Moderators: Rafat Ali and Staci D. Kramer

Panelists:
Esther Dyson, Chairman, EDventure
Jason Hirschhorn, President, Sling Media Entertainment Group
Mike Lang, VP Strategy, Fox
Quincy Smith, President, CBS Interactive

Rafat: Quincy, you were looking for the next YouTube, is there one out there? Esther: These are people who you want to be friendly, small companies have good DNA, large companies sometimes have mass without DNA. Mike: We have a Bay area presence, spend a lot of time working with venture capitalists and entrepreneurs, we have a lot of "old companies" processes, there's nothing closed about where your technology partnerships are going to come from, build versus buy is no longer that simple, you need to nurture the DNA of an acquisition beyond the press release phase.

Rafat: What are the lessons for the MySpace integration? MySpace is so different, IDN is very different in game space, as a result a lot of content gravitates naturally to MySpace. In a lot of ways it's about management. Number one drivers were Chris and Josh, they were maniacally driven, needed that energy. They are now taking on an even larger role across our digital efforts, they've integrated successfully into our organization. Rafat: does social media fit better into angel investment? Jason: Not necessarily, there's been a huge change about the audience being in control, young entrepreneurs with not a lot of expertise so angel investors are forgiving. In some cases companies to acquisitions well, but sometimes it's "We'll change all the people and the name" so it doesn't go too well. When companies understand that you're the talent things can go very well. But Quincy pointed out that unfortunately integration oftentimes ends at the press release. Mike: First thing you say is "what can we do with our own brand" for an acquisition. Esther: There are two challenges: you could put in so much process that it overwhelms the small acquisition in the process of protecting P&L, won't invest in what they bought. Mike: some would rather pay USD 300 million on an acquisition than USD 2 million on creating your own. When you see talented people in an acquistion rise in a big company that's a good sign.

Quincy: Markets are forcing large companies to invest in growth, Internet is not the end of media, its the next step, and you have to invest in it. But they know that they don't control the audiences and that entrepreneurs have the touch. We were fortunate to acquire CSTV, great asset that we keep apart from the organization but we don't starve it, add more allocations around it. This creates a big weapon when talking to other entrepreneurs. Staci: More announcements of large chunk investment funds, but Fox has done small companies. Mike: Our shareholders are looking for value in investment returns, minority investments don't give a preferred path of control and may in fact increase the valuation if you want to acquire it later. We have a lot of commercial relationships that may result in acquisitions - or may not, or may go for warrants. Quincy: CBS might be a little different, made partial investments to help them understand a world unfamiliar to them, a chance to learn and to get exposure to DNA, we have cash, not give it right back to the shareholders all year long. Spend around USD 20 million in seeds. It's a chance to be in the board room to understand the decisions they're making. Mike: Who knows which one is right, it's difficult in today's investment community to have a rational conversation, valuations are out of whack. Esther: We have some companies you may want to invest in.

Rafat: Esther, what are you looking for in investments here vs. overseas? Esther: There just aren't that many people who know what they're doing except for social media, there aren't thousands of Russians using QuickBooks, exits are also harder. Everyone wants to go overseas, just invested in something in Brazil, the best social networkers are in Brazil. Staci: Do you acquire, hire or develop in-house? How do you make that decision? Jason: Hard when you have developers in-house, they feel that they can build things quickly, a lot of media companies were asleep at the wheel, so all of a sudden you need something that scales, if I can buy scale I can satsify advertisers immediately - though sometimes this may scare away audience for social media.

Question: After deal is signed, what advice can entrepreneurs take as to what to do and not to do in negotiations? Mike: Not being realistic. You need management that can say this is what the risk factors are, understand that things may not work out. Don't say that you don't have competition. You need a management team that can react to competition. Don't be too swayed by VCs wanting a theoretical return than to realistic returns from a business. VCs say no, then they don't get an opportunity later. Jason: Sometimes it's a self-fulfilling prophesy, especially when you're talking with 19-20 year-olds. When you have a great product you need to talk about how the company will be run. Oftentimes founders are better off as a chief product officer but they want to be CEO and things can fall if a founder leaves. Quincy: Acquiring companies tend to be slower growers, good at telling people how you need to scale back but not necessarily how to manage strong growth. Accept that acquirers may make mistakes also, speak up. Have to "get real" with each other.

