Michael Eisenberg, an Israeli VC, wrote two thought provoking posts about the way the government  invest properly in Israeli High Tech. From Microsoft and .Net monopoly through iPad banning, to poor distribution of CSO funds, our government neglects the important aspects of maintaining Israel's technological leadership.
Though not a VC, I've worked in several industries, from mobile to internet to media, and I meet a lot of startups in different stages. And I think that though Michael is right in his claims, there is another angle to this story - the core competencies of the Israeli industry is not as important as in the past.

Origins of Israeli High Tech
Israel's High Tech originated, broadly speaking, from 4 sources:
1. Technological army units such as 8200, Air force and Mamram
2. Universities such as Technion
3. Russian immigration
4. ECI/Comverse RAD group and other major companies, whose employees who jumped ship and opened their own startups.

The strong points of these sources were electrical engineering and telecom oriented know how.

The Best Beta Site
Israel has one of the highest mobile and broadband penetration rates. Therefore, a mobile startup could easily sign a deal with a local mobile operator and make it a beta site. The local mobile industry was at the same level as  European mobile markets, so Israeli companies could launch products in that huge market relatively easily, as it was close to what they had locally. I was a part of such process when working with Flash Networks. First we sold our product to Orange, and then to T-Mobile. We knew what was needed in order to build and deploy a product in such an environment.

Media and Internet are Winning. Pipes are losing.
However, the market changed. World wide innovation lies more and more in internet companies. Hulu is more innovative then Motorola. Google is more innovative (and profitable) then Nokia. Mobile operators are not as important in the value chain as they were before. And Apple is changing the game again and again with innovative hardware and software.

Failure in  Growing the Business
Most Israeli companies are just not big enough, or maybe not with the right culture and financial resources to win over the mobile and telecom market and create the next Nokia or even next iPhone. The last guys who tried it failed and closed shop, not to mention their founder's financial trouble. Yes, I am talking about Else Mobile and Eli Reifman's troubles. So in that area we are basically, well, screwed.

No Longer a Beta Site
So let's look at the Israeli internet industry. Unlike the mobile market, there is a huge difference between local internet industry to international or American one. While video is growing drastically in the US, and major media companies experimenting with new business models, our market is just too small, too centralized, to make companies feel their bread and butter is at risk. With 3-4 major media players (Hot, Yes, Reshet, Keshet), and two major portals (Walla, Ynet) no one has the incentive to innovate. They are making enough money as is, and digital cents are not even on their map, as no one buys content here.
We don't have an Israeli iTunes. We don't have an Israeli Hulu. We don't have an Israeli Huffington Post. We don't have an Israeli ereader market (Sorry E-vrit, not enough units sold yet). Come on, iPhone, one of the biggest media innovations, landed here less than a year ago.
Amazingly, there is a huge gap between Startup innovation and portals' adoption of technology.
So the Israeli media and internet is like Shakshuka - some great cutting edge media technology (eggs) floating in a sea of not extremely innovative portals (tomato sauce).

Culture
With technology less of an issue and winning product is the focus in the online and media industry - culture and media consumption habits become the key for creating a winning company. And, we don't have the visibility of neither. Cause our local market is so different.

Is This The End?
Is this the end of Israeli startup industry? No. There are several amazing content and media companies here in Israel such as Innovid, Outbrain and many more.
But we need to start think differently. It is not like 8200 will start to create cool video players so Israeli innovation won't die. But it might be that in the future these units won't be as important in Israeli High Tech as in the past.

Possible Solution
We need a simple plan - and do the so unIsraeli thing to do- actually follow it. We should encourage Hot, Yes and the major portals to invest in innovation. It might be through tax incentives or other ways, but we should give them a reason to do so, cause they don't have one now.
We should create special incubators for media companies with international media veterans. I have couple of names in mind.
And we should take into consideration that the market is going to change to the worse for us. As Michael said, we are definitely not competitive in price. If the current situation will continue, we will lose our technological edge as well.

