Tag Archives: Business

What the Goldman Sachs Facebook investment really means

Alan Patrick sees through the hype around Facebook being “worth $50 billion”:

“The one sure thing you can tell from this is that Facebook clearly can’t self fund itself enough for what it needs, even on $2bn turnover a year.”

To put it another way: A web site which has 500 million users, 1/8th of the entire population of the Internet, doesn’t have a business model capable of supporting itself.

Analyst predicts iPad will be fastest product to $1 billion sales, ever

Carl Howe, for Yankee Group:

“Apple announced on Monday that it has sold more than 1 million iPads since its announcement on January 27. I’m counting since January 27 only because pre-orders are included; the reality is the most of those sales and deliveries have been in the last 30 days. Assuming that rate continues in May (and because even Apple Stores keep running out of stock that seems likely), we’ll see Apple having sold about 1.5 million units by the end of May. Average sales prices seem to be in the $645 range (16 GByte WiFi and 64GByte 3G units seem to be the top sellers). Do the math, and we discover a quite remarkable number: Apple’s iPad will likely take the crown for the fastest consumer product growth to the $1 billion revenue mark in history, taking less than 120 days from announcement to reach that milestone.” [My emphasis]

It’s pretty astounding that a product which many predicted had no plausible niche should get to one million sales. That it should turn out to be the fastest billion dollar business in history, in any product category is marginally insane.

I’m not convinced that it’s correct to assume that these are disaffected netbook buyers, but it’s pretty clear that there’s a lot of pent-up demand for something like the iPad. Mine has barely left my side since I bought it.

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Sometimes, “think like a startup” isn’t the best option

In an interesting piece on the problems at MySpace under Murdoch, Om Malik mentions this:

Kevin also mentioned that Murdoch, and every large media company, need to think like startups.

Good advice – but only to a point. The fact is that News Corp (like all major media companies) can currently make more money online creating products which leverage other assets they own than standalone digital-only properties.

One simple example: a site tying into Avatar will have an instant audience and massive opportunity for cross-promotion and cross-sell, as long as it doesn’t suck. It won’t take years to build audience, won’t have large ongoing costs, and won’t need to have much in the way of work done on visual identity. It’s an instant money-spinner.

So if News Inc was developing digital-only properties from scratch, as I’m sure it will do in the future, “think like a startup” is good advice. But most of the time, it needs to “think like a corporate” – creating digital properties based on other media, linking them all together, and using the power of old media to create instant brand identity in the digital space.

(Picture via World Economic Forum)

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3′s Spotify/Android deal could be a game-changer

Image representing Android as depicted in Crun...
Image via CrunchBase

Quick heads up on this, and I’ll probably write more later, but 3 is apparently going to do a bundle of the HTC Hero Android phone (widely-regarded as the best of the current crop) with a premium Spotify account for the two year lifetime of the contract.

And, by strange coincidence, it’s priced at the same level as the cheapest o2 iPhone package.

More to follow, no doubt.

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Watch out, Mac-using analysts: Ballmer knows where you live

Via Joe Wilcox, comes this bit of Steve Ballmer’s speech to financial analysts:

“We have low share, by the way, in the investor audience. I can see the Apple logos versus the PC logos. So we have more work to do, more work to do. Our share is lower in this audience than the average audience. But don’t hide it. I’ve already counted them. I have been doing that since we started talking. (Laughter.) Anyway, we’ve got a bank of them right here in the middle. I know where they all are. One over here on the side. But anyway, that’s OK. Feel free as long as you’re using Office to go right on ahead.”

My guess is that the average financial analyst doesn’t spend less than $1,000 on a laptop…

 

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Why are companies so afraid of “think(ing) different”?

You’d think that companies would want to make their products different from their competitors, wouldn’t you? ?After all, if there’s a difference, people might actually buy your product rather than someone else’s?

Not always the case, as Matthew Taylor notes:

“Then a few days later a friend was comparing prices from Virgin and BT to have a broadband package in the home. Leaflets came through the door with attractive and strikingly different all-in monthly prices on their cover. It took a couple of hours of ploughing through the small print to work out that the actual cost was two or three times as much and, if everything was included, the prices were virtually identical.”

(Caveat: BT are a client, so naturally I’d dispute part of this! :) )

In his fabulous list of “Top tips on how to get the worst out of your agency“, James Myers notes much the same thing from a marketing perspective:

“Under no circumstances provide information that suggests your product or service is different in any way shape or form.”

So why on earth does this happen? My guess is that there’s two reasons. First, when you’re supplying a commodity good or service, all companies are working with the same basic products and similar margins, which means you have to work very hard to do something different. 

The second – and I think what James is getting at – is that differentiation is risky and most corporations are notoriously risk-averse. If you’re doing something different to the competition and it fails, you – the middle-level manager with a budget – are going to get dumped on from a very great height. If, on the other hand, you’re doing the same thing as your competitors then it’s likely they’ll fail as badly as you – and then everything will be fine. 

Which leads me to a question which will form a decent book for someone: How does Apple manage to be a company which apparently doesn’t take too many risks, but which manages nonetheless to do marketing, product design and development so differently to everyone else? How, in a market which everyone is convinced is a commodity one, do they differentiate?

As I mentioned, I think there’s a serious book in that. One that, once he’s retired, I hope Steve Jobs will write. 

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The new economic reality: business model first, build traffic second

Farhad Manjoo at Slate offers a timely reminder of one of the underlying realities of online business:

“Everyone knows that print newspapers are our generation’s horse-and-buggy; in the most wired cities, they’ve been pummeled by competition from the Web. But it might surprise you to learn that one of the largest and most-celebrated new-media ventures is burning through cash at a rate that makes newspapers look like wise investments. It’s called YouTube.”

I’ve said before in various conversations that one of the factors that big online publishers need to consider is the value of the traffic they are getting, and YouTube is a perfect, if extreme, example. Without a real method of turning traffic into money, every visitor represents a cost to your business. Bandwidth, server maintenance, development, and infrastructure might have a low cost on a per-user basis, but they’re not free, and the more users you have, the bigger than sum is going to be.

Saying, as some commentators do, that you should build traffic before having at least the outline of a plan to turn that traffic into money is simply unsustainable in the current economic climate. It was actually unsustainable in the old economic climate too, but the flood of cheap credit based ultimately on overvalued assets and Chinese savings disguised that fact. It made it seem like the era when VCs would endless fund business with no business model (and big companies would buy them) would go on forever – and that’s sadly not the case.

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The Hulu and Boxee fight continues

Image representing Boxee as depicted in CrunchBase
Image via CrunchBase

The TV producers’ decision to block Boxee from using Hulu content appears pretty shortsighted, but there is method in the madness, as VentureBeat points out:

“The truth of the matter is that Hulu’s new encryption efforts make dollars and sense for its content parters. Networks like NBC and Fox might have snagged viewers by partnering with the video portal, but Hulu’s slightly airy ad library hardly compares to the revenue generated from their broadcast cousins. For these networks, as well as their partners, protecting broadcast advertising’s revenue stream will always be a priority. At least, while the advertising market continues to stay solvent.”

At the moment all the money is actually in television. Hulu/Boxee is potentially huge in the future, but now? Nothing much.

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