Dinner tonite was actually the birthday dinner for Surf Canyon’s CEO – Mark Cramer (I was Dave’s rather poor second choice to his lovely wife who couldn’t make it).   Mark’s friends were all in attendance and since Mark has been on the startup ride for a while was a chance to meet a bunch of other startup folks.  I got a chance to meet an entirely new circle of startup folks.

One of the interesting points of the conversation when talking shop about Surf Canyon was talking about how they could get more downloads of their search plugin and toolbar.  I spent a number of years in the toolbar space and have been surprised by how many questions I have been getting recently about my toolbar years especially from folks in the social networking space.  So here’s my general take – in an increasingly web and browser dominated world – getting any user to install software is an increasingly difficult.  Users have become wary of hidden risks and potentially harmful software coming from seemingly innocuous software.  The adoption/conversion rates from web-based applications vs. downloads can be a factor of 3x difference if not more.  Also web-based applications have the potential to be tied into social network platforms which can be very effective channels for incredibly cheap user acquisition.

At the same time, the toolbar market from a user perspective is highly saturated.  Google is the dominant toolbar today and it’s hard to find virgin users who either don’t have a toolbar or are willing to replace what they already have.  And the competition to reach those users is fierce and being fought be folks who are making a lot of money.  Ask.com’s Smiley Central toolbar group pays $1.50 to $3 per install in part because of their Google ad syndication deal they can make $5 to 6 per install (at least that and likely even higher).  So for new anyone looking to offer a toolbar as their primary business model – I usually offer a strong word of caution.  Even if you have a better mouse trap, if you can’t pay for shelf space, then you might want to consider a different model.  And case in point, the only “viral” toolbar from the last few years that was reasonably and widely successful has been Stumbleupon.  Every else – even Google – can bring their war chests and buy up the market.

Now Surf Canyon has a real cool browser plug-in and a great product is a great place to start.  I just hope that the competitive and financial realities of the toolbar market don’t prevent them from being a big success.