SiliconBeat

The decision by co-founder Jerry Yang to resign from the Yahoo board is as sad as it is overdue.

No matter how rudderless Yahoo had become in recent years, Yang deservedly remains a Silicon Valley icon. He was there at the start of the Internet era, along with co-founder David Filo, building one of the first great Web businesses. It is a company that generated millions of dollars in wealth for founders and employees, created thousands of jobs, and helped pioneer the idea that the Web could be a place where businesses could be built.

In short, it’s nothing to sneer at. And if things had gone differently, it would be a career that people would be exulting today instead of softly mocking.

Had Yang taken this step several years ago, as many suggested, he might have moved into the role of Valley elder statesman. There could have been a graceful pivot to serving as a mentor or start-up advisor, angel investor or venture capitalist. Or perhaps even starting his own business. One could imagine him following the path that another Internet wunderkind Marc Andreessen has take to a new kind of prominence.

Instead, Yang made the ill-advised decision to try to fix an ailing Yahoo back in 2007 and became CEO. It was a short stint, but coincided with a hostile takeover bid from Microsoft that Yang helped thwart. In the mind of many investors, Yang will forever be villified as the person who lost them billions of dollars.

Yahoo continued to drift under his successor, Carol Bartz, and during the many months it took to find a new CEO after she was fired last summer. Meanwhile, the board agonized over how to chart a new course for the company.

Yang and Yahoo’s era had clearly passed, and the longer he remained involved, the harder it would be for the company to make a dramatic break from its past and move forward. If recently hired CEO Scott Thompson is to have any hope of moving the company forward, he needs a clean slate. More importantly, employees and shareholders need to have faith that he is in charge of strategy and decision making.

That means that while Yang was the first to leave the board, he hopefully won’t be the last. There were already rumors swirling Tuesday that there would be more departures from the board. Let’s hope that’s true. This has been one of the worst boards in Silicon Valley. And chair Roy Bostock, one of the board’s longest serving vets, who has overseen the hiring of three CEOs, needs to be the next to head for the exits.

Other long-time members should also probably step down, including Gary Wilson, a general partner at, Manhattan Pacific Partners (2001); and Arthur Kern, an investor and former radio executive (1996). This would give Yahoo an opportunity to bring in four fresh, dynamic voices who could help Thompson envision a way forward for a company that still has so many tantalizing assets and remains one of the most visited sites on the Web.

Yahoo has attempted to reboot several times over the past decade and stumbled each time. Just because the company keeps getting another chance, doesn’t mean it will continue to do so. This could well be the last chance the company has to seize the future and restore itself to glory.

It’s an opportunity that it can’t afford to waste by holding on to anything — or anyone — from its past.

Zynga released its latest quarterly earnings number in an updated prospectus. Dean Takahashi at VentureBeat has a good overview of the numbers:

“Zynga reported net income of $12.5 million in the third quarter ended Sept. 30, down 54 percent from $27 million a year ago, according to anupdated S1 filing with the Securities and Exchange Commission. The performance isn’t stellar, but it’s not so bad as to suggest Zynga’s planned initial public offering is in trouble.

Revenue was $307 million in the quarter, up 80 percent from $170.6 million a year ago. In other words, Zynga is working harder for the profits it gets by generating a lot more revenue compared to the past.

In the second quarter, Zynga reported only $1.4 million in profits on $280 million in revenue, so the third quarter report is an improvement on a quarter-to-quarter basis.”

What’s interesting are the user metrics. From the filing:

“According to AppData, as of September 30, 2011, we had the largest player audience on Facebook, with more MAUs on Facebook than the next eight social game developers combined.”

In the previous filing, Zynga had as many users as the next 15 developers combined as of June 30.

Also:

“Our players are also more engaged, with our games being played by more than 58 million average daily active users, or DAUs, worldwide as of September 30, 2011.”

That’s down from 60 million at the end of June. And the quarter included the release of two new games: Empires & Allies and Adventure World. Also, monthly average users fell from 232 million to 230 million in the quarter.

Finally:

“According to AppData, as of September 30, 2011, our games were played by more DAUs than the next 14 social game developers combined.”

That number is down from 30 at the end of June.

So, as Takahashi notes:

“Zynga is working harder for the profits it gets by generating a lot more revenue compared to the past.”

The good news, as Zynga prepare for an IPO in the next few weeks, is that it’s coaxing more revenue out of fewer players. And Zynga has a big pipeline of games coming. That includes CastleVille, which will launch in the next couple of weeks.

