Valuations and intrinsic value
bubblegeneration: "Let's realize that gigantic valuations are not the same thing as real, durable, value creation." Needs to be repeated every now and then.
Two ears and one mouth
"I don't use my blog as a mouthpiece or a megaphone. I use it as a listening device." - David Haddad of SocialLocalMobile
Mozilla took in 66.8 million dollars in 2006
In 2006 Mozilla Foundation, makers of Firefox and Thunderbird, had revenue of $66.8 million, with 85 % coming from Google. Google doesn't need a browser of its own, for all intent and purposes Firefox does what Google needs. 1) Chipping away market share from Internet Explorer and 2) getting Google default search distribution.
Twitter is Jaiku-like
I really liked this quote at this Wedensday's Webbdagarna: "Twitter, the Jaiku-like presence service." The exact wording is probably a bit off, but it reminded me that our reference points are decided by where we live. Somehow I don't think Beata Wickbom would have described Evan Williams' service quite the same way had she presented to a U.S. audience. But I love it.
Microsoft invests $240 million in Facebook
Microsoft invests $240 million in Facebook at a $15 billion dollar valuation, giving them 1.6 % of the company. In addition Microsoft secured the right to sell advertising in non-US market on behalf of Facebook. I'm going to write more about this if time permits, but one way to think of the investment is as a advance against advertising to be sold with an option on equity appreciation.
Not putting their money in Internet companies anyway
According to Svenska Riskkapitalföreningen (Swedish Venture Capital Association) Swedish venture capitalists invested 74 million SEK in 11 Internet technology companies in the second quarter of 2007. That is $1 million and change for each company.
To understand how litte that is, consider that Benchmark Capital alone put $8 million (about 50 million SEK) into Power Challenge in early May.
Update October 27th: A good friend who spoke to a few Swedish tech VCs about the number told me that the VCs, based on the their own investments, say the 74 million SEK number is too low.
Fred Wilson: "We've observed over the years that little things like getting the incentives right in a social system make all the difference in the world."
I agree and went back and reread Björn Jeffery's Trading with internet currency blog post to freshen my memory on some different types of incentives that can be used.
Videos from Graphing Social Patterns Conference
Videos from the Graphing Social Patterns: The Business & Technology of Facebook conference. Presentations from among others Reid Hoffman of LinkedIn, Tim O'Reilly and Jia Shen of RockYou. Worth a look if you want to better understand Facebook as a platform.
Time for yet another Sunday evening news roundup (or in short YASENR).
Inside Facebook on Facebook standardizing application invites. Comments from Andrew Chen.
Chris "Long Tail" Anderson: Everything in the music industry is up! (except those plastic discs) And he doesn't take into account the money going to artists because they are brands (endorsements etc).
History might not repeat itself, but it definitely rhymes. The old privacy discussions surrounding online-offline advertising targeting integration (DoubleClick + Abacus back in the dot.com days) will likely resurface as Acxiom is doing the same thing today.
Martin Jönsson comments on the interesting acquisition made by the cash rich and highly profitable Herenco in the Swedish local newspaper market. Previously Herenco-owned Jönköpings-Posten was the only local newspaper without a news web site. Instead of launching one, they acquired the startup competitor Jnytt
Web 2.0 Summit Presentation Videos
On blip.tv some of the presentations from Web 2.0 Summit are up. Currently John Battelle's interview of Facebook founder and CEO Mark Zuckerberg and Mary Meeker's High Order Bit on trends in technology are up. Hopefully more will follow.
On SecondBusiness blog Beata Wickbom has additional reporting from Web 2.0 Summit. Reality is broken, Forget platforms (already?) - data is hot, Everybody wants to be a platform.
Skype's revenue at $400 million a year
As eBay reported financial results I kept my eyes open for Skype's revenue. It grew 96 % (year-on-year) to $98 million in the quarter. However in the conference call Q&A eBay CEO Meg Whitman said Skype over-monetized and kept the net margin to high. When I've read media comments surrounding the Skype team getting "only" 1/3 of the earn out, the big problem seemed to have been that Skype didn't hit the financial targets. After the impairment charge eBay values Skype, a $400 million dollar annual Internet business growing almost 100 % year-on-year, at $2 billion on its books. Even Alley Insider thinks Skype is likely worth about $4 billion.
