Interactive Q&A: Dick Costolo, Co-Founder and CEO of FeedBurner

This is the latest in the Seeking Alpha series of interviews with leading companies of interest to our readers. These, however, are interviews with a twist: the executive has agreed to answer questions and respond to comments not from a single interviewer, but rather from our community of readers and contributors.

This interactive Q&A is with Dick Costolo, Co-Founder and CEO of FeedBurner, the privately-held news feed and readership management provider. FeedBurner has sponsored this interview, which works like this:

• Dick briefly introduces himself and the issues he's focused on below.
• Readers and contributors can immediately start to post questions and remarks using the comment box below (Note: you need to sign up for free registration and be logged in to do so).
• Seeking Alpha editors will not filter or edit the questions and comments from readers, except to delete profane or hostile language.
• Dick will respond to the questions and remarks beginning Wednesday, April 25th. Readers can track his answers and respond to them during that period, with the resulting dialogue remaining on the site.

Yahoo Finance readers may join the Q&A by following this link.

Over to Dick:

Hi - I'm Dick Costolo, author of "Rice Pudding: Fact or Fiction" and more recently cofounder/CEO of FeedBurner, the leading platform for media distribution and audience engagement services. We provide online publishers and marketers with services to help them distribute content feeds and measure their influence on the Web while engaging and building an audience. Our customers run the gamut - from Reuters and Dow Jones to top blogs, podcasts and other gamut-running properties.

I'm looking forward to answering any questions you might have about media fragmentation and distribution, advertising strategies for new media, RSS and blogs. I also author a blog called Ask the Wizard, where I provide a rambling yet enthusiastic third-person account of entrepreneurship and building a company from the ground up.

I'm happy to discuss a range of topics with Seeking Alpha readers, including:

• Growth trends for distributed content and its disruption on traditional media channels and strategies
• Monetization strategies that work (and don't work) for various types of online content producers
• The future of media on the Intertubes
• Start-up lessons learned

Comments

[SeekingAlphaEditors]

Hi Dick, thanks for this opportunity.

As a media investor, I'm wondering which publicly-traded media companies, in your opinion, have the right approach to distributed content, and which ones are lacking in that department?

I see Feedburner works with two big media companies, Dow Jones and Reuters. What should a DJ or Reuters investor know about how Feedburner helps create value for their shareholders?

[Dick Costolo]

Well, there is no question in my mind that both Reuters and Dow Jones both have a deep appreciation for what I would call many of the potential alternative futures of distributed media, and I would add others like USA Today (Gannett Co), CBS, and a number of folks across Time Warner as well. I would say about Reuters specifically that I have sat in the room with their senior executives and been fascinated by the different ways in which they see the fragmentation and re-aggregation of audiences playing out. They are not only thinking about what the current trends mean for them but they're very far along the curve of understanding the implications of those trends as well. What we do to help these companies create value for their shareholders can be boiled down to assisting them in re-aggregating audience in a world of media fragmentation and distribution. It is critical that media companies promote media distribution and reach people in contexts away from the media site's portal or web site or walled garden. We help these folks measure their audience in distribution and promote further distribution and audience engagement.

[William May]

Dick - enjoy following your career path after meeting you through JEG at Diamond. Question - what's your take on new services like Twitter? RSS on speed possibly?

[Dick Costolo]

Well, I know Evan and Biz Stone at Twitter well, and I couldn't be happier for those guys, although Ev is certainly turning out to be someone you don't need to really be too happy for, given his success rate. My thoughts on twitter are less that it's RSS on speed, I think the two capabilities will diverge quite a bit in the near future, with feeds being used more and more as ingredients to other ends and twitter being more of a front and center thing one finds within social networks. My four cents on twitter itself is that it can go two ways right now - it can become what fred wilson calls a universal internet status tool, where we all broadcast our status messages via twitter, or it can become a Group message service social media tool that's the way people within Facebook and myspace communicate. Obviously it can be both of these things and more, but at some point soon the tools for some type of use case will dominate and the service will head down the path where the most customers collect.