The CastleVille release is the latest in Zynga’s “Ville” franchise that includes FarmVille and CityVille.

“This is really built on the shoulders of the games that came before it,” said Bill Jackson, the Zynga creative director who led a team based in Dallas that built the game.  ”It’s built on the shoulders of giants.”

Jackson was giving me a preview of the games a few days ago. And the quality is indeed impressive.

CastleVille is set in Medieval times and has many elements that will be familiar to Zynga players. In this case, the goal is to build the castle of your dreams by engaging in a series of quests. A preview of the game demonstrated how Zynga continues to push the edge in terms of graphics as well as music, which includes the use of a full symphony to create the soundtrack.

Where the game pushes into new territory is in its expanded use of narrative. There is a story at the heart of it that players can choose how they follow, rather than having quests or goals dictated to them as in previous games.

At its heart, CastleVille remains a social game, but it also shows how Zynga is moving toward creating massively multiplayer experiences. The question now is whether the rising production values and the evolving game experience will draw new players as well as longtime Zynga fans.

While Zynga’s update to its IPO filing today doesn’t have huge news, it does include two important clarifications that will provide fodder for both critics fans of the company.

First, the bottom line: The clarifications confirm that users are playing Zynga games for shorter periods of time. That’s going to fuel critics. But, the company also said that the biggest increase in revenue for the first six months of 2011 came from FarmVille, one of its relatively older games.

So, the takeaway seems to be that while the company faces challenges in holding the attention of more casual players, it’s doing a solid job in coaxing long-term, hardcore players to spend more money on its games. That’s good news for the company’s boosters.

The declining lifespan can be problematic, of course, because if new games have shorter lifespans, then the company will need to crank up investment in creating new games, or find ways to sustain interest in old ones. The filing shows that it’s having some luck at doing the latter. And at the Unleashed press event at Zynga’s new headquarters (which the filing says has increased in size from 345,000 square feet to 406,000 square feet) earlier this week, the company was trying to deliver the message that it has a big pipeline of games in the offing.

Two other important tidbits: The company selected the ticker sympbol “ZNGA” and revealed that it will trade on the Nasdaq. While this doesn’t tell us when the company expects to actually go public, it does indicate that it’s checked a couple more items off the IPO to-do list.

Now, back to the numbers.

The first clarification involved a somewhat arcane accounting issue, but one that had muddled questions about Zynga’s overall momentum. The company has provided more transparency on the issue, so kudos to them for doing so.

Zynga makes money primarily through the sale of virtual goods in its game which are free to play. There are two types of virtual goods: Consumable, which is something you buy and use right away; and Durable, which is something you buy and use essentially as long as you continue to play. More importantly, revenue from consumable virtual goods is recognized immediately, while revenue from durable virtual goods is recognized over the time the average person plays the game.

In previous filings, Zynga said the time period over which the company recognized that revenue was declining, from 19 months to 11 months. The problem was that it had averaged both durable and consumable virtual goods together, and so you couldn’t say conclusively that the decline meant that people were playing the games for shorter time periods. For instance, it could have been possible that people were buying more consumable virtual goods, which would also pull the average consumption period down.

But the new filing separates those two categories:

“Consumable virtual goods accounted for 40% and 32% of online game revenue in the six months ended June 30, 2010 and 2011, respectively. Revenue from consumable virtual goods accounted for 25% of the increase in online game revenue from the six months ended June 30, 2010 to the six months ended June 30, 2011.”

Then the company says:

“Durable virtual goods accounted for 60% and 68% of online game revenue in the six months ended June 30, 2010 and 2011. Revenue from durable virtual goods accounted for 75% of the increase in online game revenue from the six months ended June 30, 2010 to the six months ended June 30, 2011.

The company then plainly states that the average life of durable goods has declined from 19 months to 15 months for the six month period ending June 30, 2011. Thus, people are playing the games for shorter periods of time.

The company then also, for the first time, breaks out revenues by games:

“For the six months ended June 30, 2010 and 2011, Mafia Wars, FarmVille and Zynga Poker were our top three revenue-generating games and comprised 84% and 59%, respectively, of online game revenue.”

And just as impressive:

“Online game revenue increased $271.5 million from the six months ended June 30, 2010 to the six months ended June 30, 2011. FarmVille, FrontierVille and CityVille accounted for $76.6 million, $70.5 million of the increase, and $46.6 million of the increase, respectively.”

