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The LA Times and Chicago Tribune are for sale. BarryDiller recently announced that buying Newsweek was a mistake. They are not alone in their distress. Newspapers and print magazine across the country are under increasing pressure as they trade analog dollars for digital pennies. 

Everyone is going online. Readers were willing to pay for content when it is printed on paper but they want it for free online. Advertisers pay less for online ads than they do for ones in print. Unfortunately, it is only getting worse. Mobile ad units are cheaper and more ineffective than online units, putting even more pressure on newspaper revenues. In the US, newspaper revenues in 2012 were half what they were in 2000.

But it doesn’t get any cheaper to run a quality newsroom – estimated at around $50-100M a year for a single, high quality national newspaper covering regional, national and international news.

Newspapers have responded by erecting paywalls in front of their content. Says, the Economist:

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The number of American newspapers with some sort of paywall has at least doubled this year. More than a quarter of newspapers now have one, and most big groups that do not have plans to charge for digital access. This is a global trend: newspapers in Brazil, Germany and elsewhere are fed up with giving away their articles for nothing on the internet.

Charging for content online used to be the privilege of the lucky few, such as the Financial Times and Wall Street Journal, offering market-sensitive information readers would pay for. General newspapers opposed charging because they feared their traffic would drop—and their fragile digital ad revenues would fall rather than rise….

Newspapers have been heartened by evidence that pay systems can work. In the industry’s most closely watched experiment to date the New York Times adopted a paid-access model in March 2011. It chose a pay “meter”, which is more porous than a hard “wall”, and allows readers to view a certain number of articles each month before having to pay. The advantage of this is that search engines and social media can still direct casual readers to a newspaper’s site. Traffic typically drops by only around 20%, according to J.P. Morgan, an investment bank. This means online advertising revenue can be mostly preserved while readers are required to open their wallets. In October the New York Times and International Herald Tribune, its global sister, had nearly 600,000 paid digital subscribers. …

It is also too early to tell exactly how successful paywalls will be. They may not work at national newspapers without any real comparative advantage in news, or at newspapers in competitive districts where other papers are giving away content free. The Washington Post, which has had a tough time, has opposed a paywall so far, presumably because it worries it will not woo enough paying readers.

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Newspapers have been forced to use paywalls to offer a subscription product because the cost of payments has been too high to be able to charge a penny or two to read a single article. But even a penny to read an article can be the equivalent of a $10 CPM, which is pretty rich for the online world. Would more users be willing to pay to read just what they want, versus being turned off by more expensive subscriptions?  Freemium certainly seems to have won out over subscription in the gaming industry.

Newspapers haven’t had the ability to try true micropayments to see if this could also work for them. The structure of payments costs has simply been too high. By making it possible for a newspaper to charge pennies to read a page, instead of several dollars for a monthly subscription, they may see a dramatic lift in the proportion of readers that they can charge. Whether it is a supplement or replacement for subscription paywalls, it can only add to revenue as it improves the ability to price discriminate.

One of the areas that Bitcoin could revolutionize payments is in micropayments. Since it costs roughly 30c plus 2% for a credit card transaction when the card is not present, it has been impossible to set prices at a few cents for anything. Bitcoin has zero transaction costs. It would have no problem in handling a 1c transaction, or even lower. This could be a huge boon for newspapers, and for online content more broadly.

What do you think, could Bitcoin help newspapers roll out “pay by the drink” payments systems?

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What does “big data” mean to you? When most of us hear the term, we immediately think about mainstream use cases that leverage smarter data sets to assist companies in making better decisions that optimize business operations, improve enterprise application performance, and even create apps for children to foster more engaged and successful learning. At Lightspeed, we are working with a number of companies that are disrupting their target markets by harnessing the power of big data such as EdgeSpring, Bloomreach, Origami Logic, Click Security, Boundary Networks, Datastax, MapR and Qubole, and we believe that big data will continue to evolve in the coming years to solve an even broader array of market challenges – including problems associated with human health.

One such company, Natera, is a good example of a startup that has brought together doctors, geneticists, statisticians, data scientists and software engineers to leverage both big data and genetics for the improvement pre-natal health.

By combining the power of big data computation and algorithms with world-class genomic science, Natera provides expectant mothers and doctors with information that can improve their chances of having a healthy child.

Natera announced today that it closed $54.6 million in financing to support expansion and continued global rollout of its non-invasive pre-natal test, Panorama™. This new test leverages the power of science and big data to discover chromosomal abnormalities through analysis of a drop of blood from the mother-to-be, eliminating the risk associated with older techniques like amniocentesis and ionic villus sampling, which can lead to complications such as miscarriage. Panorama holds the possibility of reducing and ultimately obviating the need for many of today’s high-risk pre-natal procedures.

From the very beginning of our partnership with Natera, we’ve recognized that they’re poised to completely disrupt the pre-natal genetic testing market while positively benefitting expectant mothers and doctors. The opportunity for Natera to improve lives through cutting edge computer science and big data is a bold proposition, and one that touches many of us personally. In the past, doctors have had to wait until the second or third trimester to conduct many pre-natal tests. By this time, the risk is much higher and the options are far more limited. Natera is completely changing that model by enabling physicians to uncover highly accurate clinical information and data through a simple blood draw as early as six weeks into a pregnancy.