The ususal podcasting mix
Yesterday I, Björn Jeffery, Fredrik Wass and Thomas Wennström recorded What's Next. Google & Jaiku, transparency, record companies in crises and Steve Ballmer were a few of the subjects we discussed.
BeyondVC Startup Cycle
Ed Sims on when you should continue building your company and when you should sell it. Ed does a nice adaptation of Gartner's Hype Cycle to explain how a startup's value changes over time.
Find the viral loops
Bronte Media: "if you are developing an app that is social in nature, you better have Facebook or MySpace in mind from the beginning, otherwise you?re an idiot."
Will there be an advertisement to answer every question?
Beth Comstock at NBC Universal on online business development and business models: "I'm getting to the point where I feel like every answer to every business development pitch is 'We're going to be advertiser supported.' ... There are not going to be enough advertising dollars in the marketplace. No matter how clever we are, no matter what the format is."
Jonas Midbrink (Trig.com) in Realtid: "- Egentligen byggs de här sajterna inte för att ta intäkter. De byggs för att bli jättestora och säljas dyrt. Vi har fått fotfäste i USA. Vi är den första svenska sajten som lyckats med det."
According to the article Trig.com has 75,000 members. Not the first time I suspect a quote out of context.
As "everyone" is using Facebook, I'm experiencing that all my networks, for lack of a better word, are on their way to merging into one connected and transparent "friends" network. It makes me feel uneasy as it raises important questions about context, transparency and online voyeurism. Questions I don't have good, long-term answers to at the moment.
Don't play games you cannot win
Ian Rogers, VP of Product Development Yahoo! Music: Convenience Wins, Hubris Loses and Content vs. Context, a Presentation for Some Music Industry Friends. [via: TechCrunch]
"Inconvenient experiences don't have Web-scale potential, and platforms which monetize the gigantic scale of the Web is the only way to compete with the control you've lost, the only way to reclaim value in the music industry. If your consultants are telling you anything else, they are wrong."
"I'm here to tell you today that I for one am no longer going to fall into this trap. If the licensing labels offer their content to Yahoo! put more barriers in front of the users, I'm not interested. Do what you feel you need to do for your business, I'll be polite, say thank you, and decline to sign. I won't let Yahoo! invest any more money in consumer inconvenience. I will tell Yahoo! to give the money they were going to give me to build awesome media applications to Yahoo! Mail or Answers or some other deserving endeavor. I personally don't have any more time to give and can't bear to see any more money spent on pathetic attempts for control instead of building consumer value. Life's too short. I want to delight consumers, not bum them out."
Good example of thinking about alternative cost a.k.a. the best way to spend resources and having a strategy that includes avoiding playing games that cannot be won.
Bilddagboken Acquisition Makes Sense For Lunar Group
Lunar Group's/LunarWorks' acquisition of the remaining 60 % of Bilddagboken makes a lot of sense strategically. Acquiring additional sites let Lunar Group use its established sales force to sell premium priced brand advertising to advertisers, even if the number of vistors to LunarStorm declines.
The reason I think it makes strategic sense, especially compared with launching LunarStorm in other countries, is the following:
Before a site/publisher has grown large it is very difficult to sell premium priced brand advertising to, primarily, media agencies. Once entrepreneurs have built a popular a site, they will have to build a sales force that can sell to the media agencies etc. Building the sales fore takes time and often requires additional capital. Selling to an industrial buyer, like Lunar Group, will often make sense.
Lunar Group, and other media companies, can by snapping up sites like Bilddagboken (not that such sites come along that often) add value to an acquisition by accelerating the move from response-based advertising to higher priced branded advertising. It is not a pure financial acquisition, as there are very real synergies. The strategy also lets the media company partly mitigate the risk of a specific site losing popularity by building an organization where advertising sales for a bouquet of sites and smart acquisitions are the core competencies.
