2001 and 2002: With the emergence of "the warbloggers" post-9/11, as they were called, everyone feuded with everyone. Seriously. Everyone! (N.B. that account includes some serious misreading.) It was sheer chaos, a mass freakout that distended psychoanalytic space and time. There were even Denial of Service attacks. Dave Winer, the feudiest of all internetters, took on the world, briefly.

You won't click all those links, so just read the one where Instapundit agrees with Denton.

(Photo via Wonkette)

Here's what Doc says: He was originally diagnosed with a pulmonary embolism — blockage of an artery. That's what could've killed him. It didn't. He's on blood thinners now. But he's had bad reactions to the process of being hospitalized for the "PE." He's got a partially collapsed lung. He's retaining water. Most painful, a fairly standard exploratory procedure gave him pancreatitis — inflammation of the pancreas. You have a pancreas, but most of the time you can't feel it. Doc can tell you all about his right now.

Prognosis? Honestly, between Doc's painkillers and our own crying into the keyboard, we lost track of all the talk about cystic lesion this and endoscopic that. But here's the takeaway: Doc is going to suffer a lot for a few more days. In theory, he'll get better. In practice, he hurts like hell. He asked that we not name his hospital or give out his contact info. If you worry, he says, just send good thoughts his way. He'll keep posting updates. One thing's sure: When he's better, he's going to have a better metaphor for Web 2.0 accidentally killing the patient that anyone's ever dreamed of.

(Photo by dsifry)

In a wonderful piece of linkbait, Vanity Fair produced an illustration featuring a number of popular "blogs" arranged in a cartesian graph from "Scurrolous" to "Earnest" on one axis and "Opinion" to "News" on another. While we're trying to grasp how the 'Wag ended up on the earnest side of the scale, more confusing is the inclusion of Salon and Slate. Apparently, if you're not printed on paper, you're a "blog" — even though both publications predate the term. But where the chart really gets things wrong is in using the disembodied head of Amanda Congdon to illustrate online video program Rocketboom. If the authors or illustrator actually watched the show or read many of the listed blogs, they'd know that Joanne Colan took over as host after a very nasty and public departure from the show by Congdon. Keep trying, guys, you're bound to figure out this Internet thing eventually!

“The lack of evolution is disappointing to me. Back in 1996, it was going to be this brave new world where women were finally going to take control of their stories."

The girl utopia the early women of the Web have been holding out for? It's arrived, sandwiched neatly between tampon and diet ads. The only question is why we ever expected anything different. (Photo by Caterina Fake)

Tumblize actualized my crazy vision in ways I didn't think the internet even allowed for. They're poet/designers making haiku websites out of dreams.

Click to expand the images.

I'd long thought that Battelle's flip-the-bird photo, used here, was a reflection of his charmingly combative personality. As a founding editor of Wired, which set the tech world on fire in the '90s and helped inflate the bubble, Battelle failed to stack up the tall dollars. He founded The Industry Standard, which sold more pages of advertising than any other magazine in American in 2000 and then went bankrupt in 2001. Battelle, in short, has been adept at chronicling booms, but not profiting from them. Until now.

Battelle is just the latest entrepreneur to cash out before his company goes public, a practice once frowned upon in Silicon Valley. But Federated Media turned profitable last fall, we're told. Being cash-flow positive means never having to say you're sorry. And it also gives entrepreneurs leverage with investors that they never had in the '90s, when building Web companies was much more expensive.

So at last he's earned what they call in the Valley "fuck-you money" — enough money to simply walk away, should a job turn unpleasant. In fact, we hear that's what Battelle is planning to do, albeit temporarily. He's told investors in Federated that he plans to take a leave from the business to work on his next book, The Conversation.

Where Battelle's profane wealth may get him in trouble is with the bloggers he represents. Unlike him, most of them have yet to cash out, or even turn a profit. Federated Media's take of their advertising — typically 40 percent — strikes many as too high, though most have yet to try their hands at hiring and managing their own salespeople.

But they shouldn't worry. Having enriched himself, Battelle is now thinking of them. After hearing rumors that one of Federated's blogs was in merger talks, he approached the blogger and encouraged him to come talk to Federated first before taking an offer.

