2009-09-22

Some, mostly older, thoughts on paid online news

This weekend Svenska Dagbladet wrote about paid online news and initiated a blog relay race on the subject. As this is not the first time the subject is discussed, I dug out some decent older posts that still reflect my thoughts on the subject. In addition to the older posts I'd like to add:

1. It seems like paid online mass media news, as an idea, is driven more by ego (i.e. this is important thus people should pay) than strategic thinking (i.e. this is what we can get paid for and use the proceeds from to reach our strategic objectives)
2. The product quality (the packaging of news, relevancy, insight etc) of online news must likely improve as readers increasingly have alternatives (other Swedish newspapers, international newspapers, blogs, Wikipedia, etc)
3. As newspapers are going from a monopoly-like to a more competitive situation they will have to increase their focus on cost-base, effectiveness (doing the right stuff) and productivity (doing the right stuff efficiently) while improving product quality in order to stay profitable

Now for the older posts with a more strategic perspective:

Rant on online newspaper business model and differentation (Jan 2009)

"The big problem for online newspapers that want to charge their readers is that they are producing something that, to a large extent, is an undifferentiated commodity. While news is popular, it is hardly ever unique. Most of the content, for the lack a better word, found at Aftonbladet, Expressen, DN and SvD can be found at its main competitor in very similar form. No individual Swedish newspaper does create a product that is great enough to motivate a larger number of people why they should pay for it when there are advertising-funded alternatives. (It doesn't mean that it is impossible to create a product that you can charge for, as Wall Street Journal Online proves.)"

"As a good online newspaper gets lots of visitors (even if they usually lack commercial intent and as a group are heterogeneous and thus far less valuable than a visitor to a search engine or niche site), the possibility to launch mass-market add-on services (which has been done in classifieds, dieting, dating and other sectors) to add sales is at least as great as when selling DVDs with the physical paper."

Big is beautiful (Sept 2007)

"As a large media site Aftonbladet gets some advantages from investing in user paid services like Plus:

- Less dependent on advertisers (which is a good thing)
- A platform to be a fast follower or develop new paid only offerings internally (think dating, dieting etc), as parts of the knowledge and infrastructure is in place
- Higher revenue per (paying) user for certain services than advertising will provide

The three areas of advantage lead both to significant short-/mid-term revenue opportunities and longer term strategic flexibility.


25+ million SEK is nothing to sneeze at (Sept 2007)

"Advertisers are bad masters for online media, probably especially to newspapers, so one shouldn't rule out premium (a.k.a. paid for by users) material and features even if the international trend is to go all advertising supported. There are lot of ways to implement premium features, and with the devil in the details a freemium model makes a lot of sense to many web sites."

Bad bank rules for .se - sign the petition

Sign the petition against the proposed rules regarding the word bank in .se domains: Namnbank.se.

2009-09-21

Adobe to acquire Omniture for $1.8 billion: doesn't make sense to me

Adobe paying $1.8 billion in cash for Omniture has a very, very high chance of being one of the worst Internet acquisitions ever. Pricey (5x sales/1.73 PEG/10x gross profit/26x operating cash flow for a $300 million business), in cash (almost 80 % of Adobe's cash), few synergies, fighting customer economics (only makes sense for e-commerce and maybe brand marketers, not for advertising-driven publishers) and fighting Google and other 'free' analytics providers that have strong incentives to subsidize analytics (a.k.a. pricing pressure is likely to increase).

Adobe could have spent far less cash and been far more customer-oriented by investing in better technical integrations with different analytics solutions rather than acquiring the high-end provider that a lot of Adobe customers don't use. Congratulations to Omniture, Adobe shareholders should beware.

2009-09-20

Interview with Daniel Ek of Spotify

Videos, eight in total, of the interview of Daniel Ek of Spotify at The Glasshouse on September 17, 2009 (via Shak). Some tidbits:

