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To: stockman_scott who wrote (841)2/25/2012 10:24:29 AM
From: Glenn Petersen
1 Recommendation   of 1459
Why Dropbox Is A Major Disruption

Bill Gurley
Posted on February 23, 2012.

Back in October, Techcrunch announced that Dropbox had raised $250mm at a seemingly absurd valuation. Many firms, including my firm Benchmark Capital, participated. When this happened, many people asked us why this was a special company that would cause us to break our standard investment paradigm. They didn’t quite understand why this was a company that deserved once-in-a-generation special attention.

The first answer to this question is rather straightforward, but not earth shattering. Drew Houston and his team had taken a hard problem — file synchronization — and made it brain dead simple. Anyone that had used previous file synchronization programs, including Apple’s own iDisk, constantly encountered state problems. Modifications in one location would get out of synch with those in another, ruining the entire premise of seamless synchronization. It wasn’t that these other companies did not understand the problem, it was just that they could not execute on the solution. The Dropbox team solved this, which was a critical innovation.

Although this was critical, nailing technical synchronization would not necessarily warrant outsized valuations. In order to be worth $40B one day (which is 10X the $4B reported round, the objective return of a VC investment), the company would need to hold a place in the ecosystem that is far more strategic than that of a simple high-tech problem solver. So what is it Dropbox does that is so special?

This evening, TechCrunch reported that Dropbox would automatically synch your Android photos. Once again, someone could suggest “so what, how hard is it to do that?, and why is that worth billions?”

Here is why. Once you begin using Dropbox, you become more and more indifferent to the hardware you are using, as well as the operating system on that device. Dropbox commoditizes your devices and their OS, by being your “state” system in the sky. Storing credentials and configurations of devices, and even applications are natural next steps for this company. And the further they take it, the less dependent any user becomes of the physical machine (HW and SW) that is accessing that data (and state). Imagine the number of companies, as well as the previous paradigms, this threatens.

That is a major, major deal. And it comes at a time where there are many competing platforms on both desktop and mobile. This “unsure” market backdrop ensures the need for a cross-platform solution and plays right into Dropbox’s hand. You can lose your desktop computer, you can lose your smartphone. It doesn’t matter, because all you really care about is in the Dropbox cloud.

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To: stockman_scott who wrote (841)3/4/2012 12:20:00 AM
From: Glenn Petersen
1 Recommendation   of 1459
Zynga is transitioning its gaming cloud platform from Amazon to its internal Z-Cloud platform:

Zynga's play platform a big test for its cloud computing prowess

By Larry Dignan
March 2, 2012, 6:37am PST

Summary: Zynga has transitioned from Amazon Web Services to its own Citrix-enabled Z-Cloud. That Z-Cloud will be tested as becomes a destination.

Zynga’s move to create its own platform and Web service for game developers will be a big test for its cloud computing infrastructure.

The game company on Thursday outlined its new platform. In a nutshell, will become a destination for games. The company will also diversify away from Facebook, which accounts for most of Zynga’s distribution. Zynga will also open up its platform to third party game developers.

None of those items would be possible without Zynga’s Z-Cloud infrastructure. That infrastructure relies heavily on Citrix software and virtualization technology.

The launch of Zynga’s platform is notable because the company has totally revamped its approach to cloud computing. In July, Zynga said it would file for an initial public offering and noted that Amazon Web Services was its background. On July 1 Zynga said:

A significant majority of our game traffic is hosted by Amazon Web Services, or AWS, which service uses multiple locations.

On Feb 28, Zynga’s annual report was filed with some word tweaks:

In the fourth quarter of 2011, AWS hosted approximately one-third of our game traffic.

Zynga executives highlighted the move from AWS on the company’s fourth quarter earnings conference call. Zynga operating chief John Schappert said:

We have built our own infrastructure, the Z-Cloud, to handle the tens of millions of players we serve each day. We migrated a number of our key games over to the Z-Cloud, which provides ongoing network savings and enhanced performance for our players. By the end of the year, nearly 80% of our DAUs (daily active users) were hosted in the Z-Cloud, compared to just 20% at the beginning of the year. Our technology sets us apart from other companies in our space and helps our games scale higher and perform faster while keeping costs down.

In other words, Zynga is controlling more of its own destiny. With the launch of its game platform it diversifies away from Facebook. With the scaling of Z-Cloud, Zynga controls its infrastructure fate too.

Zynga’s engineering blog has key details about the migration from AWS to Z-Cloud. CTO Allan Leinwand said:

Between 2009 and 2011, we increased our physical server capacity by two orders of magnitude. We turned zCloud into a faster and more automated system. For social games specifically, zCloud offers 3x the efficiency of standard public cloud infrastructure. For example, where our games in the public cloud would require three physical servers, zCloud only uses one. We worked on provisioning and automation tools to make zCloud event faster and easier to set up. We’ve optimized storage operations and networking throughput for social gaming. Systems that took us days to set up instead took minutes. zCloud became a sports car that’s finely tuned for games.