In other words, Battelle is now contemplating a blog rollup. Rather than see his customers picked off one by one, with their ad inventory walking out the door, Battelle may use some of the money he's raised to buy blogs himself. It only makes sense. He knows his customers' businesses well, since he organizes conferences, orchestrates redesigns, and performs other services besides for them, in addition to the mundanities of selling advertising.

Battelle likes to think of himself as more than just a business partner to his bloggers. He's their buddy. He's their pal! This bubble has everyone frothy, and the valuations may be making some of the bloggers under his care unduly giddy. While Battelle may enjoy a tipple now and then, friends don't let friends sell drunk.

• 0:40: WordPress.com has 140 million unique visitors a month, generating 600 million to 700 million pageviews.
• 2:30:
Mullenweg is bearish on advertising on social networks: "I like our position because it's around content. It's not around photos, or people trying to connect with each other."
• 3:30: And yet, he hasn't really thought about how his company's going to make money: "Monetization is something we think about, but I don't think we've had any brilliant ideas."

Likely because of the rumored privilege afforded to it by Google's search algorithm. Blogger blogs appear on the blogspot.com domain, which has high rank in search results, and Google makes it easy to run profitable AdSense text links on the site. That adds up to easy money.Researchers aren't clear if spammers have managed to compromise captchas through automation or simply by employing cheap labor, but if the latter, then even KittenAuth won't be able to stem the tide of spam blogs gaming keywords for clickfraud riches. Your move, Google.

Nothing has changed. I spend my time writing, reading, and puzzle-solving instead, and my stress levels are markedly down. Now I am absolutely convinced that I need to ditch my RSS reader permanently, and only read a handful of feeds on a start page like iGoogle or Netvibes.

There you have it: Microsoft gets to produce an awesomely cheesy video to pump up the sales troops — but in a way that lets them pretend to be air-quotes cool, resistant to such straightforward come-ons. PR then strategically leaks it, lets the blogosphere react predictably, and finds a gullible square of a tech reporter to declare victory on Microsoft's behalf.

Gizmodo has it right: Why is Microsoft wasting money on staging fake concerts? To which I'd add: Why are they then thumping their chests about how they "fooled" bloggers? Unembarrassed, Microsoft is now challenging competitors to make an even more ironic-fake-bad-but-not-really video. To see the Microsoft spin machine at work on such a worthless cause should give Google new hope.

The big market for us is the trade media. Companies like Reed Elsevier, Nielsen, Incisive and Informa play in this market, not these blogs.

And Ali is putting forward this odd ambition even as Hollywood solons are looking at an industrywide downturn, and their spokesrag Variety is for sale by Reed Elsevier. To quote another So. Cal.-based journo who's made a name for herself chasing personal foibles on a blog, Nikki Finke, "[W]hat if someone buys Variety and turns it into a real news-gathering operation and not just an echo chamber for the powers-that-be that control showbiz?" Seems both Ali and Arrington are aiming for the weakest members of the herd.

Or here's an idea, Sony: stop trying to milk profits and start giving consumers laptops that actually work out of the box.

The whole contrast-with-Google angle makes no sense, holds up to no scrutiny, and serves no purpose other than to reach the punchy conclusion that Apple is "irredeemably evil." By Kahney's logic, any company that is different from Google —- and clearly most companies are far more different from Google than Apple is —- is evil.

It's a dull knife. Gruber's argument, not Kahney's, founders on its specifics. When Kahney calls Jobs a "notorious micromanager," Gruber retorts that Google VP Marissa Mayer approves every minor change to the Google homepage. There's no comparison: Jobs is a screaming jerk who wouldn't last one minute in the cuddly Googleplex. Gruber's real argument, I suspect, is that he should be writing cover stories for Wired. John, why don't you just pitch Chris Anderson directly? That seems easier.

(Photo by Randy Stewart)

They endlessly, during the entire existence of LJ promote initiatives, whose only purpouse is to bring harm to LJ, its founders, their goal is to criticize, destablilize and ruin our reputation.

On whether threats to harass advertisers by incensed emos are serious:

Of course not. Where will you find such idiots that will call serious companies? It's one thing to call a newspaper in hope that they will give you 15 minutes of fame on their page. But a proper firm? The first thing you'll get asked is "so who exactly are you trying to reach? What is this about and why the hell should we care?"