[SeekingAlphaEditors]

Hi Dick, thanks for doing this. My questions are about monetization of RSS feeds.

-- How do currently available ads in RSS feeds perform compared to ads on web pages?

-- Does Google have an RSS feed ad product, and what's your view of it?

-- Will the market for ads in RSS feeds ever be as big as the market for ads on web pages?

Cheers!

[Dick Costolo]

Hi Ed, the answer to your first question is that some kinds of ads perform better than site ads and some worse. I'll give an abbreviated explanation. Site traffic is made up of three kinds of visitors - regular visitors to the site, search referrals, and links from other sites. Search in many cases delivering even a majority of traffic. Search traffic is traffic that comes to a page looking for something or at least has a specific context. In those cases, contextual ads and specifically contextual direct response ads can and do work very well. In feeds, almost all of the traffic is made up of people who've expressed a direct interest in *this particular content author* or the like. So, although my VC friend may be writing about the latest blackberry today, his 15,000 subscribers aren't reading him because he wrote about the blackberry, they're reading him because he's a VC who writes generally about startups and venture financing etc. So, we've certainly found that demographic targetted and awareness campaigns perform much better in feeds, in many cases a lot better than they'd perform on sites, but conversely that contextually targeted ads in many cases perform more poorly than they would on sites. Google does have a product called AdSense for feeds that they launched some time ago, and there are certainly a variety of other vendors with products in the market. The answer to your last question is that the market for advertising around distributed media will be huge and it will come to include ads on web pages because so much distributed media will start to be consumed away from the source site but on other web pages, not just a classic "feed reader". If you include this notion of syndication, which I certainly would, you can definitely see this market becoming a monster over time.

[SeekingAlphaEditors]

Thanks for answering questions, Dick.

Your business puts you in a unique position to see the growth of Web 2.0 companies. There's been a lot of speculation recently that most Web 2.0 companies don't have sustainable business models, and that there's a Web 2.0 bubble that's about to burst. What's your view on this?

[Dick Costolo]

I have two quick thoughts here: first, while there's a consensus that many companies don't seem to have sustainable business models, I would say that a lot of successful companies find their model well after they've launched, and it's my opinion that this is a perfectly reasonable way to start a company....building something about which your passionate with the goal of finding the right model as you go. Having said that, there's certainly a great deal of money flowing to some things you'd have to scratch your head over, but since the public markets have not engaged in the sort of hype we saw the first time around, I don't think we're in an environment where something is about to blow up without some external impetus. While a lot of companies will undoubtedly be unable to find or sustain the progress they'd need to justify their current valuations, I don't see funding drying up anytime soon.

[Michael]

HI Dick -
Thanks for doing this. Do you have any metrics or evidence that there are consumers outside of the tech savvy crowd in and around Silicon Valley that use RSS in a meaningful way? This is distinct from the fact that RSS is used in B2B federation of the content.
Thanks

[Dick Costolo]

Oh yes, no doubt about it. There are a growing number of feeds that nobody would classify as tech savvy silicon valley that have tens of thousands of subscribers and are trending upward rapidly. We strongly believe that as the specification/protocol of RSS itself gets pushed down the stack and people just "subscribe" to stuff via mechanisms with which they're already familiar (email, dragging something onto a desktop, putting a widget on a myspace page), that this trend will continue. We see feeds that have absolutely nothing to do with early adopters gaining subscribers by leaps and bounds.

[DavidJackson]

Hi Dick,

Thanks for doing this. Two questions:

-- Can you tell us more about Feedburner's revenue model?

-- Which public company do you think Feedburner poses the greatest long term threat to?

