Category: The Internet

Two Pieces of Business Advice

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An employee recently left Kapost (sad to see you go T) and i was out to lunch with her and she asked some advice. I thought back to two pieces of advice that I was given or things that i have witnessed from successful colleagues.  Here’s what popped up:

“90% of Power is Taken not Given”

This is a quote from my old boss Bill Raduchel.  Bill loves saying phrases like this to me, and this was one juicy nugget he spat out in 2002 when I was working at AOL.  I took it to heart. I was a product manager at the time and aspired t

Bill at the Inn at Little Washington

o have even more responsibility within the company.  He noticed that and delivered this great quote.  What he meant was that nobody is going to give me extra responsibility.  If i want it, i have to go take it and earn it.

That’s what i did. I wanted to run video services within the company.  There were lots of people running bits and pieces but nobody was owning it.  Instead of waiting for a title and position to be created, i just started acting like i was the defacto video product manager. I had weekly all-hands meetings with the other stakeholders, came up with a product roadmap, and basically acted like the product owner.  What happened? Eventually the company realized i was the product owner and rewarded me with that title.

In small companies there are too many things to do.  In big companies there are lots of ambiguity, swirl and gray space. In both instances, there’s an opportunity to do what you want.  Just be proactive and go do it.  In real estate, ownership is 9/10 the law.  In startups, doing is 9/10 the position.

Don’t Eat Alone

This is just something i’ve realized. Most of the people we hire at Kapost come from referrals.  Most of the opportunities i’ve been given in my career come from contacts of friends of friends.  The size and strength (i.e. authenticity) of your network matters in today’s work world and in your career.  I’ve seen people (Nick O’Neil) go crazy about this where they actually track in a spreadsheet the people they’ve met and want to keep in touch with and make sure every X number of days that they give them an update.  It may sound excessive but it works.  He has a ton of connections who regularly help him out.

There’s even a pretty good book, called “Never Eat Alone” which talks about the power of these connections.

Those are two things that immediately came to mind.  I’d be curious if any of you have heard any other nuggets of great advice that you’d like to share.

Twitter Stock and Slowing Growth

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In mid-December I bought Twitter stock for ~$45 a share.  Here’s why: 

  1. I’m bulling on Twitter as a social network. I think it has lots of great use cases that almost anyone could benefit from.  It will only grow in popularity once people start realizing what it is. 
  2. I think Dick Costolo is a great CEO and product person. I’ve watched numerous interview with him (including this great PandoMonthly one), have followed his path since Feedburner, and I believe he has the company running on the right track and is doing a great job.
  3. Twitter is just now starting to monetize but I think they’ll be able to pull in a good amount of money.
  4. When I bought their market cap was 20 billion.  At 10x multiples, that means they have to have yearly revenues of $2 billion.  That seems feasible for me that they’ll get there.

I was happy with my purchase. Then, on Wednesday night Twitter announced their first ever earnings since going public.  What a disaster it was.  First off, everyone compares them to Facebook even though they are completely different.  Second, they have seemed to have stopped growing.  Look at this chart:

That’s not good.  They need to grow.  They only added 1 million US users in Q4.  Wow, that is a crazy low number. 

So, while I am still a believer, I think it might be a tough year or two (or three) until they hit mainstream.  Trust me, it’ll be a better world when they do.  

Yahoo! is on it’s way back

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I had pretty much written Yahoo off.  I thought they were dead.  They hadn’t done anything new and interesting for over 5 years.  Their webpages looked like crap.  They were just treading water.  That all changed lately.  Specifically in the past 6 months, they’ve done some things that really make me think they’ll be a player in the future.

First, let’s talk about Flickr.  I’ve always used it as my default photo service where i store all my photos online.  It used to be the best (in 2003-2006) and then it got abandoned.  I still kept putting my photos there because i was locked in, but i knew it was dead.  They added one small feature a year. I had seen that playbook at AOL.  It means it’s only a matter of time before it’s time to leave.  Then something magical happened.  They pushed out a new iPhone app for it that was actually decent.  Then they updated it to make it really slick.  Then they announced 1 terabyte of free storage.  Then they announced automatic iPhone uploads of photos.  Whoa.  All of the sudden, it was one of the best photo apps on my phone.  All in about a 6 month period.

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Second, they released a new News Digest app that is basically The Week magazine but a daily app.  It aggregates 8 to 10 recent news stories and sends them to you twice a day.  Once you’ve read the morning stories, you have to wait for the evening delivery. It’s beautifully made and is really easy to consume.  It’s not the main way I get mainstream news.