Izbrannoe: Let's say I want to start a blog in LJ, but I hate advertising as a concept in our lives and I have no money for a paid account. I can't?

Nosik: Today you will not be able to start a blog in LJ. As you would not, for example, on mail.ru, google, yahoo... There no longer exists an entity on the web, which, without specifically being a charity, would refise to make money - be it from users or from advertising. This is normal, you don't walk into a store and ask for free products.

Let's say, I say to you, mr. Journalist, "I think you put an extra comma here". Your natural reaction is "Oh, you're right" or "Let's ask the editor". But if I come to you and say "Take away the comma or I will beat you." Will you really go checking your spelling after that?

In a situation where people are trying to scare and blackmail us, threatening to destroy our business, there are business reasons for not rewarding such behaviour. This is not just human psychology, which retaliates more the more it is pressed. Problem is that there's never been a successful company whose success was based on bowing to collective resistant forces. No decision — no matter how correct — should be based on pressure.

For the record, Valleywag is seeking to raise $10 million. What? For an equity stake in this blog? Are you an idiot? Nick Denton doesn't toss around shares like that Craig Newmark twit. We're hoping someone will just give us the goddamn money and go away.

(Disclaimer: Valleywag is published by Gawker Media. So is Gizmodo, a gadget blog which competes with Engadget. Not that we care. Can you explain the difference between them to us? They both have freaky commenters who are way too emotionally involved in MacBook "unboxings," whatever those are.)

Dissecting a Bankruptcy: ATMDirect

February 27, 2008

I thought it might be interesting to dissect a recent bankruptcy sale we were involved with. You might want to catch up by reading my post title, "Section 363 of the U.S. Bankruptcy Code". Those of you who have been following Nicholas Carlson's coverage of the Pay By Touch bankruptcy won't be surprised that the company is running their Chapter 11 reorganization as well as they ran their business. Pay By Touch operated a business unit here in Dallas (Irving) called ATMDirect. Our team spent the past month conducting diligence on the business and ultimately participated in the auction to purchase ATMDirect last week.

The local ATMDirect people (both current and former employees) were very helpful and simply wanted to keep their business up and running. The Pay By Touch people (in general) were less than helpful and at every turn seemed to be erecting roadblocks. The creditors hired a company called FTI to sell off non-core assets like ATMDirect and to reorganize the core operations of the parent company Pay By Touch. FTI installed Thomas Lumsden as 'Chief Restructuring Officer' who, by looking at his CV, seems to be very qualified for the position.

After our first meeting with the local ATMDirect people I was certain we wanted to make an offer for the assets. Evidently Thomas had set a bid deadline, which failed attract even a single bid. I called him and offered to serve as the 'stalking horse' so that an auction could be held. He suggested that he intended to draft his own asset purchase agreement (APA) and that he would be scheduling another auction in a couple of weeks. I suggested that it might be in the interest of the debtor to have one of the bidders (i.e. us) prepare the APA. Thomas didn't agree and in a confusing twist became somewhat belligerent. Our subsequent communication was exclusively electronic, much of it rather silly.

Despite the fact that I was in contact with Thomas on a daily basis, we didn't receive his APA until two business days prior to the deadline for bids. There simply wasn't enough time to get our lawyers to review the document, circulate it to my team and complete it in time for submission to Pay By Touch. Some members of my team assumed this was by design (i.e. the conspiracy theorists in my group), while I simply assumed it was a matter of incompetence. This brings me to my thesis: 'Bankruptcy is inherently chaotic and as a result creates real opportunity for anyone willing to endure the process'. Thomas' sale process was broken and a result there was a good chance very few bidders would be willing to stay in the game resulting in a lower price.

We began digging into the business and we quickly realized that the asset value of the associated personal property (i.e. servers, networking equipment, computers and office equipment) was worth between $300,000 (quick and nasty sale) and $600,000 (current value based on recent ebay sales). Within two weeks we had a buyer willing to pay $475,000 for the equipment. With this information we began attempting to value the associated intellectual property (a lovely patent) ultimately finding an IP litigation boutique who suggested that (depending on the prosecution history) that they would buy litigation rights for the patent for $750,000 at a minimum. It wasn't my intent to immediately liquidate the equipment or sell off the litigation rights of the patent, but these data points helped me understand the minimum value of the assets ($1.2MM). One interesting data point was that Pay By Touch had bought ATMDirect in 2006 for approximately $8MM ($4MM in cash and the remainder in debt/stock).