As for vendors, Citrix gets the biggest win here. Citrix executives have been talking up Zynga as a reference customer for quite some time. Why? Zynga is using Citrix’s XenServer and Cloudstack to deliver its services. Sameer Dholakia, general manager of cloud platforms at Citrix, outlined some of the Zynga economics at a Pacific Crest conference Feb. 15. Dholakia said:

Zynga was Amazon’s single largest customer. They were spending literally north of a $100 million a year renting infrastructure from Amazon. They needed it for elasticity. What they didn’t know, if I put out a game, was I going to get a million users, 10 million users, 50 million users? They had no idea. But once they did know, then you can actually build capacity to it. And so they have basically built what they call a Z-Cloud, a Zynga cloud, that is an Amazon style cloud on premise on our stuff. And they needed CloudStack and XenServer and all this stuff underneath it. And so this is where all of our suite comes together and this is how we make money.

Overall, Zynga found it more cost effective to build out its cloud capacity internally once it could benchmark its traffic spikes. In addition, Zynga is now a cloud provider. Piper Jaffray analyst Michael Olson noted:

We believe could alter the Zynga growth story going forward. Importantly, represents a reclassification of Zynga’s business model by adding other small-to-mid sized developers as customers. We believe the service is analogous to Amazon Web Services and Fulfillment by Amazon as it opens Zynga’s existing technology infrastructure to third parties. This new model is also consistent with Zynga’s core competency of analytics and cross promotion.

The economics for Zynga go like this:

  • According to Dave Wehner, CFO of Zynga, the company will lower its cost of revenue over the next 18 to 24 months as third-party hosting costs decrease. Wehner said that Zynga plans to “roll off the majority of those third-party hosting arrangements.”
  • Zynga’s capital expenditures in the fourth quarter were $50 million, down from $63 million in the third quarter. Most of that spending is focused on Z-Cloud. For 2011, capital investments were $238 million.
  • The building of its own infrastructure will help the bottom line. Zynga can depreciate its gear and lower quarterly expenses. “We believe this investment will have a short payback period and enable us to expand gross margins in the long term,” said Wehner.
Now all Zynga has to do is keep Z-Cloud humming so it can handle traffic spikes. In any case, Zynga now controls its own fate—distribution and infrastructure—much more than it did a year ago.

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To: stockman_scott who wrote (841)3/4/2012 11:42:39 PM
From: Glenn Petersen
1 Recommendation   of 1459
The cloud goes public

The market seems to be welcoming business-software IPOs with open arms, provided they offer some cloud computing capabilities. They are not, however, being met with the critical scrutiny Facebook has received.

By Kevin Kelleher, contributor
CNN Money
February 27, 2012: 10:35 AM ET

FORTUNE -- Facebook may be grabbing the lion's share of IPO news coverage these days as the social network prepares to raise $5 billion from the public markets. But even as Facebook's planned IPO seems to be drawing some critical scrutiny, several smaller IPOs that went public under the banner of cloud computing are faring much better.

The latest example is Bazaarvoice ( BV), which sold 9.5 million shares at $12 a share, above the initial range of $8 to $10 a share. Last Friday, on its first day of trading, Bazaarvoice closed up 38% at $16.51. The Austin, Tex., company monitors how company products and services are discussed on social networks and review sites. In some ways, Bazaarvoice is a test for bigger-name IPOs coming up -- Facebook as well as review site Yelp notably -- but since it hosts much of its word-of-mouth management software online, it's also grouped together with other recent cloud-computing IPOs.

A week earlier Brightcove ( BCOV) went public, rising 30% on its first day of trading. Brightcove, which offers a cloud-based platform where its customers can publish online videos, has held steady since then, closing last week at $15.10, or 37% above its offering price. The firm's services are used by companies ranging from General Motors ( GM) to Electronic Arts ( ERTS).

There are some reasons for those warm welcomes. Both Bazaarvoice and Brightcove are experiencing the kind of healthy growth that investors like to see in newly listed companies. Bazaarvoice saw revenue rise 67% in its fiscal 2011 and 65% during the nine months through January 2012. Brightcove's 2010 revenue grew 21% and the pace picked up last year, rising 45%.

Both also have metrics that -- during recent, finickier IPO markets – have caused some IPOs to falter or not even get out the gate. Both posted net losses during their past two fiscal years, thanks largely to operating expenses that ate up most of revenue. And both saw negative cash flows during the same periods.