Finally, they launched a new Tech site that claims to be different than current tech sites.  The premise being that all tech sites today are focused on the top tier tech enthusiasts and people who care a lot about Silicon Valley.  Yahoo Tech will be focused on the other 90%. People who want to know what the best TV is, not which Palo Alto exec just changed jobs.  I think that’s a great idea.

So, it’s good to have another player back out there.  Someone is building new things and innovating.  I’m excited.  It seems that Yahoo! is indeed earning the exclamation point on their name.

 

YouTube is Huge and Sketchy

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I wrote a few weeks ago a post about just how massive the site is.  I listened to a good interview with Jason Calcanis recently where he shared his experiences working with them as a potential partner.  

The short of it is that YouTube has not been at all interested in accommodating any partners because of their size and scale.  One thing that i found interesting in this talk was just how powerful the future of YouTube is. Some interesting points:

  1. Cash. They have an amazing amount of cash at $50 billion  (Forbes)
  2. Nobody’s in charge. Google is great at this in general.  It is very hard to identify who is setting the direction and strategy for each group and the company as a whole.  Because of this, they can’t be critiqued for lack of execution or for being evil. 
  3. Avoiding Anti-Trust. They can’t buy any large players due to the fear that the government would block it for anti-competition reasons.  
  4. They are copying competitor’s strategies.  These competitors are getting lots of video channels around a niche and selling ads around it.  YouTube is now doing just that and will probably do more. 

The cool part of this is that YouTube could have bought Netflix or something similar.  Thus, they are just going to buy lots and lots of content and put it out for free.  My prediction is that You’ll see NFL and other sports content available there along with full tv shows – and it’ll be SWEET for all of us.  

Happy Holidays: My Holiday Reading

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I did a lot of couch reading this holiday and as a result found some good stuff on the interwebs and thought I’d share…

1. The Paul Rudd & Conan video

Paul Rudd has been going on Conan O’Brien’s show for 20 years.  Each year he brings a clip to promote a new film. Apparently, every time he brings the same video clip every time. Here’s a video showing all of them. This is pretty hysterical. 

2. Bill Gates’s Good News of 2013

Here’s a post from Bill Gates about the good things that happened this year. Gates is out there solving real problems and he has such a unique perspective of how things are improving on a global level. This is worth reading.  For instance, he lets us know:

Half as many children died in 2012 as in 1990. That’s the biggest decline ever recorded. And hardly anyone knows about it! 

3. Billy Joel at MSG

Billy (now age 64) hasn’t released a record since 1993 and hasn’t toured since he wrapped up his last gig in 2010, but he’s still changing the music business. He recently signed a deal with Madison Square Garden to play a concert there every month. A good article in businessweek.

4. Maria Bello’s Modern Family

I’ve always loved Maria Bello as an actress.  She has an interesting personal life too. She’s penned a good essay in the NYTimes about her children and romantic situation.  It’s good and worth a read.

   

5. NYTimes and New Yorker vs. Buzzfeed and Gawker

The online advertising world is changing.  Sites like Gawker and Buzzfeed are grabbing lots of traffic and some good ad dollars.  This article looks at how publications that try to be more exclusive (and thus have less traffic) are trying to compete.  Hint: it’s not going to work out well for them. 

6. Be Nice to Cats

We have two cats and love them (most of the time) and I loved this video of a mean old woman getting karma right in the face.

7. Pregnant Virgins

Here’s an Interesting study here of 8000 women about how they got pregnant.  Almost 1% of them said they got pregnant with no men involved (and no in vitro or other reproductive technology).  Here’s to immaculate conception.

Happy Holidays everyone.  (note: if you want to regularly get my links, follow me as @MikePLewis on twitter)

Let’s Talk about Bitcoin

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There are a lot of talking and articles about what the price of bitcoin is these days.  These drive me nuts.  They are missing the point completely.  Here’s why…

First, i like bitcoin because it’s a technology. If you ask anyone who knows about technology, they love bitcoin (see here).  It is because bitcoin is first and foremost a protocol.  It has the potential to be the transaction and financial protocol for the entire internet.  This doesn’t exist now.  There hasn’t been a layer of internet infrastructure that was global, distributed, and not owned by any one person or company for payments.  This is a technology-based architecture that looks like TCP/IP or HTTP. It can be fundamental to the internet.   This is why investors and entrepreneurs are gaga about it.  It can be used (and will be used) to create applications on top of and we’ll see payments and money flow on the internet in the same way we see content, images and everything else flows on the internet.  It will not be controlled by any one company like PayPal or Visa and money will be unlocked. 