Working under my two assumptions a) the process was broken and b) the assets were worth $1.2MM I spent my weekend marking up the debtor provided APA. I settled on a total bid of $1MM ($250K in cash and $750K in a 24 month note). My business plan allowed us to attempt to execute on the underlying business (there were significant risk factors) for up-to 24 months and ensured that if the business failed we would break even (on a cash basis, obviously our time would be lost). We were prepared to bid as much as $750,000 cash plus up-to $500,000 in debt for a total bid of $1.5MM (risking around $700K in cash at this price).

The day of the auction arrived and two other bidders were present. After several hiccups on the teleconference Thomas explained to us that the prevailing bid was $1MM cash. This was more cash than I had wanted to bid and after a few moments of consideration I told him we weren't interested in meeting the offer. I was disappointed, but I learned long ago not to bid on emotion. The two remaining bidders remained and Thomas terminate our connection to the conference bridge. To our shock and dismay on Monday we learned from the debtor that the prevailing bidder paid $600,000 cash for the business. The sale hearing had already occurred earlier in the day and as we had assumed Thomas had given us accurate information we had no reason to object to the sale. Had we known the sale went through at the $600K price we would have certainly objected to the sale.

This morning we discussed our options and instead of dragging the process out in court and objecting to the sale we have decided to move on as it is our understanding and belief that the prevailing buyer would have bid as much as $800,000 cash. This bid would have been higher than ours. The only damage seems to have been borne by the creditors. I am no expert, but within fourteen days I was able to secure buyers for key assets for a cash price of $1.2MM; however, after months of 'marketing' and tens of thousands of dollars in legal fees Thomas Lumsden was only able to recover half of that amount. What is wrong with this picture?

Everything, but at the end of the day the important thing to remember is that it is the very process that can create value for you as a buyer. Think about the motives of the parties involved. The seller (i.e. the debtor) is being run by employees who almost certainly don't have a future with the company. How concerned are they going to be with their duty to obtain the highest and best price for the creditors? Not very. Ironically, according to insiders at Pay By Touch, in this case the creditors hired FTI to sell off assets and agreed to pay them a percentage of the sale price. Anyone would assume that Thomas Lumsden would be more than interested in getting the highest and best price for the assets. Again, in this case it was KEY that we understand the motives of everyone involved. For example, I couldn't understand why Thomas wanted to draft the APA instead of having one of the bidders bear this cost. But it didn't take long to figure out that, the costs associated with the process are not deducted from his firm's commission. Secondly, by controlling the APA he was able to control the definitions, definitions that would dictate how much money he would make. Specifically, he defined the purchase price as not only the price paid by the buyer, but by the value of the 'assumed liabilities' (i.e. executory contracts such as the lease). Our fatal flaw was realizing this too late. In our APA we rejected almost all contracts of the seller (the most powerful feature of a 363 sale). We felt that we could negotiate new contracts on better terms. From Thomas' point of view, $600,000 plus the assumed liabilities was more valuable to HIM than $1.5MM without the assuming liabilities. Of course, from the secured creditors perspective, the $1.5MM would have been far more valuable as the assumed liabilities would have never come into play (i.e. none of them were secured).

Turns out the creditors are VERY aware that their interests aren't being protected. Just last week according to Nicholas Carlson, "On Friday, a party of creditors filed a restraining order with a court in Los Angeles to prevent management from "shutting down the operations of Pay By Touch Payment Solutions"- its main business."

A note to prospective Lois Lanes: We hear Marshall is unattached. Time to indulge your Daily Planet newsroom fantasies?

Hi, I have a laptop. Is it my computer? I have to scroll to the right to read your page. Have a wonderful evening. Janie

Our admittedly biased answer: Duh. We're not alone in this opinion. Leitch wrote his piece for GQ and it ran in an issue that's been out for weeks. He then quoted from it for the Valleywag post. Since when must a reporter ask nicely before writing a piece on someone? According to Cuban fanboys, noted journalism experts all, since forever. Some even believe that Cuban and GQ signed a contract before the magazine could proceed with an article. Anybody up for some mindless outrage?

