Why We Invested in FeedBurner

Last October, I wrote a post called “The Lady Doth Protest Too Much” in which I told the following story:

Once upon a time, we had a very early stage company in our sights.

We met the Company shortly after it was formed.

We became users of the service, promoted it to a lot of our friends, and got to know the management team really well.

When it came time to consider an investment, we did what all good VCs do. We got on the phone and called ten people in the industry that we knew really well to get their take on the Company’s service.

We heard pretty much unanimously that they “would never use it”.

We passed on the investment.

But it was a huge headfake.

Because within six months all of the people we called had become customers.

The company in that story is FeedBurner, a company that I have been a customer of, a fan of, and a believer in for over two years.

When we realized that we had been “headfaked” around the time of that post, we called Dick Costolo, one of the four founders of the company and the CEO, and told him we’d made a mistake and wanted to be an investor in the company.

Instead of telling us to screw off, he said “let me and my partners think about it”.

Within a month, we’d worked something out that everyone could get excited about and Union Square Ventures is now an investor in FeedBurner. And we are thrilled about it.

But why are we thrilled about it?

Because we believe in two things that are not yet obvious;

1 – RSS will become mainstream. I wrote just the other day that “RSS needs to become brain dead simple to use” before it will bust out. And it’s nowhere close to that now. But it will become “brain dead simple” because it’s a very simple and powerful technology like http, smtp, etc before it. Apple has already made subscribing to podcasts via RSS in iTunes “brain dead” simple. And Microsoft is going to make RSS subscriptions “native” in the upcoming Vista operating sytem. MyYahoo has made subscribing to RSS very close to “brain dead simple” in its web service. And others are working on this problem as well. We don’t know if it will be one year, two years, or three years before “soccer moms, myspace kids, construction workers, and grandmothers” are using RSS every day, but it’s going to happen.

2 – The RSS channel will be monetized “in the medium” like every other medium. I remember when people thought the web was going to be a tool to drive traffic to offline where it could be monetized. That didn’t happen. Now people think of RSS as a medium to drive traffic to the web where it will be monetized. Some of that is happening, but all mediums develop their own native monetization systems and so will RSS. This is where FeedBurner is key. They are leading the way, by a very wide margin, in developing a business around RSS content. They provide the best and simplest way to market your feed. They provide the best and easiest to understand analytics around what your feed audience is. And they have built the first and by far the largest advertising network designed specifically for RSS feeds.

If you have RSS feeds or are planning to offer them, and if you want to make money off of them, at this point you should be using FeedBurner. I know, I use them and I make more money off of my RSS feeds every month than I make off of Adsense or Yahoo Publisher Network (by a wide margin).

There is a raging debate going on right now on my personal weblog about email vs RSS with many people taking different sides on this debate. But one thing is clear. RSS will win at the end of the day for commercial messaging (newsletters, al messages, marketing) because it is better than email for that application. RSS allows the user to control the subscription and can’t be spammed.

So RSS is going to become a huge business. But it will take time. The platform providers (Microsoft, Apple, Google, Yahoo!, AOL, etc) will need to work to build it into their offerings in a way that hides the complexity but keeps the user control. And FeedBurner and its competitors will need to build the business models and monetization systems to make it work as a commercial medium.

We have no doubts that Dick Costolo and his partners and his management team at FeedBurner will lead the way in developing RSS as a commercial medium. We have been working with them and watching them for over two years and know that they have the vision, the experience, and the motivation to lead this market to its logical conclusion.

So that is why we invested in FeedBurner. We could not be more pleased to be an investor, finally.

And if you are a publisher who is using RSS or who wants to use RSS as a commercial medium, you should be talking to FeedBurner. We would be happy to make an introduction.

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