One caveat: Part of that increase for FarmVille, which launched in 2009, came from an accounting change, when the company decreased the lifespan of durable goods, that means it recognizes more revenue sooner. It would be nice if the company said how much of the increase was the result of the accounting change vs. organic growth in the amount of durable goods being purchased.

Still, my hunch is that the accounting change is likely only a small part, and it doesn’t seem to be a factor in the increase seen in the other games. If nothing else, I base that on the surprisingly large number of requests I keep getting from my FarmVille friends for help, even though I probably haven’t really spent any time in the game for, well, months.

One other tidbit: The filing says the company has filed for 248 patents, more than double what has previously been reported.

Finally, the big question that doesn’t get answered: When’s the IPO?

With millions of users and more joining every second, LinkedIn has become a data nerd’s delight. And it allows for intriguing experiments like the one recently conducted by Monica Rogati, LinkedIn’ senior data scientist.

Rogati was curious: What could that rich set of data tell her about the factors that go into making an entrepreneur? Or, as she put it in a study released today, “Sequencing the Startup DNA.”

If there was a big surprise for her, it was this:

“Geography matters, even if you like to think it doesn’t,” Rogati said. “Even if you like to think starting a company is democratic and the world is flat.”

Rogati basically took about 10,000 profiles of people who had started companies in some fashion. Interesting to note that only about 2 percent of those people go on to start another company, becoming so-called serial entrepreneurs.

But looking at geography, the most likely place someone will start a company is San Francisco. Indeed, someone is twice as likely to start a company in SF as they are in New York. And in turn, they are twice as likely to start a company in NY as they are in Boston.

The data on age is also interesting: 40 percent of founders were between 30 and 39 years old; 20 percent between 40 and 49; only 34 percent between 20 and 29. That means that over 40 percent were over 30, which challenges the conventional wisdom about startups being a game for the young.

The other data point likely to get tongues wagging is the schools where founders are mostly likely to come from. Number one is Stanford’s Graduate School of Business, followed by Harvard’s biz school, Berkeley’s Haas School of Business, MIT Sloan, and Tuck School of Business at Dartmouth.

There’s other data in there, of course. Check it out and post any other thoughts below.

Last January, the Merc’s Dana Hull wrote a tough but fair story about Solyndra, the solar manufacturer in Fremont that had fallen on rough times.

The company was in full denial. Just a few weeks earlier, when I was speaking at a media forum, I made reference to Solyndra’s problems. A PR rep came up to be after the event and insisted things were going well and the company had big plans.

And then, after Hull’s story ran, we received the following email from the Solyndra CEO:

“Fremont’s Solyndra is on the right track

Dana Hull’s article (Page 1E, Jan. 30) does not tell the full story of Solyndra’s potential.

The piece focused on old news, missing the facts that we cut costs in half in the past year, had record consumption in the fourth quarter, will ship our 100th megawatt within the month, and expect to be cash-flow positive this year. That sounds like a good news story to us.

Our company has had growing pains, like many Silicon Valley startups transitioning to full production. But we have moved forward, and are proud to manufacture here in Fremont. We invite the Mercury News, and anyone else interested in our future, rather than our past, to meet the Solyndra team and get the real Solyndra story.

Brian Harrison

President and CEO Solyndra, Inc.

Of course, on Wednesday, we finally got the real story: the company is shutting the doors. There’s no shame in failing. This is Silicon Valley, after all. But it’s hard to respect corporate leaders who expended so much energy spinning their problems, rather than facing up to them.

Following my Sunday column, “Who will be Silicon Valley’s next Steve Jobs?” the most common response I got was: Why wasn’t Twitter co-founder Jack Dorsey on the list? That was echoed in comments, tweets and emails.

In fact, I did strongly consider Dorsey. But ultimately, I dropped him.

There are certainly many intriguing parallels between the Twitter co-founder and Jobs. Like Jobs, Dorsey created a remarkable technology company that has had huge impact. And while there are several people considered co-founders of Twitter, Dorsey is usually credited with the concept, and the development. And, of course, he was the first CEO of Twitter before being pushed aside a couple of years ago — just like Jobs!

Rather than sulk and withdraw, Dorsey started another company, Square, a mobile payment service that has shown strong growth, attracting a recent venture round of $100 million that values the company at $1.6 billion.