Neither Bazaarvoice nor Brigthcove is generating enough money yet to finance its own operations. Bazaarvoice says the upfront costs of acquiring new clients, coupled with the recording of revenue over an extended period, caused the negative cash flow. Brightcove also cites deferred revenue as well as accounts receivable because of an increase in new customers.

That can be seen as a red flag for IPO investors, since it can signal a company that's desperate for cash but that may not have a plan to become profitable. In these cases, being involved in the cloud industry is enough to give them a mulligan.

And there is some reason for investors to be optimistic. As cloud-computing companies scale up to take on more customers, their infrastructure costs don't rise as quickly. But there are also plenty of risks: any hot tech sector is bound to lure in new competitors, many of them with deeper pockets than startups that have been burning through cash.

Earlier this year, two other cloud companies enjoyed successful IPOs, each offering business software for specific industries. In late January, Guidewire Software ( GWRE), which offers web-based software for insurers, raised $116 million in an offering that listed its shares at $13 a share. The stock, which rose 32% on its first day of trading, is now 81% higher than its offering price. In early February, Greenway Medical Technologies ( GWAY), which helps physicians manage patient data, went public at $10 a share, raising $67 million. The stock also closed 30% up on its first day, and is now 45% above its offering price.

Greenway showed a net profit in its fiscal year through June 30, but slipped to a $406,000 net loss in its most recent quarter. Guidewire is the only consistently profitable company of the four recent cloud IPOs, reporting a $8.3 million profit last year before taxes and $7.9 million profit in its most recent quarter.

All of which explains why Guidewire is the best performing stock of the four cloud companies to go public in recent weeks. Its success seemed to pave the way for cloud IPOs that were significantly smaller in revenue and that had yet to post a profit. But somehow they have all managed to receive warm welcomes in a IPO market that is not always kind to red ink.

It may be chalked up to cloud mania. Or it may be Wall Street priming its IPO for more web-based offerings ahead of the mammoth Facebook deal. It's very much in the interest of Facebook -- and its investment banks -- to see web IPOs perform well after they debut. But recent history shows that many web offerings that start strong out of the gate languish after a few months.

That may be the case with these cloud IPOs as well, except perhaps for Guidewire. For companies that are losing money and burning through cash, they are priced richly: Greenway is trading at 4.5 times its historical revenue, Brightcove is trading at 6.1 times, and Bazaarvoice at an expensive 14.6 times revenue. If investors were to put the kind of critical scrutiny to these stocks that analysts and reporters are applying to Facebook's financials, they might not be faring so well.

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To: stockman_scott who wrote (841)3/6/2012 7:47:20 AM
From: Glenn Petersen
1 Recommendation   of 1459
Business Cloud Consulting Is Consolidating

New York Times
March 6, 2012, 6:41 am

Cloud-based business software has come of age: the consultants are consolidating, investors are placing bigger bets, and the online giants are aiding their smaller allies.

Cloud Sherpas, an Atlanta company that helps companies use Google’s online word processing and spreadsheet business, called Google Apps, is merging with GlobalOne, a New York consultancy that specializes in helping companies use the business productivity applications from The new company will keep the Cloud Sherpas name, and is picking up a $20 million investment from Columbia Capital.

The resulting company, with over 1,500 business clients, will be the largest so-called cloud service provider, the industry name for a cloud consultancy for business applications. These new applications are intended to replace existing on-site software from companies like Microsoft and Oracle.

In addition to its traditional work of adapting legacy enterprise computing systems to a cloud computing environment, David Northington, Cloud Sherpas’s chief executive, said the company will also offer collaborative and mobile strategic advice and applications.

“Google and Salesforce are aware of what we’re doing, and they’ve had a very positive reception about our plan,” he said. “Using Google Apps leads to Salesforce work, and when they connect to Salesforce, it leads to more Google work.”

In addition, he said, Cloud Sherpas is looking at ways it can offer services related to other cloud enterprise software companies, like Workday.

Executives at Google and Salesforce confirmed that they were aware of the deal, and happy about its strategic implications. “This is another indication of the growth we’re seeing in our business,” said Ron Huddleston, the senior vice president for business alliances at Salesforce. “There is a vision here of a new kind of consultant, who can build collaborative services, connect companies to their customers, and in the longer term connect products themselves into a social network.”

Last September, Salesforce initiated a $50 million investment fund for cloud service providers, in particular for developing skills in building cloud-ready mobile and social applications. Mr. Huddleston would not comment on whether Cloud Sherpas had received some of that money.

Unlike the traditional consulting services provided by companies like I.B.M. and Accenture, cloud service providers tend to provide companies with shorter-term services like connecting a company’s internal human resources software to a more generic Google App. The consultants also frequently charge clients a small recurring fee, instead of a large one-time fee. There is more on their business model here.

