Business plan obfuscation: Twitter style «

The question of the day seems to be "Does Twitter have a business plan?". There's lots of chat in the blog sphere about how VC's invest in companies without business plans. (I think not).

Anyway, Scoble has this post on whether or not Twitter has a business plan. My take is that they do. What is it? I have no idea. The word on the street is that they just got $5m in Series A funding and traded 25% of the company. Wow - that's way outside what's considered the norm (a pre of $6 and a post of $8m).

Lets say they have a business plan. What are they going to do with the $5m. That's essentially enough runway for 2 years at $2.5m a year which is about 20 employees unless they ramp like crazy.

So what's the business model that's going to work here? The only thing I can think of right now is advertising. There's not much room in 160 characters to do that, so maybe their going to build an online Twitter social network that is similar to Facebook. Again I have no idea.

What I do know is that it's incredibly hard to monetize the sol called "Freemium" model. That's the model where they give it away and then charge customers for additional services. The conversion rate is usually about 1% or it can be as high as 3%. With a couple million users that amounts to 20,000 on the low side and 60,000 on the high side. Reality is probably somewhere in between. The next question becomes what are those 30,000 people going to pay for AND is that sustainable over a period of time?

Again I have no idea. Lots of smart people have stepped up for Twitter it's going to be really interesting watching how it plays out. Right now for a 10x return the VC's will be looking for a $250m exit which puts in right in the stratosphere of exits. Lets hope they come up with a measurable, sustainable, profitable revenue model from volume. If they do it will be a huge win for the investors.

 

Business plan obfuscation: Twitter style « Scobleizer

The times, how they have changed

This week amongst other things, I had to do some tech support on our mobile software. The customer was located in Scotland (UK). Here are the tools I used to troubleshoot the problem and resolve it in about 20 minutes...

1. Crossloop - a very cool piece of remote control software. It's VNC under the covers, and on top it has to have the easiest user interface I've ever seen. Cost $0
2. Pocket Controller - another very cool piece of remote control software for Windows Mobile devices. Installs in a couple of seconds and allows you to see what's going on with a connected WM device. Cost $36 - we used the trial version, Cost $0
3. Phone call - the customer helped me out here (even though I could have done it with SkypeOut for a similar charge). He used a local access number to call me on. We were on the call for 20 minutes. Total cost (1 penny per minute - 2 cents per minute US) $0.40

So excluding our time - we did the whole support for 40 cents US. That's simply amazing. In the old days (5-6 years ago) this simply would not have been possible. The customer simply downloaded and auto installed items 1 & 2 above and then a cheap phone call did the rest. Tools that I could only dream about having access to are now available for free or next to free. Fortunately we've kept our software simple to install and use and the customer was up an running in a few minutes.

As I said to my Scottish friend - 40 cents won't even by you a beer anymore. The times sure have changed a lot. 

Internet Outsider: MySpace: $1B of Revenue in 2007

This post illustrates why the VC's are rushing to social networks. $1b in revenue is real money and makes a 10x multiple for Facebook ($10b) price tag a reality.

Of course I come back to reality - how many of these can the market support and who will buy them. A billion a year is a lot of money, until you're a Google - and then it's only about 6 weeks worth of revenue (wow).

Either way I expect more and more social networks to show up, however there's only really room in the marketplace for 3... MySpace, Facebook and one more. 

Internet Outsider: MySpace: $1B of Revenue in 2007

4x - No X - and yet to be determined X

What am I talking about? Return on invested capital... in the last few days I've seen three announcements regarding Opsware, Amp'd and Hi5

Opsware was recently sold to HP for $1.6B - the only reason I heard of them was because of Marc Andreessen. They sell software that helps automate large data centers, something that HP will be able to use with their customers. $1.6b is a huge number on par with YouTube. The difference? Well YouTube had no revenues and Opsware had roughly a $100m in revenues. The other difference? YouTube had about $30m or so pumped into it, Opsware had over $350m pumped into it. The final exit for Opsware was roughly a 4x return on invested capital (1.6b/350m)...