And then, Dorsey made a triumphant return to Twitter earlier this year to lead product development, while remaining CEO of Square. Again, shades of Jobs, with his creation of NeXT, his role at Pixar, and then returning to Apple at first as an advisor.

And certainly, many others have made the Dorsey-Jobs connection. For instance, BetaBeat recently wrote:

“What we were startled by was the growing feeling feeling that there’s something about Mr. Dorsey that just sounds so familiar. A heavy emphasis on clean design. A charismatic presence at public announcements… wait a minute: @jack is kinda like a young Steve Jobs. Apple has even started selling Square in their retail stores.”

So, why didn’t I put him on the list? Part of it was the conceit of the list. I needed to keep it narrowly defined to be able to make comparisons, and so I decided to stick to people who were all CEOs. Yes, Dorsey is the CEO of Square, but that’s not why he’s such a big figure at the moment. Square is still tiny in impact compared to Twitter. It’s his role at Twitter, both as co-founder and now lead product designer that makes him a figure of note.

And in that regard, Twitter is still a mixed bag for me. The company still has scant revenue, and is still struggling to get its arms around a complex set of design and feature issues. The most interesting things about Twitter are often built by third parties, and the company needs to redefine its relationship with its ecsystem.

If Dorsey sorts all of that out, and he helps create a core, unified Twitter experience, then he’s certainly on the path to demonstrating a Jobs-like prowess. And if he can actually help the company figure out a business model, and even return to the CEO chair, then I think he’s someone to be considered for legendary status.

Everyone on that list has a lot to prove to be considered heir to Jobs’ legacy. But right now, compared to other folks on the list, Dorsey has even further to go.

There were two tantalizing tidbits that broke yesterday about Twitter.

The first was a nice scoop by All Things D’s Kara Swisher that Andreessen Horowitz had bought $80 million dollars worth of Twitter’s stock from employees in a secondary placement. Every more interesting, though also more vague, was a report by Swisher’s sister publication, the Wall Street Journal, about some possible acquisition talks between Twitter and Facebook and Google:

“As Internet valuations climb and bankers and would-be buyers circle Silicon Valley in an increasingly frothy tech market, many eyes are on one particularly desirable, if still enigmatic, target: Twitter. Discussions with at least some potential suitors have produced an estimated valuation of $8 billion to $10 billion.
Executives at both Facebook Inc. and Google Inc., among other companies, have held low-level talks with those at Twitter Inc. in recent months to explore the prospect of an acquisition of the messaging service, according to people familiar with the matter. The talks have so far gone nowhere, these people say.”

That’s an odd way to start a story, because it reports the talks and then tells us not to take them too seriously. Okay. The story justifies itself by saying what’s really interesting is that buyers are talking about an $8 billion to $10 billion price tag for Twitter.

I’m sure the Twitter folks are stubbornly clinging to their independence. But they shouldn’t. They should take the money. And they should take it from Google. And Facebook should walk away.

I know popular sentiment in tech circles is for Twitter to stay independent. Someone I respect a lot, Matthew Ingram at GigaOm, wrote a post, “Please Twitter, Don’t Sell to Google or Facebook.”

Ingram writes

“One of the best things about Twitter, despite all the problems it has had in the not-too-distant past with reliability and other issues, is that it is totally, 100-percent focused on being a real-time communications network. Being bought by either Google or Facebook might bring a big payoff, and substantial financial and operational resources, but it would almost certainly dilute that focus — simply because it would be a small part of a much larger company — and that would be a shame just when the service is starting to show its real potential.”

But with all due respect, let me say, “Please Twitter, do sell to Google.”

Here’s why:  I still don’t believe Twitter has a sustainable business model.

Twitter, of course, believes it does. And when I see smart people like Andreessen Horowitz buying shares at this relatively late date, I believe they see some there there. But I don’t.

The reason has to do with Twitter’s fundamental relationship to me. I don’t think Twitter knows all that much about me. And I don’t think there’s much of interest it can leverage to advertisers.

Let’s compare Twitter to the two potential acquirers. Facebook is going to be an advertising monster because it has an unprecedented amount of information about me, my friends, and my likes. It is my default Web profile. And it’s still in the early stages of learning how to use all that data. But its knowledge of me is the stuff that advertisers have probably dreamed of, well, ever since there has been advertising.