* If 10+ % of users pay you have a very good freemium model. Less than 10 % of Spotify's users pay for Premium.
* Revenue split likely to be around 50/50, maybe 60/40 premium/advertising. Some people have reported this as 60 % of Spotify users are likely to be premium, which seems to be incorrect.
* Hope to launch in the US either late 2009 or early 2010.
* There's likely entrepreneurial opportunity (outside of Spotify) in moving concepts between the Western world and Asia
* To entrepreneurs: Think of one problem and one solution to that problem and you can build a company around it
* Spotify wants to be the platform for playing music, provide tools to developers
* Spotify is looking at how to help people share music with their friends (not playlist aggregation like ShareMyPlaylists etc)
* Spotify's two "secrets" for success: a great product and getting the music licenses
* Spotify has plenty more to prove in music before going into film and other content
* There will be several Spotify powered devices, but probably not hardware built by Spotify.
* Music taste is not currently widely used to target advertising, hopefully it can be used to improve the quality of advertising. Spotify will invest in making it better.
* Rights are getting more fragmented as artists run their own music companies and license to distributors in different territories.
* 50-100 people in the big music companies were the key success factors for getting the licensing deals as they supported the deals inside the music companies.
* Spotify has chosen to grow instead of being cash-flow positive
* Trying to build a company that is really big, run from Europe and is a stand-alone company (like SAP)
* Goal is to be a platform between the artist and the fan
* You [as an entrepreneur] always have doubts, but never doubted they could build a great product. At times doubted if artists and record labels would like it.
* Big setbacks: thought they'd get licenses within six months from founding but it took 2.5 years, user-information leakage in early 2009,















2009-09-10

Double standard

Sarah Lacy, who wrote Once Your Lucky, Twice Your Good, wrote an article for Business Week calling the Facebook employees who sell up to 25 % of their vested shares mercenaries. I think that is giving a bad name to good people.

* Saying that founders should be able to partly cash out, as Mark Zuckerberg apparently has done, but not early employees because the founders invest "everything" in the company simplifies the reality of a startup. Many employees put as much or at least nearly as much of their lives into a startup as the founder.

* People work at companies for love AND for money. It's not an either or question.

* Employees might want to sell some shares to make a down payment on a house or pay off student loans. Or diversify their investments. That doesn't make them mercenaries.

* Facebook seems to have a 13x revenue multiple, valued at $6.5 billion on alleged $500 million in revenue (likely on the high side). It is a fair to high valuation. Consider the valuations of the four most successful public US Internet companies (Google $145.2 billion, Amazon.com $34.9 billion, Ebay $28.1 billion and Yahoo $20.3 billion), and it is clear that Facebook needs to execute close to perfectly to increase its valuation. Having the majority of your net worth in such a company is quite a risk to an individual employee.

* Given its size, reporting requirements to the SEC and fund raising, Facebook pretty much is a listed company in every sense except being listed on a stock exchange. And apparently being listed is when its ok to sell.

* When did drinking the Kool-Aid become a negative? Well, ask the Enron employees who had large parts of their 401(k)s in company stock. Working at a startup is easier if you drink the Kool-Aid. But as most drinking, it should be done in moderation.

2009-09-07

Spotify available for iPhone/iPod and Android

Spotify Mobile is now available for iPhone/iPod and Android. And it works just fine.

2009-09-04

Seven years and counting

September 4, 2009 is this blog's seventh birthday. Thank you for reading.

Farmville is great, but Zynga doesn't have 100 million users (yet)

All Facebook reports that social games developer Zynga has more than 100 million users playing its games. Unfortunately All Facebook is wrong (at least if one is looking at the statistics All Facebook is). As great and fast-growing as Zynga is, one cannot add the users of Farmville, Mafia Wars, Texas Hold'em Poker and other Zynga games together and talk about Zynga users without eliminating double counting of users who play multiple games from the total number.

Update November 24th, 2009: Zynga passes 100 million unique users, poker chips the main revenue driver

2009-09-02

More on eBay-Skype

Niki Scevak on eBay's acquisition and partial sale of Skype. Ebay likely overpaid, but being cash positive (around $200 million) and keeping a significant upside on the deal is good for any major acquisition done in 2005.

2009-09-01

eBay sells Skype to Silver Lake, Index and others

Almost four years to the day after acquiring Skype, eBay is parting with 65 % at a $2.75 billion valuation. It is an interesting combination of buyers led by technology-oriented private equity firm Silver Lake Partners, Index Ventures' growth fund (one of Index's venture funds was on the selling side four years ago), Andreessen Horowitz (Marc Andreessen is a member of eBay's board of directors) and the Canada Pension Plan (CPP) Investment Board.

While the current valuation of Skype is slightly lower than eBay paid for it, it has been keeping its value much better than the rest of eBay (eBay's share price is down roughly 55 % in the same time period).