David

[Dick Costolo]

The revenue model is very straightforward. We have an ad network we provide publishers through which we take a percentage of the ad revenues, and then we have a robust set of commercial grade dashboard interfaces that handle bulk feed management for which we charge a monthly fee to commercial publishers with tens/hundreds/thousand... of feeds. I have never been able to correctly identify our most threatening competitor in any startup I've ever been involved with, so I have gotten very comfortable assuming it could be anybody and not worrying about it. I honestly have no idea who could cut our legs out from under us in some way I don't currently anticipate.

[DominicJones]

Hi Dick,

First, thanks for a great service and congrats on building a remarkable service-oriented company culture. I'm sure I speak for many FeedBurner users when I say we are truly spoiled.

My question: With a growing number of companies starting to offer RSS feeds for their investor news and disclosures, which company, if any, is aggregating all of these feeds into one big pipe and smaller ones based on industries etc. It's a pain to have to subscribe to each company's feed separately and while there are tools to mix your own feeds, that can be time consuming. Is this something FeedBurner might consider doing?

[Dick Costolo]

Dominic, thanks for the kind words. While it's never a good idea to say "that's not something we'll ever do", I don't see us heading down that path. I do think you highlight an opportunity that's currently underserved in the market, and that's the ability to provide infrastructure services around feeds that enable third parties or consumers to easily create value-added services from the growing landscape of available feeds. Yahoo pipes is of course a very general approach to this, but there are probably more application-centric or vertically focused tools that one could imagine. You could certainly suppose that companies like InfoNGEN will attack this opportunity for the financial services industry.

[DominicJones]

Thanks, Dick.

[SeekingAlphaEditors]

Dick,

Thanks for doing this. Scott Karp just wrote "Without a filter, RSS has no value."

What are your thoughts on that, and what is Feedburner developing to address the issue?

Thanks,
Dave

[Dick Costolo]

Scott is a very careful thinker and you could probably lose a lot of money ignoring his opinions. Having said that, I don't really understand the context for Scott's comment, and as such, I'm not sure whether I agree or disagree with it! If it's meant to stand on its own, then I'd generally disagree with the sentiment, since feeds are already filters in an of themselves, providing you only with updates from the specific filters (content providers) in which you've expressed an interest. If, on the other hand, the sentiment is meant to reflect the growing need for the abliity to further refine updates as you subscribe to more and more feeds, I would expect the subscriber facing services like NewsGator and Google Reader to be in this business. The kinds of filters you will see us providing on the publisher side are filters that enable a content provider to generate one master feed but disseminate thousands of parameter specific feeds to subscribers. We already provide this parameterized feed capability (eg, a general feed that provides a weather feed for any specific zip code a subscriber prefers) for a number of commercial publishers. The parameterized feed capability can be expanded in a variety of ways, and if the market trends in that direction, we have a very extensible capability there that we can attack.

[SeekingAlphaEditors]

Thanks for answering questions, Dick.

What do you think of Yahoo Pipes? And which company do you think will best leverage RSS -- Yahoo or Google? And why?

[Dick Costolo]

I think Yahoo Pipes is an important first step in a potentially huge market. As I mentioned above, there is a growing need and opportunity for value-added services that can be achieved via the manipulation of existing sets of feeds within industry verticals or 3rd party application integration. Pipes itself is probably too general purpose to seize that particular market, but I think that Yahoo has a real opportunity to leverage the capability internally in order to provide consumers with interesting sets of bundled/filtered content. They could use the tool, for example, to provide a Chicago Sports Roundup feed to chicago sports fans, knowing that 99.9% of us wouldn't be able to piece such a thing together in Pipes ourselves. To your second question, it's not obvious to me that it will be one of those two companies that best leverages RSS, but if you're asking me which of those two will better leverage the capability, that is ground on which I dare not tread.

[SeekingAlphaEditors]

Thank you for participating, Dick.

My question is this: many blogs I used to read have shut down. After the initial fun of publishing, many bloggers seem to find that there's nothing in it for them, in particular no money.