Lightspeed would like to congratulate the entire Natera team on their bold vision and tremendous success to date. We look forward to our ongoing shared journey as Natera continues to transform the way the world conducts pre-natal genetic testing with the combined power of science and big data.

Follow Ravi on Twitter @RMTacct

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For there to be a deep and liquid exchange marketplace in Bitcoin, the primary Bitcoin exchange needs to be robust and performant, with millisecond trade execution timeframes under heavy volume. Right now, Mt. Gox, the primary place where people can exchange dollars for Bitcoin, is neither. It has suffered under repeated DDOS attacks and has seen protracted outages and trade execution times that stretch into minutes and even hours when it has stayed up. Trade capacity is reputed to be in the 10s per second, several orders of magnitudes short of what is needed for a future proofed exchange. This is not an acceptable long term situation if the Bitcoin ecosystem is to grow.

Mt. Gox understands this. In an FAQ in response to the DDOS attacks on April 24th, the company said:

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“Mt. Gox has been working overtime since February to build a new trading engine which

will be implemented by the end of June. Additionally, since early March we have been

building a new IT infrastructure which will be completed by the end of May.”

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This is pretty exciting news. Here we are at the end of April, so a new trading platform that could potentially support much higher volumes and more robust to hackers attacks may be only weeks away.

But there are many disgruntled Bitcoin traders who are approaching the limits of their patience with Gox’s poor performance, poor service and restrictive limitations on transfer of funds. Will they wait a few weeks for a fix, especially if we see continued outages? It not, the window is short before they look for a new alternative.

One possible future holds that in the next couple of weeks, Gox suffers another  major attack and goes dowm for a protracted period of time. Some group of traders grows impatient and moves en mass to another exchange, creating a new nexus for liquidity. Although there are a number of startup Bitcoin exchanges, the only ones that could reasonable handle the volume in the next few weeks are likely the ones already up and running, btc-e and BitStamp.

Another potential vulnerability might be if Gox comes under investigation by FinCEN or some other regulatory body. In a recent interview on Let’s Talk Bitcoin, Bradley Jansen of Freebanking.org (start listening at 17,14) says:

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“Jensen: “I have heard through the grapevine that FinCEN has prosecutions in the works for Bitcoin broadly speaking.  My guess, based on the timing of the guidance, and what I had heard previously from the rumor mill about the prosecutions, is that FinCEN put out the guidance sort of ex post facto to justify the prosecutions that they’re about to launch.”

Interviewer: “So you expect this to happen within in the next couple of months…”
Jensen:  “Again, I’ve heard different rumors, it’s difficult to predict, but yeah.  We knew that the prosecutions were in the works, and then later the guidance came out, it seems like a sort of CYA approach to how they’re doing it.””
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I don’t know Jansen, but from his writing he does not come off as someone who is completely impartial; he is an ex regulatory aide to Ron Paul and can definitely be described as “anti governmental control”. But if what he reports is right, then it is reasonable to assume that FinCEN might target Gox. Just due to its market share and longevity, there is a pretty good chance that if any financial crimes have been committed with Bitcoin (and there have been many), that Gox has touched that tainted Bitcoin in some way.

If Gox gets targeted by FinCEN, then this would open the door for a new exchange to capture share. In fact a new exchange with no prior trading history, and hence no risk of prior financial crimes, may be advantaged as it can start from scratch with squeaky clean AML and KYC practices, money transmittal licenses and so on.

But if Gox keeps its liquidity through the period of instability before it can ship a new trading platform, and it is not targeted by FinCEN, then life gets a lot harder for new exchanges. They would need to extract liquidity from a well functioning Gox, a much harder proposition than taking on Gox today. This is not an impossible task as Gox is essentially a “single item” exchange, which is much more vulnerable to loss of market share than an exchange that trades in many different items. But a new exchange will require a well thought through strategy to take liquidity away from Gox. It can’t just rely on a better product.

I’d love to hear what readers think about these scenarios, other scenarios, and possible strategies to extract liquidity from Gox.

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Supercell raised $130M at a $770M valuation and got a lot of press for it recently. It is well on its way to being a billion dollar game company. Also on that track are companies like Kixeye (a Lightspeed portfolio …

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This week, the price of Bitcoin hit an all-time high of $266 and then a “flash crash” brought the price tumbling down to $105.  What happened?  The largest exchange Mt. Gox reported that it had seen dramatic increases in new …

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I’ve been fascinated by the potential disruption that Bitcoin represents. Disruptions like this could create both massive value destruction for incumbents and massive value creation for startups, which is exactly where entrepreneurs and VCs should be playing.

I recently did …

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Over the past several years, MuleSoft has quietly emerged as one of the leaders in providing platforms for powering the New Enterprise. Lightspeed was an early investor in MuleSoft, and we’re excited to be partnered with a company that has …

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Courtesy of visual.ly. Click through to see a bigger version.

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Hyperink is an interesting startup focused on reinventing publishing in an e-book world. (We are not investors). They have published a number of great “blogs to books”, including ones from Jeff Atwood (co-founder of Stack Overflow), Sean Ellis (growth hacker …

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Last week, Lightspeed Venture Partners and the Amazon Web Services team brought together top technologists, startups, students, former Lightspeed Summer Fellows and venture capitalists to discuss how big data trends are impacting companies today. Companies like Boundary, DataStax, …

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