Google knows far less about me, and what it does know is muddled. If it follows my searches from home, it probably thinks I’m interested in technology, Duke University basketball, Star Wars, Captain Underpants, and Barbie. That’s because my whole family uses that PC. What has made them so successful is that they do a better job than anyone else at guessing who I am and what my interests are. Much of that comes directly from my search queries.

So Facebook knows who I am. Google is great at guessing at who I am. Where does that leave Twitter?

My profile information at Twitter is spare. There’s little way for it to know what tweets I might have read, unless I click on something, which I rarely do. It might draw some inference from my friends and followers, but that’s a weak pool of information.

Twitter probably doesn’t even know how deeply I engage with the service. Yes, I visit the Twitter homepage once a day, or so. But I have TweetDeck running all day, across three Twitter accounts I manage. I have glimpsed a promoted Tweet there once or twice, but rarely. I click on links in tweets, but that doesn’t mean I endorse or like the content, just that I was curious.

Given the way people use Twitter, and the poor quality of information it collects, I don’t have any expectation that it will be a compelling place for advertisers. As for any paid services, Twitter is so consistently behind the curve in feature development, it’s hard to imagine that they will build any specialized features that they could charger power users for.

In sum: No business model here. And you know what? That’s okay.

We have this default assumption that any company or service that can attract a kajillion users certainly must be able to monetize them. This is a kind of article of faith in Silicon Valley, but it’s wildly misplaced. As evidence, I would point to the most important piece of technology that may just be the worst business on the Web:

The browser.

There was a brief moment when Netscape asked us to pay $30 for the browser. But Microsoft put an end to that. And for the past 15 years or so, the browser has been free. Three of the four big ones are now made by big companies that don’t expect any revenue from them: Explorer, Safari, and Chrome. The browsers allow them to collect data on our Web surfing habits, but don’t put cash into their pockets. The other, FireFox, is developed under a non-profit.

I think Twitter is like that. It can be an important service that another company can use to enhance other things it does. The question then, is who is the best buyer?

The answer: Google.

As Ingram mentioned, Google needs to get social in the worst way. On the plus side, I think it has the engineering and the infrastructure to help Twitter fix its reliability problems once and for all. And I think it could help develop analytic tools that could help maximize Twitter’s limited revenue upside. And combining that user data with our search data would hopefully enhance Google overall.

Is there a chance that Google could snuff out all that is magical about Twitter? Yep. But I think it’s a chance worth taking to ensure that Twitter continues to exist.

A deal with Facebook would be a mistake for both asides. Ingram is right to point out that Facebook probably doesn’t have the cash to do the deal. But that aside, what would Facebook do with Twitter? I don’t think it could directly integrate Twitter, because it would mangle both services. The friend and follower dynamics are too different. And I’m not sure it brings any new users into the fold. Possibly Facebook could become a kind of social media holding company, owning both Facebook and Twitter, but operating them independently (though with friendlier integration). But that seems way too distracting.

No, at this point, there’s not enough upside for Facebook.

All this said, I think chances for a deal any time soon are remote. Twitter probably has enough money to run for awhile. It seems able to keep raising more private money, both for the company and to let employees cash out. And I’m sure the company wants to give its advertising business its best shot.

I think the real pressure, here, is on Google. In my mind, there is no amount of money that Google could pay for Twitter that would be too much. Not because of the revenue potential, but because it might inject some social thinking into Google’s engineering-driven DNA.

Google should put crazy money on the table until it’s piled so high, Twitter and its investors have no choice but to accept.

It’s official: Marc Bodnick, co-founder of the investment fund Elevation Partners, has left to join Quora, one of Silicon Valley’s hottest start-ups.

In a press release issued late Thursday night, the Elevation said:

“Elevation Partners, a private equity firm focused on large-scale investments in market leading consumer and technology businesses, announced today that Managing Director Marc Bodnick has resigned from the firm to pursue interests outside of Elevation Partners. Mr. Bodnick’s responsibilities will be assumed by Elevation’s other managing directors.

“Marc has made the decision to leave Elevation to pursue new opportunities,” said Roger McNamee,
Managing Director and Co-Founder of Elevation Partners. “Over the years, Marc has made many
contributions to the firm, and he leaves behind a healthy portfolio from Elevation’s first fund. We wish Marc continued success in the future.” “

Word began leaking out earlier this week about Bodnick’s departure from the firm that was started by McNamee and U2’s Bono, among others. Just a couple of weeks ago, I had a chance to interview Bodnick, whose reputation was on the rise thanks to his role in getting Elevation to invest in Facebook and Yelp:

“Perhaps no investor had more reason to cheer the deal that valued Facebook at $50 billion this week than Elevation Partners. Just one year ago, the conventional wisdom in Silicon Valley was that the high-profile investment fund, co-founded by Bono of U2, looked like a bust thanks to a bet on Palm that appeared to be a disaster.