What’s also really interested about the protocol is that there is a ledger (called blockchain) that is global, distributed, peer-to-peer that exists on every bitcoin wallet so that every bitcoin transaction clears publicly.  

Second, I like bitcoin because it can be a currency.  I want to pay for stuff using bitcoins and i’m way less likely to do this if the price is $300 one day and $1200 the next.  I need it to be stable. I don’t want to “invest” in bitcoin, i want to use it.  I don’t invest in US dollars, i use them.  I want to do the same with bitcoins as i believe that this is the future of it.  So, please stop treating it like a commodity (like gold). 

I’m still getting used to it and i’m excited to see what applications are built to use it.  I’ll be out there testing them

Growth vs. Profitability and Kapost

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One of the more interesting learnings I’ve learned at Kapost is what makes SaaS business models work. Related to that I often get the question asked to me, “How is Kapost doing? Is it profitable yet?” implying that if it isn’t, things are bad and if it is, then things are good.  This post is an attempt to address that question.

When talking about a company’s performance, I’ve noticed that you have to talk about both its growth and profitability, and discussing just one in the absence of the other is dumb.

I recently did a post comparing Salesforce and Linkedin.  You’ll notice in there that neither company is profitable yet both are worth over $30 billion dollars.  LinkedIn makes a $1 billion a year in revenue, whereas Salesforce does $1 billion a quarter ($4 billion a year).  Why are they worth the same?  Because LinkedIn is growing at 60% a year whereas Salesforce is growing at 30%.

To investors, companies are worth what their cash flow is going to be in the future – not what it is now.  That’s all they care about.  If they think the cash flow will be huge, the company will command a huge valuation.

Let’s take Amazon.com as an example.  They have had no profits for years, yet it’s currently worth $166 billion.  One analyst even jokes about it, writing:

With every Amazon quarterly earnings call, my Twitter feed lights up with jokes about how Amazon continues to grow its revenue and make no profits and how trusting investors continue to rewards the company for it. The apotheosis of that line of thoughts is a quote from Slate’s Matthew Yglesias earlier this year: “Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers.”

The point here is that you need to understand why any company is not profitable. In the case of Amazon, it is making huge investments in warehouses to grow its retailing business and huge investments in data centers to grow its AWS business. It could stop making those investments and start generating profits. But doing so will sacrifice growth in the market they current work in.  Amazon’s doing $70 billion in revenue this year and did $34 billion in 2010.  Here’s Amazon’s revenue since 1996:

That’s doubling in 3 years.  That’s pretty amazing.  I’m sure it’d be worse if they were focusing on profitability.

What does this mean for Kapost?  Kapost has established itself as the market leader in content marketing software and hit profitability early in 2013.  However, we desired to grow and grow quickly.  Thus, we raised a round of funding and are using the those funds to accelerate our growth.

Why can’t we grow organically with our profits?  

The way SaaS businesses work is that they face significant losses in the early years because they have to invest upfront to acquire customers, but they recover the profits from that investment over a long period of time (the life of the customer).  What’s somewhat strange for people to understand about SaaS businesses is that the faster the business decides to grow, the worse the initial losses become.

For example, imagine a world we you spend $6,000 to acquire a customer, and then charge them $500 per month.  For one customer, you’ll get the money back after a year, but you need $6k up front first to get them.  And, if you want to grow faster and get even more customers, you have to spend even more money.  The graph below shows that the more you spend, the better the rate of growth is.

This is why Kapost did another round of funding.  Going forward, as long as we’re accelerating the rate of revenue growth, we’ll always be needing more money and more money that we’ll need to fund that growth.  That is, unless we don’t want our rate of growth to increase.

Now, of couse, profits are critical to the health of a business.  The key is to be able to be profitable if we want to be and to be profitable at some point in the future, at least hypothetically. So, when you hear that a company is losing money, don’t read that as a necessarily bad thing. It could be a very good thing. It all depends on why.