What's Wrong with this  Post?
If you know me you know that I love well established facts. Unfortunately I don't have the numbers to back the claims here. It is based on personal experience and being in the industry for 10 years.
Would love to hear your opinion.

I've written about this event here - and you should be there. I know I will. And because I'd like to see you, here are some last minute codes for free exclusive invitation:
TN67BL1;TN68BL2;TN69BL3;TN70BL4
Each code is limited for 1o invitations only, and some of them were already used - so time is NOT on your side.
See you there.

Yes, I know, I am an Apple fan promoting a Microsoft's event, but this one is different...
Last year, Think Next was an awesome event - covering innovation, startups and keynote from thought leaders. This year the Microsoft guys are planning an even more exciting event, with Craig Mundie as a keynote speaker (Chief strategy and research officer of Microsoft), Moshe Lichtman (President of Microsoft's Israel R&D Center and a great speaker), a DemoFest AND - Yes, Natal.
So here is the thing - it is a closed event but a little bird gave me several invite codes. Each code could provide 10 invitations.
After 20 RTs of this post - I will publish a code on this blog.
In the weeks leading to the event I will publish additional codes on my Twitter and Facebook profile.
ThinkNext will take place in Tel Aviv Port, Hanger 11, on April 14th.

I am very excited today. Channel 2 News, Israel's biggest news company, just launched its iPhone application, developed by Pravda Media.
The application allows viewers to watch videos, text news items, and weather reports. It also allows users to send images directly to Channel 2 News Desk, and report scoops and exclusive images.
We've been working with Channel 2 News company, especially with Liran Dan, head of interactive, and Tom Sharon, iPhone project manager,  on various digital projects, among them the integration of Twitter with TV shows and in their general workflow.
We believe that media companies, as well as marketers, should reach their customers on every platform, network, mean and channel. We help our customers to achieve this goal with building the needed tools, strategies, and technologies.
It was extremely exciting to work on this application. And it is only the first version. We are planning to release exciting new features soon.
(*SSP - shameless self promotion)

Twitter is, by far, the most engaging online platform today, and represent a huge opportunity for traditional media and brands - read on to see the numbers.

In the last couple of months, Pravda Media was working with Israel's biggest TV News Company, Channel 2 News, on integrating Twitter in their ongoing operation.
We looked at twitter in two ways:
1. Distribution Channel - Channel 2 News website is populated with video news section, both pre-recorded and and live. We wanted to use Twitter to drive more traffic to the site and increase video viewership.
2. Interaction Channel - We chose one TV show, called Meet The Press, and interacted with the audience via Twitter. Viewers were asked to send questions to the host before the live broadcast of the show, and twits were displayed on TV screen during the live show.

Twitter, though still a small network in Israel, proven to be the most engaging online platform today, with highest click through rates , and responses from TV audience

Let's look the the figures:
1.  Users are clicking on links on Twitter  more than on  any other platform: the Average click through rate (CTR) of twitter links is 10% - X70 times more than banners, X10 times more than links in forums and items on Channel 2 website. According to Eyeblaster's research, the average banner CTR of  is 0.14%.  Channel 2 News generate around 1% CTR in their items and in online forums. When considering the fact that twitter is a time based medium, meaning that users see  twits in a specific time window, these numbers are even more significant, as they represent a higher engagement.

2. Level of engagement of TV viewers is much higher in Twitter than in other media channels. Meet The Press offered viewers to ask their weekly guest questions via Twitter, in addition to the show's forum and comments on their site. Twitter generated tens of questions and responses, much more than any other platform.

3. On  June 14th 2009, Israel's prime minister gave an historical speech at Bar Ilan university. The speech was broadcast live on all TV channels, and online in all major news sites. 10% of all traffic reaching channel 2 news site to watch the broadcast originated from Twitter, an amazing number considering that Channel 2 started engaging in twitter only a couple of months before this event.