But the success of its big investment in Facebook, and a smaller one in Yelp, have raised its standing in the valley and put the spotlight on Elevation partner and co-founder Marc Bodnick, 41, who played a critical role in landing both.”

Among the people I interviewed for the profile was McNamee, who was very complimentary about Bodnick’s role in the firm, those social media investments, and his general tech vision. However, according to the Daily Beast’s Dan Lyons, some at Elevation were less than pleased with the story I wrote and its focus on Bodnick:

“…an insider, speaking on the condition of anonymity, said Bodnick had exaggerated his contribution to Elevation’s success.

They’re especially miffed by a recent profile of Bodnick in the San Jose Mercury News in which Bodnick got a lot of credit—too much, the Elevation insider says—for Elevation’s successful investment in Facebook.

“Marc is a great guy. He’s a friend. But if you look at Marc’s background and hold that up to the rest of the group, well, he’s an equal partner, but if you’re going to lose somebody he’s probably the least damaging one to lose,” the insider said.”

It’s unclear whether Bodnick and Elevation have settled all outstanding issues related to Bodnick’s departure. Among the questions to be determined: How much of Bodnick’s share of the fund and its return will he be allowed to keep? What happens to his board seat at Yelp?

And most important: Will this have an impact on any plans Elevation has to raise a second fund? When I spoke to Bodnick earlier this month, he indicated signs seemed favorable to raise a second fund, despite the fact that Elevation investors had refused to give the partners more time to invest the first fund. They were apparently unhappy over its performance on investments in Palm (which managed to post a good but not great return) and Forbes (which has not done so hot).

But Facebook’s soaring valuation seems to have the first fund poised to post a healthy return. And as McNamee said when we talked, this serves as a reminder why it’s dangerous to pass judgment on any fund before it’s all said and done. At the time, McNamee said he’s be “surprised” if Elevation didn’t raise a second fund, and noted that the firm had brought on two new partners last year, presumably laying the groundwork for a second fund.

As for Bodnick, his move to Quora, a question and answer site launched last year by some former Facebook employees, puts him in the middle of a fast-growing new segment of the social media world. Bodnick has been a poweruser of the site since it launched.

On Friday morning, Bodnick responded to the question: “How was Marc Bodnick recruited to Quora?”

Bodnick wrote:

“Meeting the founders and using the product were the first steps in my growing interest in the company. I knew Charlie Cheever and Adam D’Angelo through mutual friends. I’ve been an active Quora user since October 2009, a time when there were only a few hundred users. I got onto the site after running into Charlie and Rebekah Cox, Quora’s lead product designer and first employee, at a birthday party in Palo Alto and bugging them for a beta invitation.

In October, Charlie invited me into the beta and I became immediately addicted. I have an eclectic set of interests, and I spent a ton of time on non-technical topics -> U.S. Politics, Movies, Children’s Books, Crossword Puzzles. In 2009-10, my kids and I were in the middle of reading Harry Potter, and I ended up writing dozens of questions about the books as I read each one. Then I did the same thing for the Matrix movies, Iron Man 2, and Black Swan. (I’m currently plowing throughPercy Jackson, btw.) I wrote way more questions than answers.

In early 2010, Charlie and I started talking about policy on the site, and he asked me if I wanted to get more involved with the company. So I started meeting most Sunday nights with Adam, Charlie, and Rebekah. These were awesome discussions for me. I was like a Madden fan getting to hang out with Bill Walsh to talk about the West Coast offense.

Toward the end of the year, Adam, Charlie and I started talking about the idea of me joining Quora in a more active role. It’s a small company, so I’ll take on a variety of roles including product marketing, community, and business operations. This is a big change since I’ve been an investor my whole life. I start Monday Jan 31 at Quora and it is a super-exciting new adventure for me.”

At the age of 41, Bodnick now becomes the “adult” presence at Quora. While he will have a wide-ranging portfolio, it will inevitably invite some comparisons to his sister-in-law, Sheryl Sandberg, the chief operating officer at Facebook.