We're sure that he doesn't care about ethics, only blog hits and garnering attention for increased book sales. — Miguel

Totally not ethical. He basically lied to you and then used your interview for his own personal gain. I'd be more than upset with him and hopefully, the magazine is as well. That was very unprofessional in my opinion. His work for the magazine should be kept separate from his blogging life. — tiffany

Completely unethical, possibly illegal. The magazine that paid for his travel and wage, likely owns all of the intellectual property generated. When the author took that property and used it for his own benefit outside of the company on blog, he may have violated the law. Even if he did not break the law, it was unethical, and bad journalism. These are new issues that have to be tested and figured out though... — PRoales

Oh, did we mention that Yahoo Research Berkeley is one of the locations rumored to be on the chopping block?

Expect Yahoo to "dump some featured bloggers" and other content creators for sites like Yahoo Food, Tech, and Finance, this source said. But don't expect a major bloodletting. "The cuts are so small that this is more like a repurposing of headcount," he says.

Where have I heard that take before?

Not updated since: October 24, 2007
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Yes, it was One Laptop Per Child's XO. The owner, who was being interviewed by some Web publication, told us that he "really liked" the OLPC and thought it had "great potential" to change the lives of children in the developing world. Then he went on a tangent about how the MacBook Air was too expensive and all we really needed was the OLPC because we could all load free software on it and then the world would be a better place. Then he started talking about how great socialism is. Welcome to San Francisco, but really, isn't he at the wrong conference?

Some more pics from the blogger lounge:

• No protective sleeve for press room coffee cup.
  
• Photo credential only allows you to take pics of booth dudes, not babes.
  
• Shocks from a designer Taser anytime you roll your eyes at a vendor's use of jargon.
  
• Mandatory lunch with Scoble and Calacanis.
  

We have been informed of inappropriate behavior on the show floor by a credentialed media attendee from the Web site Gizmodo, owned by Gawker Media. Specifically, the Gizmodo staffer interfered with the exhibitor booth operations of numerous companies, including disrupting at least one press event. The Gizmodo staffer violated the terms of CES media credentials and caused harm to CES exhibitors. This Gizmodo staffer has been identified and will be barred from attending any future CES events. Additional sanctions against Gizmodo and Gawker Media are under discussion.

The employee in question, Richard Blakeley, is clearly credited, so it shouldn't be difficult to "identify" him, though both Portfolio and Silicon Alley Insider failed to get that essential detail right. Blakeley tells us that he has received "no notice at all" from CES about the banning. Though, seeing as how CES is over, we've got a year for this to all blow over. And Blakeley has a year to think up another stunt.

Entrepreneurs You guys think money is everything. That is, you think money is some sort of universal currency into which anything can be converted, and which can be converted to anything else.

• Good writing is one of the things you can't buy with just cash. Bill Gates, the richest man in the world, has proven that again and again.
• Even when you guys mean to be helpful, you get it all wrong. (A) You encourage me to demand more money from my editors. The only thing they'll pay extra for is being famous, because that sells more copies without buyers having to read the article first. (B) You offer to let me "pick up a few extra bucks" by writing your kids' college entrance essays.
• Here's an idea: Pay me to mention your company and/or product in one of my articles. Not that I would, but I'm sure someone else will. The astounding thing is in 11 years I've been offered money for everything but a covert endorsement. You guys have a blind spot there.

Engineers It's hard to be smarter than everyone else, isn't it? You tech people never ask anything about my job. Instead, you explain it to me.

• You just know that my life as a professional writer must be exactly like your life as a professional software developer or sysadmin. Salespeople must come by my desk and demand I change my articles so they can close a big deal, right?
  
• You're 100% certain that if you wrote the article instead of me, it would have been better. Lucky for you, your fellow engineers are like string theorists: They'll praise this assertion for its elegance and daring, instead of asking you to prove it with a real-world test.
  