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Notes: Here are some good posts on this topic that helped me out:

  1. David Skok is awesome.  I stole his graph and a lot of his thoughts.
  2. Wikivest
  3. From Eugene Wei’s blog
  4. From Fred Wilson’s blog

 

 

YouTube and Walmart

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I recently read a post about advertising on online video.  It’s a good post but probably too detailed for most people.  One thing in the post that stuck out is how big Walmart is and also how big YouTube is.  It got me thinking.  Pretty interesting stuff about two behemoths of our time.  Here are some details: 

Walmart is ginormous: 

  • 8% of every dollar spent in America is spent at Walmart  
  • They have more than 4,000 locations and sell more than $34 billion / month.
  • If Walmart were a country it would be the 19th largest in the world.

YouTube is also huge:

  • 1 billion monthly uniques hit the site
  • 40% of the online population uses YouTube every month
  • 6 billion hours of watched video a month. That’s enough for every human on earth to watch 150 videos a year. 
  • 63% of all videos watched in the US are on YouTube

 

The point of the article is that if you’re in the online video business, it’s foolish to try to do anything without thinking about YouTube. Similarly, it’d be foolish for a retailer to not want to sell their product through Walmart. 

 

 

Who Would You Invest In? Salesforce vs. LinkedIn

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I like playing this game.  It’s a game where you have to force yourself to choose to invest between two (arguably) overpriced companies.  I’m been doing it once a year between Foursquare and Quora.  Go ahead and make your vote there.

I read today in a good article about LinkedIn’s business that the two companies LinkedIn and Salesforce.com have the roughly the same market cap at $30 billion (Linkedin lately has cruised past it even more to $32).  So here’s the game: If you had to put 80% of your entire life savings into stock of one of these companies, which do you choose?  A breakdown:

LinkedIn:

  • Current market cap: $32 billion
  • 2013 Q2 revenue: $364 million
  • Net income last quarter: $3.7 million
  • Growth rate: 12% last quarter & 60% over the last 12 months

Salesforce

  • Current market cap: $30 billion
  • 2013 Q3 revenue: $957 million
  • Net Income in Q3: $76 million
  • Growth rate: 7% last quarter & 31% over the last 12 months

I think from these comparisons, you can see that SF is twice the size, but growing at half the rate. If both companies keep growing at the same rate, LinkedIn will be bigger in 5.5 years and almost double the size of Salesforce in 9 years. The market really rewards growth and doesn’t seem to care about profits from newish companies.

Personally, i’m putting my money into Salesforce, but it’s interesting to see how much the market loves LinkedIn.  In my daily work life, i use both. We have all our sales information in Salesforce and can’t operate without it.  All of tools plug into it (Eloqua, Totango, Desk.com, etc.).  At the same time we’re hiring and not a day goes by where i’m not looking at someone at LinkedIn or trying to contact them through that platform.  It’s proven to be invaluable when hiring.  I can see it breaking into new businesses and growing fast.

That said, i can’t see Salesforce being replaced any time soon – and the pricing is much better.  We pay less than $1000 a year for LinkedIn (for the ability to message people) but well over $30k a year for Salesforce.

Who would you bet on?

[poll id=”4″]

 

 

Apple Maps vs. Google Maps: A Rant

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I recently heard someone talk about what a bad move it was for Apple to release their own Maps app on the iPhone.  I’ve heard this maybe half a dozen times lately and I couldn’t disagree more.  We should all be happy this happened.  Here’s why…

About a year ago when there was no Apple Maps, the situation was this:

  • The default map app on the phone was Google maps
  • Apple had repeatedly been negotiating with Google to have them provide turn-by-turn directions and voice navigation in their app on the iPhone.  Google had turned them down time and time again so they could promote Android phones and claim some level of superiority.
  • Apple had no alternative but to accept that Google was sandbagging their iPhone app

Fast forward to today.  Apple releases Maps which has turn-by-turn directions that are way better than the old Google app.  Google was rendered to be an optional app on phone and because of this fact they stepped up their development efforts and made the Google maps app way better than their previous app.

Today iPhone users have two great options for maps and both options are way better than they had a year ago.  If Apple hadn’t done anything, we’d probably still be stuck with a second-tier version of Google maps.

So, Apple’s probably pretty happy with their decision.  The iPhone mapping capability is at the very least comparable to Android, something they couldn’t claim a year ago.

Ok, i can now go back to work.  Thanks for letting me rant.

May 2015 Update: 

Looking at this latest report you can see that 84% of cell phone users get turn-by-turn navigation while driving.  Looks like Apple made a good call to really shake up the platform to get that functionality in there.

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