiber. We have a tech savvy, engaged population and we're already home to a local Google office," Mayor Dave Cieslewicz said. "We need the community's help to make our application as competitive as possible."

Now why is this whole Google Fiber thing such a big deal? Eating MadFiber.net Ice Cream from UW's Babcock Dairy is delicious, but having 1 gbps Internet service would be awesome... and completely revolutionize lots of things. The backbone of the entire Internet infrastructure is fiber. These ultra-high speed, mega capacity lines criss cross and interconnect the world.

So why would having fiber run to your doorstep be awesome? Well, it all goes back to how your computer connects to the magical Internet. Your computer's connected to a router in your house. Your router's connected to a Cable modem, DSL connection, or something similar which comes to your house via an Internet Service Provider (ISP). Your ISP connects your house with all the other houses in your neighborhood and those are then connected to other networks to form larger regional networks. Now, if you're lucky, these regional networks may then finally connect up with the Internet backbone itself. Or it might take another step or two.

This whole process is done mostly over old school copper wires. The available bandwidth is divided at each of these steps, resulting in a lower available bandwidth after each. Running a fiber line to your door minimizes the bandwidth loss caused by all that division as well as eliminates the inherent loss caused by using analog copper wires. Fiber would allow you to tap directly into the backbone of the Internet via an all digital, super fast signal. Your bits will literally travel at the speed of light.

This kind of connection will provide businesses and homes with reliable Internet that is amazingly fast, high capacity, and low latency. You won't have to even think about how long it will take to upload or download something. Your video conference streams won't be choppy and grainy. This type of bandwidth would allow your streaming video and video conferencing to be near real life quality- similar to that of Cisco Telepresence.

As with any major new technology, the first locations to get it will have a huge advantage over everyone else. This would result in a competitive advantage for local business (especially those in high tech) and would have a reverberating effect on all other types of businesses. This type of infrastructure would sprout new businesses and attract other businesses and start-ups to the area.

This just touches on why getting Google Fiber in Madison is such a big deal. We need your support to make the best case possible for selecting Madison as the trial city. Go to MadFiber.net for ways you can help out and support this effort.

2 - 3 - 100,000

The 2010 Winter Olympics have started, and we've got Olympic fever. The Olympics are all about rankings and numbers, so in that spirit, here are a few recent exciting ones from PerBlue:

The results of the Best App Ever awards are in. Parallel Kingdom was nominated in 4 categories. We were close, but we didn't take any firsts. Though much like the US's Ohno and Celski at the Men's 1500m Speedskating event, we took an exciting 2nd and 3rd. The results:

• 2nd for Best Augmented Reality App
  
• 3rd for Best MMO Game
  
• Honorable Mention for Best Use of Location Services and Most Creative Use of iPhone Hardware
  

Thank you to everyone who voted for PK, we appreciate your support!

In other news, Parallel Kingdom recently achieved a long time milestone. We now have over 100,000 PK user accounts. That's a lot of PK'ers from all around the world.

Some other fun numbers:
1015 Cities have been founded in PK. There are 1,240,861 Flags, which represent about 425,000 km² of claimed territory across the world. That may sound like a lot, but it's less than 1% of the Earth's surface. That leaves 509,647,000 km² of spacious unclaimed territory - go claim some!

Adventures in Mobile Advertising

(And the advent of the blank ad revolution.)
Like any good company looking to promote a product online, we recently started running online advertisements. We have been experimenting with multiple different ad platforms and methods, and have had varying success.

There's been a fair amount of press over the last few months regarding the current state of online advertising. The current widely adopted metric to measure the effectiveness of an online ad is the click through rate of an ad. The click through rates of online ads have been declining for years, and are horrendously low. Currently this rate is somewhere near 1%, and as low as .01% on some ad networks.

Something's not working here. On a good day, out of the 1% of people that actually click the ad, how many actually buy the product (or in our case, download it)? In our experience, that rate is somewhere near 2%. So if 1% of people actually click an ad, and 2% of those people actually buy or download the product, the overall conversion rate is a lowly .02% (yes, two hundredths of 1 percent).

Some argue that the click through rate shouldn't be used to measure the effectiveness of online ads. Even Microsoft thinks there's got to be a better way to measure the real effectiveness of online ads by applying traditional offline advertising metrics.

But what if all this arguing over increasing click through or conversion rates by a tenth of percent doesn't really matter? What if there was a bigger influence that made these click through statistics insignificant? Introducing: accidental clicks. How many ads are actually clicked in error? Being good engineers, we did a little experiment in an attempt to do a bit of error analysis.

Which one of these ads would you be more likely to click?

This one (PK ad):


Or this (Blank ad):

Yes, that is a blank ad. Our ad rep was a bit confused when we tried to start running the ad. Here's an excerpt from the email conversation:

Them: "Can you please resend the creative? I am seeing it as a blank image."

Us: "That should be the correct image. We are trying to step outside of the box and show the viewers a mystifying and curiosity invoking ad. We are hoping their curiosity will lead them to be delightfully surprised by our app description and the depth of our game."

Them: "I downloaded the ad again and I am still only getting a blank ad for the test ad. Can you please double check and ensure this is the right ad?"

Us: "Yes, this is the right ad. It is a completely white ad."

Now things get interesting. Both of these ads were run on the same mobile ad network appearing inside of various mobile apps. Both ads received around 100,000 impressions and were run in the US over approximately the same time period.

The PK ad click through rate: 0.35%
The Blank ad click through rate: 1.50%

That's right, our blank ad (the "mystifying and curiosity invoking" one) had a 4x higher click through rate than the real ad. Now granted, the conversion rate for the real ad (aka the people who clicked then downloaded our app) was much higher than the blank ad. But how is it possible that a blank ad has a higher click through rate than a real ad?

Maybe we just stumbled on a new paradigm in display advertising. Or maybe there's another explanation.

Do people dislike ads to the point that they will actively avoid going anywhere near them? In an ad on a mobile app, this would mean people have to avoid clicking (with their finger) on the banner ad. Solution: people don't put their finger anywhere near the ad. If people are so scared of the ad and are avoiding the possibility of clicking the ad in the first place, they are most likely not paying attention to the content of the ad.

So why would someone click on a blank ad? Our conclusion is that almost all of these clicks must be accidental. Granted, probably a few adventurous people were intrigued by the possibility of some white space and wanted to find out more, but it's highly unlikely that this would account for all these click throughs.

Most likely people were in an intense game of Tap Tap Revolution when their finger got a little too close to the banner ad and tapped it. But if the normal "accidental" click through rate (essentially the error rate) is higher than the average click through rates themselves, how can these click through rates be statistically relevant (let alone the methods for "improving" your click through rate by .1%)? Why bother with online ads at all?

This little experiment is by no means conclusive. Mobile advertising obviously works to an extent, but this whole blank ad thing brings up some interesting questions worth pondering. So put that in your milk, ponder away, and try out running a blank ad for yourself.

Things you shouldn't screw up

Justin (PerBlue's CEO) just completed a five part series on his blog called "Things you shouldn't screw up". These are a collection of posts featuring many of the things Justin (and PerBlue) have learned over the last few years about building a company. Here's the CliffsNotes version of what's covered:

1. Build the right product
2. Sell that product
3. Don't run out of cash
4. Don't let yourself ruin your company
5. Staff for talent and commitment

So if you're looking for some advice on starting a company, definitely check his posts out.

Also, just a reminder to vote for Parallel Kingdom in the Best App Ever Awards. Voting closes January 31 (this Sunday), so make sure you vote! If we win, we'll give out a sweet prize to our players.