Mr. Northington said these characteristics, along with a bias to keep offering their older and more profitable products, will make it hard for traditional consultants to compete for cloud services provider business. “I.B.M. and Accenture could offer what we do, and they almost certainly will say they will,” he said. “We don’t have a competing business across our halls, we can speak without an internal conflict.”

While a bigger firm could buy Cloud Sherpas, Mr. Northington said, a more likely suitor, as well as an ally for his company, would be a computer hardware manufacturer that is looking to move into cloud computing technology and needed consulting as part of its sales and service strategy. “We are committed to long-term growth,” he added. “We want to bring a full spectrum of cloud offerings to customers.”

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From: Glenn Petersen3/11/2012 8:03:39 PM
2 Recommendations   of 1459
h/t Bill Hammond

Oracle has a cloud computing secret

By George Gilbert, Tech-Alpha
Mar. 10, 2012, 9:00am PT

There’s a reason Larry Ellison called cloud computing “ nonsense” in 2009 and why he still won’t permit Amazon-style metered pricing for Oracle’s mainstream database and middleware. A traditional 11g database license that today costs $2.8 million up front would cost less than $9 per hour using Oracle’s mySQL on Amazon. (Keep reading to see why this apples-to-oranges comparison is valid.)

We’ve seen a similar scenario play out before — back when IBM mainframes ran mission-critical applications on legacy databases. IBM actually pioneered relational databases, but it was conflicted about selling the lower-priced, lower-margin servers needed to run them.

These servers had the price-to-performance ratio customers needed for the performance-hungry RDBs. So a new generation of infrastructure vendors — led by DEC, HP, Sun, Microsoft and Oracle — disrupted the old IBM platform. Just like IBM, Oracle has the technical wherewithal to compete with the new databases that are powering cloud-based applications, but they’re conflicted about how to handle metered pricing in these environments.

Metered pricing disrupts old business models

We are in the midst of at least two technology disruptions. But as Clayton Christensen described in “The Innovator’s Dilemma,” disruptions are more often about addressing the needs of “un-served” and “over-served” customers than they are about revolutionary technologies. Web 2.0 apps are a perfect example of customers over-served by Oracle’s enterprise database. During the dot-com bubble, Oracle’s enterprise database ran on big Sun and EMC boxes and powered both Web and SAP-class applications. Since then, however, untold numbers of Web apps moved to the low-end and less expensive mySQL as part of a migration to the LAMP stack.

The second disruption is reaching un-served customers in social media and other new markets who are building big data applications with new levels of data volume, variety and velocity. These customers are often using the SMAQ stack or the still-emerging class of NoSQL or NewSQL databases.

Amazon enabled both of these disruptions by offering two critical features. They enabled on-demand delivery with elastic capacity, using hourly metered pricing and the ability to automate complete control of the remote hardware infrastructure, as Scalr CEO Sebastian Stadil recently explained to me. (Scalr manages applications for thousands of customers on Amazon and other service providers.)

Traditionally, the most challenging disruptive innovations force incumbent vendors to change their business models. Oracle clearly has the technical wherewithal to build databases that meet the needs of Web 2.0 and big data applications. But changing the resources, processes and values that underpin its business model in order to support metered pricing will be immensely challenging.

A closer look at traditional and metered prices

Even if Amazon fully supported a typical Oracle configuration, Oracle’s bread-and-butter enterprise edition database in a two-node cluster with RAC and caching on Amazon’s largest EC2 databases would cost more than $900,000 in upfront licensing fees. But according to Scalr’s data, a typical application runs most of the time at only 40 percent of its peak capacity. Since Oracle requires buying licenses for peak capacity, a $900,000 cluster would be upsized to $2.3 million. With the obligatory pre-payment of 12 months’ maintenance, the initial commitment totals $2.8 million.

Compare that to a baseline cost of $5.20 per hour for the same configuration of mirrored mySQL database servers. Peak demand would top out at $12, but it would hit that only periodically, such as during a holiday shopping surge. Scalr’s data also indicates that when capacity is averaged out between peaks and a 40-percent baseline, it comes out to 60 percent of peak capacity. So with metered pricing, if we start from $12 an hour for peak capacity, that totals an average cost of $8.70 an hour, or $19,000 per quarter or $76,000 per year.

The traditional, upfront model has additional charges. According to Michael Crandell, CEO of RightScale (a company that has launched more than 3.5 million servers for customers on Amazon and other service providers), managing the full application lifecycle may require additional licenses. Server licenses for use in quality assurance, load testing, staging and standbys for failover might not be included in the production license. Add those to the $2.8 million.