Staci: CNET's been expanding, Zander has been investing, how do you move forward? Zander: Have expanded into games, TV.com, MP3 less so, vibrant properties in Tech Republic, American Babies. We have to go in and sell them a culture. If you pay top dollar, you better integrate successfully. Rafat: Google's acquisition of DoubleClick? Quincy: DC needed a next-generation platform, Google overwhelmed them with salesmanship. Was an anti-Microsoft move. Esther: There are some that are appropriate to sell to Google, some not. The culture match is not always good. Jason: Sometimes Google overpays wildly, hard to turn down.

Question: Esther, how would you now position relationships versus content value, what would you recommend or suggest entrepreneurs for revenue models for social media? Esther: Good advice never means much until you try to apply it. Board members can give specific advice. Try to keep them loyal. Ad models, Flickr has subscriptions, mobile charges for deeper content, selling marketing collateral such as T-shirts. Be creative. Rafat: Can you build a widget company to scale? Mike: Yes, distributors will embrace widget companies, ultimately it will be how experiences are monetized, if you have a small company with a great application come to MySpace, figure out how to get distribution, hard to build traffic on your own. Do whatever you can to partner with distributors. Difficult to hold on to it all yourself. Partners like MySpace will think about the user, that's why they've done so well.

Question: What would you be buying today? What genre? Quincy: Looking at buying reach, consumers control more of the content. We don't compete with Fox, competing with LonelyGirl who uploads her content everywhere. Look for CBS to get into the game like Fox and NBC with deals that help them to make a statement sooner rather than later. Also care about new content, arrogant to say that regurgitated TV shows are going to work. User-generated content can be hilarious, new content and reach is key. Mike: Video applications, ways to do things with video, bullish on video's future on Internet, different kinds of applications. International will be important also, new audiences and new kinds of content for new regions, in many cases mobile is stronger in overseas markets. PhotoBucket guy stands up, we made up with Shawn, it was miscommunication, didn't understand monetization on MySpace.

Question: eBay/Skype deal? Jason: Could be some potential but it seems to be sitting there. Rafat: How long can Facebook hang on? Quincy: A CMO's dream, profiles get bigger, develop stickiness. On Skype, always have to buy from a position of strength, eBay core business proposition had been hacked, I give acquisitions 3-5 years, still have core team, still evangelical, audience user base is growing. On FaceBook, users don't always incorporate a lot of professional media. Over-50s need to take notice. Esther: A few years ago everyone was talking about ideas, now it seems that everyone's destiny is to be sold. Jason: Don't know that FaceBook doesn't want to sell, may be that just the price isn't right.

Question: Have some of these companies taken too much from you? Mike: Yes. Over-200 valuations vs. IPOs. The best part of a MySpace deal is that they didn't have to tell Wall Street what's happening every quarter. We've had conversations where 50 million wasn't enough to cash out. VCs they deal with take the long view, try to work rationally. Rafat: If MySpace had been under MTV umbrella, what would they have done? Jason: They'd have to invest in it. NewsCorp did a yeoman's job of investing in infrastructure and supporting the management team. It's a model for other media companies to watch. You help but you get out of the way.

Question: Google acquisition of Blogger and Dodgeball versus Yahoo with Flickr? Staci: People who leave Google are disappointed in how they were treated, that could leave baggage. Jason: Google makes mistakes just like anyone else. They just happen to have a halo over them. Mike: Yahoo and AOL don't get enough credit for their acquisitions. Esther: Yahoo has the best record of keeping the management. Ex-Googler (ex-Pyra labs, aka Blogger) - they had never acquired a company before, took a while to get their sea legs and to get the right support. Dodgeball guys were in NYC, DoubleClick in NYC also but now has more center of gravity. Some acquisitions go well, looking now at people who are going to lead a product in Google. Jason: should never underestimate how important culture is. You're used to doing what you want to do versus being in a Google where you're not employee 100. Esther: Sometimes the best place for M&A people to come with is from HR.

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