A billion here, a billion there...

You have $30.4 billion of assets (in this case CDO mortgage backed securities), which are so bad that you can only carry them at $11.1 billion on your balance sheet. In order to get them off your books you decide to sell them for $6.2 billion. Pretty bad. And that's without considering that you are lending the buyer $4.65 billion to close the sale. Amazing!

Sometimes it is obvious that Web 2.0 stuff is still minor.

Update: As the only collateral for the loan is the CDOs sold, can someone explain to me the accounting effect of the sale that Merril Lynch seems to be seeking?

Book report

Three weeks into a mostly work-free period I've managed to read two of the four books on my summer reading list. By chance both were written by Business Week journalists.

I started out with Spencer E. Ante's Creative Capital, which chronicles the early history of venture capital by following the life of Georges F. Doriot. It's a good, but in the beginning of the book a bit slow, read about one of the persons who influenced the modern venture capital industry. The primary takeaway from the book for me was the portrait of Doroit's life and secondary a history of the origins of today's technology-oriented venture capital industry. If you've read about the early days of Silicon Valley, this book gives additional flavor as it describes the development in the Boston area where Doroit and his VC-firm ARD were active.

The second book was Sarah Lacey's Once You're Lucky, Twice You're Good. I was pleasantly surprised by the book. In an easy-to-read style that almost feels like a novel, Sarah writes about some of today's most high-profile Silicon Valley Web 2.0 entrepreneurs such as Max Levchin (Slide, ex-Paypal), Marc Andreesen (Ning, ex-Netscape & ex-Opsware), Kevin Rose (Digg) and Mark Zuckerberg (Facebook). The feeling is that Sarah really manages to capture the essence of the four persons professional and to some extent personal lives. Having the book now as opposed to a in a few years when everything will have settled down makes the book even better. Definitely worth reading.

Lifetime value rises all boats, but can also drag them out to sea

TradeDoubler's 2Q report came out today and lower than expected results, driven primarily by the UK, led to the company losing about 15 % of its value on the Stockholm Stock Exchange.

With online advertising growing and TradeDoubler being active in the performance-driven space (which some claim is "recession-proof"), what is going on?

The good thing with performance-driven advertising such as affiliate, lead generation and search advertising is that when you find number-driven advertisers and show that your solution works, they will shift advertising spending quicker than brand-oriented advertisers will.

However, the number-driven advertisers will also know how much they can spend to acquire a customer or sale. If the underlying value of a customer decreases and the advertisers want to keep their margin, they will pay less for leads and sales which hit publishers, affiliates and advertising networks.

In addition, if the overall demand for a product (like mortgages or credit cards) decreases because a downturn in the business cycle or shifting consumer behavior, the volume of possible leads and sales will also decrease.

It looks like both things are hitting the UK market this year, which then hurts TradeDoubler's (and a bunch of other companies like ValueClick, Monesysupermarket.com, Yahoo, to some extent Google) sales and profit.

Bambuser gets 15 MSEK at 62.5 MSEK post-money valuation

The VC part of Norwegian group Kistefors has invested (up to) 15 million SEK in Swedish video broadcasting service Bambuser at a healthy post-money valuation of 62.5 million SEK. Congrats to the Bambuser team!

Press release.

Note: My understanding is that the investment will give Kistefos 24 % of Bambuser, not about a third which among others Beta Alfa writes. The share of ownership should be calculated by dividing the investment with the post-money valuation (post-money valuation equals the pre-money valuation plus the invested capital) and not by dividing the investment with the pre-money valuation.

I've made a small investment in Videoplaza

I've participated in Videoplaza's seed round (pdf) and have joined Videoplaza's board of directors. Swedish venture capital firm Creandum led the round.

Revenue proof of concept, Facebook policing apps and games revenue

Mike on Ads: Are you generating revenue?: "Doesn't matter if it?s adserver, behavioral tracking, a new media network ? each idea has a revenue-generating ?quick win? you can close to prove the business works. Right Media was a profitable for over a year before it launched the exchange. A single good CPA deal with AOL funded most of the first year of the company!" Creating a proof of concept in the market (user and customer demand) is something to do before one starts scaling like crazy.

Inside Facebook: Facebook?s Evolving Approach to Platform Governance: "It's now been 5 days since Slide's Top Friends application disappeared from the Facebook Platform as a result of an apparent Developer Terms of Service violation. This suspension is the most severe punitive action imposed by the Facebook Platform team that the development community has seen yet, and is at least in some sense emblematic of Facebook's evolving approach to Platform governance and regulation." Betting on an ongoing ability to annoy Facebook's or other social networks' users with forced invites and similar things is not something an application developer should do. If the social networks turn into true platforms, there is likely opportunities to build strong application companies (like on the PC). However, application developers must realize that Facebook (the company) as a service provider has more power over application developers than Microsoft had as the product provider of Windows.

Dave Perry (of Shiny and Acclaim fame) posting on Lightspeed Ventures Partners' blog: 29 business models for games. Listing 29 different ways of designing the revenue-generating part of a game's business model.