How metered pricing disrupts Oracle’s business

The most important number to traditional enterprise software companies is their total revenue during the quarter they make a sale. The bigger that number, the more profitable the company looks after subtracting the heavy, and relatively fixed, upfront expenses for sales and marketing and R&D. Oracle today recognizes immediately $2.3 million after subtracting the 12-month maintenance subscription of $0.5 million from the $2.8 million total.

At the risk of greatly over-simplifying its published income statement, let’s say that Oracle would then subtract one-third, or $750,000-plus, for sales and marketing and R&D. (In reality, the sales and marketing expense for license revenue is actually higher, because follow-on maintenance services take little effort to sell, and dwarf the license revenue). The remaining $1.5 million would be Oracle’s profit margin for the quarterly reporting period when they made the sale. Now subtract that same $750,000 in expenses from the $19,000 in quarterly revenue under metered pricing. That comes to a loss of $730,000 for the quarter in which the sale is made.

In fairness, these metered revenue streams would add up on top of each other. But the point is that the transition to metered pricing would dramatically erode Oracle’s revenue and 45 percent of its operating profit margins. That is why Oracle is resisting metered pricing.

The bottom line

Contrary to Oracle’s claims, neither its Exadata database machine nor its database appliance is a cloud strategy. Both strategies base their pricing on peak capacity, not on elastic metering. Furthermore, discrete hardware is the opposite of cloud infrastructure, which enables near-infinite capacity on demand. Like IBM during the client-server transition, Oracle has the technology to address customer demand. It is just conflicted about the business implications of cloud computing’s metered pricing.

George Gilbert is a co-founder at TechAlpha Partners, a consultancy that works with vendors serving the enterprise market, startups and institutional investors on issues of business strategy and product management and marketing. Previously, Gilbert was the lead enterprise software analyst for Credit Suisse First Boston, a leading investment bank in the technology sector.

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To: stockman_scott who wrote (841)3/15/2012 7:03:29 AM
From: Glenn Petersen
   of 1459
Constant Contact has begun offering daily deals:

Message 28013566

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From: Margin of Safety3/22/2012 2:31:03 AM
1 Recommendation   of 1459
A simple and easy to understand white board explanation of the "Cloud" by Level 3 Communications.

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From: Glenn Petersen3/23/2012 2:16:39 PM
2 Recommendations   of 1459
Baidu Takes Aim At Dropbox, Microsoft SkyDrive, With Cloud Storage Service

By Steven Millward
Tech In Asia
Mar 23, 2012 8:38 AM ET

Chinese search engine leader Baidu is holding a developers conference today, from where it has just launched a cloud storage platform called Baidu ( NSDQ: BIDU) WangPan – meaning, literally, ‘web drive’ in Chinese.

As with rivals such as Dropbox, or Microsoft’s (NASDAQ:MSFT) SkyDrive, it allows users to upload files – be they photos, mp3, videos, apps, text documents, etc. – into the cloud to be stored there and accessed anytime. Baidu WangPan will give a free 15GB of space – more than Dropbox’s initial 2GB, but less that SkyDrive’s 25GB – with incentives for unlimited free expansion. It’s not yet clear if it will offer premium extra storage for consumers or businesses.

Baidu WangPan has apps for PC and Android already, with versions for iOS and Mac in the works. Plus, Android users can make use of three Android file-management apps – ES File Explorer, File Expert, and Boat Browser – which all now support Baidu’s new cloud service with updates today.

Baidu’s move is a challenge to Microsoft ( NSDQ: MSFT), as well as local firms such as Alibaba – with its cloud-oriented Aliyun phone – and also bolsters its own Android-based phone OS, Baidu Yi, in the face of competition from Apple’s iOS (which has iCloud) and Microsoft’s WP7 ( which launched in China earlier this week).

The new cloud contender is in private beta for now. At 10am Beijing time everyday, 5,000 fresh invites will go out. Get more info on the Baidu WangPan homepage.

» This article originally appeared on Tech In Asia, and is reproduced here with permission.

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From: Glenn Petersen3/24/2012 8:18:36 PM
2 Recommendations   of 1459
What may become the ultimate cloud-based repository of factual information:

The Factual website:

Just the Facts. Yes, All of Them.

New York Times
March 24, 2012


AT 7 years old, Gilad Elbaz wrote, “I want to be a rich mathematician and very smart.” That, he figured, would help him “discover things like time machines, robots and machines that can answer any question.”

In the 34 years since, Mr. Elbaz has accomplished big chunks of these goals. He has built Web-traversing software robots and answered some very big questions for Google, along the way becoming a millionaire several hundred times over.

His time-machine plans, however, have been ditched for something he finds more important: trying to identify every fact in the world, and to hold them all in a company he calls Factual.