Can Quora be turned into a real business? Will Elevation raise a new fund or is this the end of the road? Stay tuned.

Jay Adelson speaking at FailCon 2010. Photo by Dean Takahashi of VentureBeat.

As executive confessions go, the one delivered by former Digg CEO Jay Adelson in a public forum this week stands out as one of the most remarkable ones I’ve ever seen for both its brutal honesty and fearless self examination.

The occassion was a fireside chat at FailCon 2010 with Cathy Brooks, who runs the Story Navigation workshops that I wrote about previously. I wrote a column about FailCon that you can read here. Even though I couldn’t fit Adelson’s remarks into that column, I couldn’t stop thinking about his session even after I had filed. So I wanted to circle back to them here and explain what I found so amazing.

Silicon Valley executives are often packaged in so many layers of spin and carefully crafted images, that when someone stands up and speaks from the heart, with no filters, it can be downright startling. Like a sudden gust of wind that catches you off guard and almost knocks you off your feet.

That was the feeling I got as I listened to Adelson’s remarkable exploration of his own failings. While many folks in the room were understandably anxious to hear about the failures of his business ventures, I was captivated by his unvarnished discussion of his personal failings, as a father, as a husband, and as an entrepreneur. He spoke with great authenticity and honesty about his ongoing fight to strike a healthier balance between his intense drive as an entrepreneur and the toll it takes on his family and personal life.

Adelson isn’t exactly a household name, though in Web 2.0 circles he’s somewhat of a giant. Here’s some quick background on him. In 1998, Adelson started Equinix, an Internet infrastructure company that went public after Adelson stepped aside at the suggestion of investors to let another more “professional” CEO step in and lead the IPO. Adelson eventually lost control and was pushed out of the company, to his enduring regret. That experience was fresh in his mind he was contacted for advice by another entrepreneur, Kevin Rose, who wanted to discuss his idea that became Digg.

Adelson had left Silicon Valley and moved to New York after he left Equinix to get away from the craziness and lingering bad feelings. But ensuing conversations with Rose got him so pumped about Digg, he wife told him he had a “wild” look in his eye. Reluctantly, he found himself agreeing to become CEO of Digg. And he took the role while commuting from New York.

And this is where the personal confessional begins. Even though he had vowed to steer clear of another start-up, he found himself too obsessed with the idea of Digg to say no.

“Next thing you know, I woke up in the back of the alley with a bump on my head five years later,” Adelson said. “And I loved every minute of it.”

Asked about regrets, Adelson said he doesn’t second guess the decision to turn down the two serious offers Digg received. Instead, he again circled back to the personal toll.

“Looking back on the personal, there are moments in time when I wish things were different,” Adelson said.

When he started Equinix, his first child had been born just two months earlier. He rationalized his decision at the time by thinking, hey, it’s the dot-com boom, and I want to take my shot, and if it fails, at least I can say I tried.

“But I don’t think I realized at the time, even if you go home at 6 o’clock, which I rarely did, you don’t realize how much you take home,” Adelson said. “In your head, you’re at work. Even when you’re at home, or rocking your baby to sleep, you’re there at work.

“I wish I had the discipline to shut it off,” he continued. “This is one of the reasons I left Digg. I think I have a problem there.”

Once Adelson is working on a start-up, he find he “puts the blinders up. And to some extent, you can’t stop yourself. It’s a compulsion.”

The reasons he left Digg back in April, of course, were more than just personal. He acknowledged there were disagreements over the direction of the company. But even after he left, he found he hadn’t really left.

“It took me four months after I left Digg for the process to slow down in my head,” Adelson said. “I still wake up in the morning and I’m still working there.”

“I love the emotional context,” he explained. “Everything about Digg and Revision3 (an online video company where he is chair) is about changing something bigger than me. And I get very involved.”

Adelson knows he’s not alone in his start-up compulsion. And to illustrate his point, he asked the room full of 450 entrepreneurs how many of them reached for their smartphone the moment they opened their eyes in the morning. About half raised their hands.

“That’s probably not okay,” he said. “Look into my eyes. That’s. Not. Okay.”

Last year, Adelson and his family moved to back to Silicon Valley even though he didn’t expect to stay at Digg much longer. He was starting to advise more start-ups here and he thought that maybe being closer to them would help him achieve a better balance. He said he’s trying hard to stick to his decision to not jump back into a start-up. He said he’s struggling because he’s hearing about so many amazing opportunities.