Presenting at Daytona Sessions on Nov 1st
On November 1st I'm going to give a presentation called Utan Kristallkula (Without a Crystal Ball) on Internet trendwatching at Daytona Sessions. I think it will be an great afternoon as Rasmus and the gang are gathering a lot of interesting people. Hopefully we'll meet there. More information can be found at daytona.se.
Nokia acquires Navteq
One big and noteworthy acquisition is Nokia's $8.1 billion purchase of mapping company Navteq. It is easy to focus on tagging, user created content, RSS, AJAX etc when talking about Web 2.0, but one should not forget that data is the next Intel Inside as Tim O'Reilly wrote in his What is Web 2.0 article. Also $8.1 billion is far more than any new Internet company, sans Facebook, has been valued in the last few years. Worth noticing.
FriaBurma.nu. "Vår tanke är att Friaburma.nu skall fungera som en manifestation och insamling för ett fritt och demokratiskt Burma.
Alla donationer som kommer in från kampanjen kommer oavkortat skänkas vidare till biståndsorganet Diakonia, som är en av medlemmarna i Thailand Burma Border Consortium (TBBC)."
And the worst deal is....
I'm no Gartner analyst, but it is quite obvious that Skype is about $53 billion away (not taking the fall of the US dollar and inflation into account, in which case the difference would have been greater) from being the worst Internet-related deal of the decade. But who is counting?
JAlbum launching photo hosting service
Swedish JAlbum has launched a photo hosting service to complement their photo album creator software. As "free" hosting seems to be a key growth driver for photo and blog services, it will be interesting to see the if this release speeds up JAlbum's growth (currently 7 million photo albums have been published).
Interview with Niklas Zennström, post-Skype CEO
Thomas Crampton has interviewed Niklas Zennström in conjunction with Niklas leaving the post as Skype CEO. [via: SIME 2007 Blog] An interesting read. Niklas touches upon Skype's market share (growing), monetization and Joost. I'm less bullish than Niklas on Joost (Joost hasn't given me the wow experience, yet, and I don't see Joost being competitive with piracy for the next 1-2 years), but agree with him that there are a lot of opportunity for innovation in e-mail. I think e-mail innovation is a more interesting area for technology entrepreneurs than search.
Related: Janus Friis' blog post (not) just another monday.
900 million dollars here, 900 million dollars there...
Not quite a billion, but $900 million is still a lot of money. Therefore it will be interesting to see if and how eBay's management explains its decision to write down the value of Skype with $900 million in addition to the earn-out payment of $530 million when eBay reports its Q3 results later this month.
With Skype making about $350 million in revenue this year and growing at an annual rate of about 100 percent, it is not obvious what the business is worth. Big Internet companies (Yahoo, Amazon, Google and eBay) currently has quite rich valuations, with price/earnings ratios between 30 and 100. If we for sake of argument would assume a net margin of 10 percent for Skype, the company would be making a profit of $35 million in 2007. Using the multiples of the publicly traded Internet companies, the current valuation would range from about $1 billion to $3.5 billion. Assessing fair market value and taking an impairment charge in such an environment is clearly as much an art as a science.
Free the columnists!
Even though I believe that Aftonbladet Plus can be a good business for Aftonbladet, I think making the columns part of Plus is a big mistake. Free (as in advertising supported) columns in other mainstream media and bloggers will become relatively more important as they are easier to link to and discuss. The value of a (good) column increases as more people read it. Putting such material behind a wall does not make sense. It didn't make sense when New York Times created NYTimes Select and it doesn't make sense for Aftonbladet today.
The main question isn't if you should charge for some features of your site or not, but what you can charge for without diminishing the value of your product. See older posts (in Swedish) Intäktsmodellen spelar roll and Fokus på läsaren.
Open pricing on Radiohead's latest album
Radiohead's pricing of their new album In Rainbows is, to me, one of the most interesting business developments in music for awhile. Pay as much or as little as you want, but at least 1 cent for the album plus 45 cents for credit card processing.
I think it would be even more interesting to see the effects of open pricing on major label music that sales wise is a bit down the long tail. And sell the album on iTunes or Amazon. I think such a move would create more economic value than having open pricing on one newly released album from a big artist.
Niklas Zennström no longer Skype CEO
Press release: Niklas Zennstrom Steps Down as CEO of Skype.