“The world is one big data problem,” Mr. Elbaz says from his headquarters, a quiet office 14 floors above the Los Angeles Country Club. He is a slim, soft-spoken man who weaves in his chair when an idea excites him. “What if you could spot any error, as soon as you wrote it? Factual is definitely a new thing that will change business, and a valuable new tool for computing.”

In the booming world of Big Data, where once-unimaginably huge amounts of information are scoured for world-changing discoveries, Mr. Elbaz may be the most influential inventor and investor. Besides Factual, he has interests in 30 start-ups, including an incubator in San Francisco dedicated to Big Data. Factual’s headquarters, in a high-rise on the Avenue of the Stars, hosts seminars for a data community he hopes to foster in the Los Angeles area.

Mr. Elbaz also serves on the boards of the California Institute of Technology, his alma mater, and the X Prize Foundation, which offers cash prizes to teams that meet challenges in space flight, medicine and genomics. The company he sold to Google, Applied Semantics, is the basis of Google’s AdSense business, which brings Google close to $10 billion in revenue annually.

While valued for his investments and guidance, Mr. Elbaz remains relatively little-known. He is so self-effacing that he recently walked through a conference of 3,000 data scientists, recognized only by the staff members of one of his investments. He lives quietly with his wife, a former federal prosecutor, and his three children in a modest ranch house in West Hollywood. For fun, he plays basketball at a local sports club.

His mental and financial assets, he says, are like gifts he needs to deploy so the world works better.

“If all data was clear, a lot fewer people would subtract value from the world,” he says. “A lot more people would add value.”

Creating clear, reliable data could also make Factual a very big company.

“Gil is pretty far ahead of the rest of us, the one entrepreneur where it takes a few meetings before I really understand everything he is talking about,” says Ben Horowitz, a venture capitalist who backed Factual through his firm, Andreessen Horowitz. “Three years ago, he thought Factual was his biggest chance to change the world. Over time, the world has moved his way.”

Since its start in 2008, Factual has absorbed what Mr. Elbaz terms “many billions of individual facts we’ve collated.”

Geared to both big companies and smaller software developers, it includes available government data, terabytes of corporate data and information on 60 million places in 50 countries, each described by 17 to 40 attributes. Factual knows more than 800,000 restaurants in 30 different ways, including location, ownership and ratings by diners and health boards. It also contains information on half a billion Web pages, a list of America’s high schools and data on the offices, specialties and insurance preferences of 1.8 million United States health care professionals. There are also listings of 14,000 wine grape varietals, of military aircraft accidents from 1950 to 1974, and of body masses of major celebrities. Odd facts matter too, Mr. Elbaz notes.

He keeps 500 terabytes of storage near Factual’s headquarters. That’s about twice the amount needed to hold the entire Library of Congress. He has more data stored inside Amazon’s giant cloud of computers. His statisticians have cleaned and corrected data to account for things like how different health departments score sanitation, whether the term “middle school” means two years or three in a particular town, and whether there were revisions between an original piece of data and its duplicate.

Factual’s plan, outlined in a big orange room with a few tables and walled with whiteboards, is to build the world’s chief reference point for thousands of interconnected supercomputing clouds. The digital world is expected to hold a collective 2.7 zettabytes of data by year-end, an amount roughly equivalent to 700 billion DVDs. Factual, which now has 50 employees, could prove immensely valuable as this world grows and these databases begin to interact.

FACTUAL sells data to corporations and independent software developers on a sliding scale, based on how much the information is used. Small data feeds for things like prototypes are free; contracts with its biggest customers run into the millions. Sometimes, Factual trades data with other companies, building its resources.

Some current uses are for adding information like restaurant locations to cellphone maps, or for planning sales campaigns. But more broadly, Factual is meant for the heart of a great business of our age: using all the cloud-based data and algorithms to find patterns in nature and society, for scientists to observe and businesses to exploit.

“Data has always been seen as just a side effect in computing, something you look up while you are doing work,” Mr. Elbaz says. “We see it as a whole separate layer that everyone is going to have to tap into, data you want to solve a problem, but that you might not have yourself, and completely reliable.”

A restaurant chain, for example, might use Factual to figure out whether a new location is near the competition, and how the locals have talked about the place on Yelp, the social ratings site. Checking for gas stations near the restaurant can indicate how many cars come off the highway. The chain can also employ Factual to see where it is mentioned on the Web, or to correct what other people are saying about it.

Financed with $27 million by a constellation of Silicon Valley luminaries, Factual remains closely held. But it already has thousands of customers. Facebook, CitySearch, AT&T and others use it for information about places. Newsweek used the database to help rank America’s greenest companies.
Others use Factual data for tasks like product planning and customer care. There are no profits yet, as Mr. Elbaz puts money into more data sets and talent, which already includes advanced mathematicians, data scientists from LinkedIn and Google, and at least one specialist in late Roman archaeology.