“Can  you stay on the sidelines for six months?” Brooks asked.

“Ask me that again in six months,” Adelson said. “It’s been very difficult.”

Brooks asked Adelson what he tells other prospective entrepreneurs about how to weigh the personal costs of doing a start-up against the thrill of being in the game.

“I think that it really just depends on you.” Adelson said. “It’s an emotional decision. Is it interesting to you? What it really comes down to is: Do you enjoy your life every day when you wake up? Do you grab that Blackberry first thing in the morning because you really care about this idea and the people you’re working with? Or do you grab it because you have to?”

Here is VentureBeat’s video of Adelson’s talk:

There are plenty of CEOs in Silicon Valley that I could pick on when it comes to executive compensation. And when I do, I inevitably get an email from a reader accusing me of being resentful that someone else is simply making a lot of money. But that’s not true.

And as evidence, let me now praise Netflix CEO Reed Hastings. He’s making cash by the barrel full these days. And he deserves it.

I’ve singled Hastings out for the masterful way he’s steered Netflix through countless challenges. As I noted in this blog post earlier this year, Netflix has constantly been written off for dead. And each time, it’s come back even stronger. It’s repeatedly defied its critics expectations. And Hastings, who has been at the helm for about a decade, deserves a big share of the credit.

Were this your typical company and your typical CEO, you might also expect to find his executive compensation to be lavish. It’s not, but it’s been growing week by week. That’s almost entirely due to the performance of the company, and the growing value the company has created for shareholders. In a couple of ways, Netflix has done a remarkable job of tying pay to performance, which is why I don’t begrudge Hastings his growing pot of loot.

Let’s take a closer look at how that works.

First, we’ll start with something that Netflix does not do: Pay bonuses to executives. That’s extraordinary. From the company’s most recent proxy filing:

“The Company does not currently provide a program of performance bonuses for its Named Executive Officers. The Company expects all individuals to perform at a level deserving of a bonus and therefore such bonus amounts are taken into consideration in determining total compensation for the Company’s employees.”

Show up and do your job. There’s a novel concept.

The company then sets an overall target for what it wants to pay its executives, but it does allow the individuals to request how much of that they want in cash vs. stock. That means each person can determine how much risk they want to build into their pay. Once they do that, Netflix then allocates the options in equal amounts each month over the course of the year, with the strike price fluctuating along the way. So rather than just giving executives one big chunk at the start of the year, in a kind of all or nothing gambit, the piecemeal system does two things. It likely limits the upside, but also probably keeps more options in the money in the event the stock dips.

Look at it another way: If you flip the stock right away, your profit will be limited because the strike price will be based on the latest value at the start of the month. If you hold it for the longer term, there’s going to be more potential profit.

So let’s circle back to Hastings.

In 2008 and 2009, he was paid about $1 million in salary and received about $1.7 million in stock options each year, for a total package worth around $2.7 million. By valley standards, that’s cheap.

Since Netflix went public in May 2002, Hastings has established a pattern of stock sales from which he’s never deviated. He sells a chunk of 20,000 shares every two weeks like clockwork. For many years, these resulted in such small sales that they barely got any notice. His first sale in February 2003, when Netflix stock was just over $6 per share, was worth $126,550.

More recently though, I noticed that Hastings was often showing up in the Mercury News’ list of top stock sales each week. I wondered if he had accelerated his sales. Nope. Instead, Hastings is benefiting from the 239 percent increase in the company’s stock price over the past year.

So when Hastings sold his 20,000 shares on Sept. 2, Netflix stock was trading between $134.30 and $148.78, making the sale worth $2.8 million.

Over the past seven years, Hastings has now sold 3.35 million shares to raise $118 million. That’s somewhat offset by the $1.7 million he spent to exercise 964,152 options. But that still gives him a net profit on sales over $116 million.

That comes out to an average of $15.5 million in annual take home pay for Hastings, when you combine salary and net stock sales. That’s a lot for you and me. But it’s modest by Silicon Valley standards. And more important, it’s well deserved when your stock chart looks like this:

That kind of restraint shows the faith Hastings and his board have in the long term vision he has for Netflix. The only lament here is that this kind of mentality is still more the exception than the rule. Perhaps I may be naive in hoping that other boards might look at run of success Netflix has had and wonder if they should rethink their executive compensation principles.