How much do you think blogging is a fad (with no financial incentive to support it) that will pass?

[Dick Costolo]

Hi Ed, I don't personally see any evidence that blogging is just a fad, and my strong personal belief is that it is a growing and permanent part of the landscape. Certainly blogs will come and go, rise and fall, but in the aggregate, the barriers to publication have been reduced, and blogs/podcasts/videoca... are giving rise to a bulk of content authors whose costs are so low (not just real costs but opportunity costs) that you can blog for money OR attention without incurring losses. As such, while I do believe there are a host of bloggers who will indeed make significant money, it's also the case that it's not a requirement for the ongoing success of the medium, if we want to call it a medium.

[SeekingAlphaEditors]

Hi Dick, thanks for doing this.

If you had to buy one publicly traded stock based on the industry perspective you have from Feedburner, what would it be and why?

[Dick Costolo]

I can say with the straightest face that the insights I have gained from FeedBurner have provided me with absolutely no more enhanced perspective on today's public markets than one might gain from reading the archived front page of the August 18, 1974 Wall St. Journal. I'll say this. I have been surprised by the clarity of focus with which many of today's major media companies understand the implications and alternative futures afforded by distributed media and fragmented audience. I think that by attempting to categorize entities as "old media" or "new media", investors miss a breadth a different approaches that existing media companies are taking in the market. I have already mentioned that I've been impressed by the executive team at Reuters, and I think similarly of the folks at Dow Jones and numerous others. The last point I'll make here is that I'm confident that these reduced barriers to "broadcast and distribution" will facilitate the rise of several as yet unseen media powerhouses that will leverage their brands in other markets to become media giants in a particular vertical.

[SeekingAlphaEditors]

Hi Dick,

The newspaper stocks are doing really badly and many just reported horrible results this quarter. From your perspective, are you seeing any of them making smart moves with their content online or with RSS?

Thanks,
Spencer

[Dick Costolo]

Yes. USA Today is aggressively changing the way they think about presenting and distributing content in very compelling ways. Several of the Hearst properties are working with us and others as they continue to evolve the way they think about online presence. The SF Chronicle's Correct Me if I'm Wrong podcast is one of the most innovative things I've seen from any media property, independent/new/old/ot... in the last year. I suppose I should find the link for that - here you go: www.sfgate.com/cgi-bin...;cat=1066

I won't just blow the horn of FB customers. Martin Nisenholtz at the NY Times Digital has made a number of moves and acquisitions that have worked out extremely well, and I remember people laughing at the About.com acquisition when NYT made that move but it has proved to be tremendously successful. I think there was an appreciation for SEO there before others even realized what it was.

[SeekingAlphaEditors]

Thanks for answering questions, Dick.

Which topic or subject areas are the most popular in terms of RSS feeds, and which are growing fastest?

What % of subscriptions to RSS feeds do you think are tech related?

[Dick Costolo]

Well, I think you'll be surprised at the answer here. If you think purely about text feeds, many of the technology publications and blogs are the most popular because they were embraced by the early adopters who spread the word. So you could say they got a running jump on the rest of the content and we'll just see how long that lasts. In the podcast world, however, I'd say religion and language are two of the more popular content types, and you can probably attribute that to iPods and iTunes. Because you didn't need to be a tech whiz to download podcasts onto your iPod once iTunes made subscription a real one-step process, we saw a huge jump in the popularity of all sorts of podcast topics, and again, chief among these as a group are religious topics and learning another language. Something we certainly never would have guessed. Overall, we're also seeing a tremendous rise in subscribers to commerce/retail feeds, such as feeds of offers from credit cards, hotels, etc.

[SeekingAlphaEditors]

That ends this interactive Q&A, which will now be closed to further questions. Many thanks to Dick Costolo of Feedburner, and to Seeking Alpha's community of readers and participants for their questions and comments.