Competitors in the new industry include Microsoft, which says its Windows Azure Marketplace has “trillions of data points,” as well as a language translator. People can sell data sets to Azure, too. Infochimps offers geographic and social data, among other kinds, while companies like Gnip and Datasift offer insights from Twitter and other social sites. Wolfram Alpha, founded by another mathematician, has both data and computations that are used by Apple’s Siri, among others.

And a young company called ClearStory, also financed by Andreessen Horowitz, is trying to tie together all of these companies, often called data marts, in a way ordinary people can use. There are also several open-source data repositories, with public and private information that developers plug into their algorithms.

Several other data specialists, mostly from Google, have left their jobs to wrangle lots of information in new ways. David Friedberg, a former product manager at Google, has started the Climate Corporation, which uses government data on weather, soil porosity and the root structures of wheat and soybeans to write crop insurance.

Mr. Elbaz is also an investor in Kaggle, which awards cash for finding data patterns. It was used by NASA, for example, to find a better way to measure the shape of galaxies; in the first week of competition, a Ph.D. student in glacier mapping had outperformed NASA’s algorithms. He has also put money into ZestCash, which makes payday loans that are cheaper than the industry’s average, judging risk via criteria like cellphone bills and how its applicants read the ZestCash Web site.

The ZestCash C.E.O., Douglas Merrill, once ran Google’s internal information systems.

“We feel like all data is credit data, we just don’t know how to use it yet,” he says. “This is the math we all learned at Google. A page was important for what was on it, but also for how good the grammar was, what the type font was, when it was created or edited. Everything. What Gil is doing at Factual is the same. Data matters. More data is always better.”

MR. ELBAZ was born in Washington, D.C., and grew up in Ohio, Texas and Florida. His father, who was born in Morocco and grew up in Israel, was a school principal and professor of Hebrew literature. His mother, a journalist, died when Mr. Elbaz was 18. At age 3, he began writing a repeating series of numbers at preschool. He read almanacs and enjoyed watching the crawl of stock prices on TV, seeking patterns.

“He would go to a lot of math competitions, and come out with three or four prizes,” says Nissim Elbaz, Mr. Elbaz’s father. “In between the math contests he’d take tests in physics for fun. When I would tell him what a genius he was, he’d give me a dirty look, so I learned to keep it in my heart.”

The elder Mr. Elbaz recalls that when he tried to explain the Isreali- Palestinian conflict to him, the son replied that the hatred would end if the two sides could just agree on the facts.

From an early age, Mr. Elbaz would also figure out math-related businesses — like buying the entire supply of a single brand of baseball cards in El Paso, Tex., then reselling them at three times the money at a memorabilia convention.

“We’d do lotteries based on guessing the number of marbles in a jar,” says Eytan Elbaz, his younger brother, who has worked with Gil and now has two start-ups of his own. “When he was 16, he held a contest based on rolling a Yahtzee dice. He stayed up the night before making a spreadsheet to figure out all the payouts against what we’d take in.” Mr. Elbaz’s other brother, Noam, has spent the last decade studying at a yeshiva in Israel.

At Caltech, Mr. Elbaz majored in applied science and economics. Interested in the subject of monopolies, he won an award for a paper that determined that companies would take financial losses to corner their markets.

He worked for I.B.M. for two years, looking at the use of computers in problems of manufacturing, then went to Sybase, a database company. This was in the early 1990s, when I.B.M. was stumbling in the transition from mainframe computers to servers and PCs.

His younger brother says he thinks that the experience changed him. Many employees were “just trying to hold on to their jobs, not working together for the company,” Eytan says. He recalls how Gil, concerned about how employees were hoarding their data, “started talking about how much better it would be if people shared data.”

Mr. Elbaz then joined a semiconductor start-up called Microunity and became a consultant, saving money and playing the stock market to help finance his own first business. His father gave him $10,000 to invest for him, which Mr. Elbaz tripled in 18 months. When Mr. Elbaz and a Caltech friend decided to form a company in 1998 — it became Applied Semantics — his father told him to put the stock winnings into it.

Applied Semantics software quickly scanned thousands of Web pages for their meaning. By parsing content, it could tell businesses what kind of ads would work well on a particular page. It had 45 employees and was profitable when Google acquired it in 2003 for $102 million in cash and pre-I.P.O. stock.

While Mr. Elbaz would not say how much he made from the deal, his father’s $30,000 from the stock investments was eventually worth $18 million. “He certainly changed my retirement,” Nissim Elbaz says.

Mr. Elbaz became the head of Google’s engineering office in Santa Monica, Calif., near where he lives with his wife, Elyssa, and three sons. He has donated several million dollars to a handful of causes, including science education, environmental efforts and an organization that helps Los Angeles nonprofit groups. He has also donated to Common Crawl, a Google-type Web examination tool that researchers can access through Amazon’s computers.