• You'll explain to me that my ideas for articles start from press releases, and must be reviewed prior to publication by the companies I write about. If I recommend your competition, it must mean they bought an ad. You got this worldview from your company's PR lady. You have a crush on her.
  
• Do me a favor: 34 percent of the Internet is comments from engineers that begin, "It is unsurprising to me that ..." Look, we get it. Nothing surprises you. So it's unsurprising to us that it's unsurprising to you. So shut up already.

Bloggers There is, in fact, a special circle of hell reserved for you. You're keeping it real! Real long, and real dull.

• The only other fields where people spend all their time bragging about themselves and insulting their rivals are talk radio and gangster rap. There's your level of intellectual discourse.
  
• Jack Kerouac? He had an editor. Allen Ginsberg? Spent months rewriting "Howl." Andrew Sullivan? Face time with the world's best editors, and he still puts me to sleep when he writes solo.
  
• Free advice: Every time you type the words "not so much," or "the internets," or "Techmeme," reach for that key that says DELETE and press it a few times fast. You're a better writer already!

(Did you notice? I don't hate PR people. Sure, I filter all messages with "for immediate release" or "embargo." But you guys are OK. It helps that you pick up the tab — not the free drinks, but the principle of the thing.)

Nick Denton's new pay scale — more to the point, the reactions to it — prompted me to write all this down. The thing that ties entrepreneurs, engineers and bloggers together is they all think they know everything. If you can suffer through 150 know-it-all posts, you'll find that no one got it right, on two counts.

• I hardly know who Nick Denton is. He emails us all "please log out of nexis" once a week, and has posted one comment to my work: "This post breaks the first rule of internet argument." Since there's only one rule of Internet argument and it's "Don't be boring," I ignore him. I'm logged out of Nexis already.
• Denton's new pay scale works like this: Instead of autobilling him twelve bucks a post, I'm now paid a flat fee in exchange for a minimum number of posts. There's some traffic bonus, but whatever. The important thing is that my extra posts don't cost Denton anything. So I can now post anything I want without feeling guilty. Here you go.

1. Facebook stays independent and private, strikes a meaningful deal that legitimizes its business plan, and buys a startup.
2. Born out of the writers' strike, at least one "Funny or Die" style site gets big buzz and maybe even gets bought, but it fails to produce any videos near the quality of FoD or Super Deluxe.
3. Google releases some limited version of voice search beyond GOOG 411. During the year, the company's stock tops $800.
4. Digg sells to a major media company for at least $200 million, and founder Kevin Rose starts a non-web-based company.
5. YouTube announces it's adding HD video, but the feature doesn't arrive until 2009.
6. Gawker Media, publisher of this site, starts a men's site and a Web show.
7. Yahoo suffers major layoffs, leading the press to dub it the next AOL.
8. Yet AOL is spun off and reframes itself. At the end of 2008, the company's future is still uncertain.
9. Apple releases a second-generation iPhone, and at least one New York Times article tries to draw a "middle class/rich" line between those who upgrade and those who stick with the first generation.
10. A new videoblogger emerges as the go-to example for slick independent daily vlogging, following Amanda Congdon and Ze Frank.
11. Tumblr, the pared down blogging service, enjoys the popularity that 2007 brought Twitter.
12. Twitter remains independent and spins off a new service.
13. The Internet again fails to drive one presidential candidate to success. So does Chuck Norris.
14. Jason Calacanis, still running his online directory Mahalo, starts another project.
15. A new meme started in a geeky part of the web infiltrates the "normal" population even more deeply than LOLcats.
16. Yet another e-book reader comes out and no one cares.
17. Blog search engine Technorati collapses after failing to get enough funding to stay afloat.
18. The Wall Street Journal announces it will soon be free online.
19. Blog platform maker Six Apart, having spun off LiveJournal and rearranged its exec staff, gets bought.
20. Dell screws up the good will it won in 2007 with another customer-service or bad-parts scandal.
21. Net Neutrality takes another hit from a telco-friendly Congressional bill.
22. Second Life plods along.
23. The TechCrunch blog network lands a regular TV appearance, if not a show.
24. The country tires of the last round of famous-for-being-famous celebs, and gossip blogger Perez Hilton's TV show gets cancelled.
25. A minor medical incident renews the "can Apple survive without Steve Jobs" argument.