4. Long term involvement in twitter  provides clear benefits for the company. Channel 2 sees a constant increase in amount of interaction with their Twitter user, while all other interaction channels don't show any growth.

Possible explanation of these figures

The numbers above show that Twitter users are more engaged in conversation and clicking more links than on other mediums. In my opinion, two important factors are causing this behaviour:

1. Twitter is all about instant gratification. 140 charecters and rapid life-streaming encourages users to click on links in order to get additional media. This experience is fundamentally different than forums, blogs and other longer formats.

2. When users connect to twitter, they already intend to engage. While banners are trying to divert reader's attention from the content he or she wanted to consume (the site content itself), Twitter users are there for the interaction.

Would every twitter campaign generate the same CTR? No. One should remember that Channel 2 is a leading news  company, so their content  is relevant to time of the tweet, and well produced. These factors might not exist in other cases.

However, one thing is certain - Twitter, and probably Micro-blogging as a platform, is engaging and interactive. Now it is up to us to find new creative ways to use it.

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I am excited being a judge and participant in TWS2009, as well as interviewing Dave Sifry on stage. If you are excited from this event too, I have 3 free tickets to give my blog readers. Please RT this post and leave a comment if you are interested. Young entrepreneurs and students are especially welcome.The winners will be announced tomorrow morning CET, so hurry :)

Even if you don't get a free ticket, you can apply for 40% discount  tickets  here: http://zone.thecoils.com
Since there are only limited amount of such tickets, make sure you don't miss that opportunity.
Here is some more information about the event:

The event will take place on July 13th, 2009 (next week) at the Inter Continental Hotel in Tel Aviv.

The TWS2009 aims to find and present the 10 most promising Internet startups in Israel. The event is of, for, and about the leading figures and companies that are driving innovation in the Israeli Internet economy. Well-known professionals worldwide, such as Brian Solis, Rafe Needleman, Ron Conway, Stowe Boyd, Dave Sifry, Deborah Schultz, Marc Goldberg, and Saul Klein chose the 10 winning startups.
The event is organized by Israel's biggest blog the.co.ils, with Globes as a partner.

The TWS2009 is a great platform to meet the most innovative startups, hottest ideas, latest trends, the leading VCs operating in Israel and some from abroad, private investors, seasoned and brightest young entrepreneurs, visionaries and real Web savvies.

On stage we are going to have David Sifry (Technorati), Dan Ciporin (Venture Partner Canaan Partners, Shopping.com), Gary Vaynerchuk (WineLibrary.com, via web conference) and of course, the 10 most promising Israeli startups challenged by our respected Israeli judges.

I was sick last week, and that's why I didn't post anything lately. Now I am back to work, and this blog will be updated as usual.

Digitas produced a great event called Digital Content Newfront couple of weeks ago, as a part of NYC Internet Week.

And I was an active participant, even though I was thousands of miles away.

The event covered brand marketing strategies, and was keynoted by Al Gore, who discussed Viewers Generated Ads, a strategy that let viewers create ads for brands. Mr. Gore talked extensively about the need for authenticity in brand marketing, a tricky topic for cigarettes and oil companies.
I was interested to hear Al Gore's take on that - so with a simple twit, I've sent a question to the conference, from my living room in Israel. My friend Jon Burg who was moderating incoming twitter questions, asked the question at the event - and Gore responded simply by saying that they don't work with such companies. I was a part of the whole thing as I watched the live video feed from NYC.
The amazing part of the story is not that I was able to see a video stream of a remote event and ask a question. This was done before with ustream and blog.tv. The important point here is that these technologies are now mature enough:

• The video feed was crisp and almost without any buffering. From urls of the event I believe it is the work of Bitgravity, an affordable HD CDN.
• The room was covered with multiple cameras using Tricaster , a low cost video mixer.
• And Twitter was pretty stable.

So I was in my PJ, at home, talked with one of the brightest minds, Al Gore, all thanks to usable, affordable technologies.

The Physical walls are falling. The only barrier for communication is willingness.

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