“Having money is overrated when you are brought up not to believe you are entitled to it,” he says. “You can make enough money to not need things, or you can just not need things.”

In 2007, Mr. Elbaz left Google to start Factual. When Mr. Horowitz, who along with Mark Andreessen runs Andreessen Horowitz, was asked to invest in Factual in 2009, he struggled with the idea that Mr. Elbaz would want to work hard on another start-up when he was already rich. But when Mr. Elbaz described his palace of facts, Mr. Horowitz said he recognized a true believer.

“I asked him, ‘Aren’t you too rich to build this company?’ ” Mr. Horowitz recalls. “He gave me one of the longest and most thought-out answers I’d ever heard. He thinks this is a chance to change the world — that matters to him more than money.” Mr. Horowitz says Mr. Elbaz told him he needed the money as an incentive for the engineers, and that he needed to reach his goal while his mind was still strong enough.

“I eventually realized this was not a ‘too rich to work hard’ problem.” Mr. Horowitz said.

Other investors in Factual include Ron Conway, Esther Dyson, Index Ventures and the Founder Collective.

FACTUAL also has offices in Shanghai and in Palo Alto, Calif., where Mr. Elbaz wants to add more talent from Silicon Valley. His first two employees in Palo Alto were Tim Chklovski, with a doctorate from M.I.T. in artificial intelligence, and Tyler Bell, who worked at Yahoo on maps after a decade at Oxford piecing together how ancient Rome became early Europe.

“Roman amphorae get dug up around Europe, and get described in all sorts of different ways, in different languages,” Mr. Bell says. “What we do here is the same kind of restoration. We started to learn it well when we had one million data sets uploaded. The early stuff was things like senators and how they voted, or ZIP codes, types of cigars, lists of video games. Merging ZIP codes is easy. Merging different ways people feel about toys is hard.”

Part of the difficulty, even among employees, is deciding how much data is enough. “For sure, we want the correct name and location of every gas station on the globe,” Mr. Bell says. “Not the price changes at every station.”

“Wait a minute, I’d like to know every gallon of gasoline that flows around the world,” Mr. Chklovski cuts in. “That might take us 20 years, but it would be interesting.”

At most start-ups, talk about doing the same kind of thing, only bigger and better, 20 years from now might seem like a marriage of the delusional and the dull. Mr. Elbaz and his team, however, say they feel that it makes sense. Telling everyone the true facts of the world is at least the work of a lifetime.

”Lately, I’ve been thinking that we need to get more personal data,” Mr. Elbaz says. He doesn’t mean names and addresses, but their genetic information, what they ate, when and where they exercised — ideally, for everyone on the planet, now and forever. “I want to figure out a way,” he says, “to get people to leave their data to science.”

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To: Glenn Petersen who wrote (876)3/25/2012 12:11:25 PM
2 Recommendations   of 1459
OMGPOP can thank the cloud for its acquisition by Zynga on Wednesday. The gaming startup, whose Draw Something iPhone app used cloud computing and a NoSQL database to scale from zero (relatively speaking) to more than 35 million downloads in three weeks and never miss a beat.

I had a brief call on Thursday with Couchbase CEO Bob Wiederhold, whose company worked with OMGPOP to scale its implementation of the Couchbase database as demand started growing. Although the companies aren’t ready to give exact details yet, here’s what Wiederhold told me:

OMGPOP is hosted in the cloud, but “they’re not on Amazon.”Draw Something has been downloaded more than 35 million times. Players have created more than 1 billion pictures and are creating around 3,000 pictures per second.To handle the incredible traffic spike, OMGPOP had to reconfigure its Couchbase cluster, scale it into the many tens of nodes, and many terabytes of data and increased throughout into the tens of thousands of operations per second.Throughout all this, Draw Something didn’t experience any downtime.This type of load really stresses a system, Wiederhold said, and if it wasn’t for its decision to use cloud computing and NoSQL technologies, “their game would have fallen over.” EA recently removed its “The Simpsons: Tapped Out” game from Apple’s App Store after server problems prevented users from being able to login. It’s not clear what, exactly, caused EA’s problem, but it speaks to the importance of having components that are able to scale as apps go viral.

Scalability, of course, is one of the primary calling cards for both cloud computing and NoSQL providers. NoSQL databases, which broke onto the scene a few years ago by claiming to solve the scaling problems inherent in many relational databases, are hugely popular among those building web applications. One of the early poster children of cloud computing was Animoto, who launched its Facebook app in 2008 and scaled to about 250,000 members and about 3,400 Amazon Web Services compute images over the course of a week.

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