Next comes Amp'd which burned through $360m before imploding - that works out at a Zero X return on invested capital.

Finally a new entrant to the social networking scene, Hi5 which apparently raised a $20m Series A round at a pre of $105m (Wow). Ignoring whether or not they are profitable for a moment, (which I believe they are, (but not cash flow positive)). I expect at least another round of two, probably totally $50m investment.

I can understand infrastructure purchases (Opsware), I have a much harder time understanding social network purchases. The only people who can afford such incredible valuations are either Microsoft or Google. (Yahoo doesn't have the cash/stock war chest). To add to their quarterly financial's the social networks will have to be throwing off huge cash multiples - Facebook, the best recognized brand at the moment can only manage a $100m A YEAR - Microsoft and Google do that in a week or two.

So ultimately what's the "sustainable value of the brand" over the next few years? I have no idea. If Hi5 can start throwing off over a $100m a year in revenue then the buyout will be in the $2b - $3b range. Which will most likely work out like a YouTube multiple on the exit. (Better than Opsware and a whole lot better than Amp'd).

 

The $64 dollar question - how much room is left on the table for another social network. We'll know in a couple of years.

Patents and the Tour De France

Today was patent day and also the penultimate day in the Pyrenees for the Tour De France riders.

I'm am avid cycling fan and have been glued to the TV for the last couple of weeks watching them battle it out on the roads around France.

What amazes me is how these guys keep going. The hero of the day has to be Vinokourov who rose from the dead yesterday to win the stage today.

It's some of the finest bike racing I've ever seen. Also you have to watch the battle for #1 between Rasmussen and Contador. Contador has the most incredible burst of speed up a mountain and is amazing to watch. Wednesday's Queen stage is going to be a battle royal for sure.

Which brings me to Patents. What has that got in common with the Tour De France? Well probably not a lot, however today I had to dig in and start writing the disclosure for our latest filing. Now I'm neither a writer, trained attorney or coder, so doing something like this is tough.

For some reason today it was really tough. I struggled all day, before finally figuring out what works for me (think about pacing yourself up a mountain pass on a bike). What I had to do was diagram everything. It was the only way to follow all the logic. I ended up with 7 "FIGS" (as they are listed in a patent filing). It's like a jig-saw when it all comes together.

I have to admit this is not my favorite pastime. I know how it works, I can see the magic taking place in the code, I'm just not that keen on writing it all down.

When I'm tired and ready to give up using words like "embodiment" I think about the Tour riders who have been going non stop (well only one rest day so far) for nearly 2 weeks and I say to myself, dig a little deeper, only a few more mountain passes (embodiments) to go.

 

Vive Le Tour.

Microsoft Windows patent will spy for advertisers

Interesting patent application from Microsoft... here's the abstract. (The highlights are mine). I've been saying for quite sometime that the only way to really deliver advertising is to make it contextual. If you know "Who I am, What my current device capabilities are, and Where I am, then with my permission, the level of personalization you can offer is compelling. Do it in a trustworthy manner and let me stay in control of my privacy and commerce will flourish. The more relevant the advertising, the happy I am to click on it. Wonder how Google and Yahoo will counter this?

Abstract

An advertising framework registers context data sources and advertising display clients from a variety of resources on a local computer. The ad framework may then receive context data and display triggers from the registered context data sources. The context data and display triggers may be processed and an advertising request generated and sent to an external advertising source. Non-advertising content may also be supported. When a targeted advertisement is received in response, a display manager may send the ad to an appropriate display client. When the ad has been presented a the advertising framework will communicate to the advertising supplier who may apportion and credit advertising revenue to the participating parties.

 

Microsoft Windows patent will spy for advertisers | The Register

El Reg lobs iPhone at Genius Bar | The Register

 This is a great read... here's the bottom line..."The iPhone is a worthwhile purchase if you're interested in doing the things that Apple wants you to do, if you're interested in doing the things that everyone else is doing. But you aren't given the freedom to do things your way. That's true where the wireless network is concerned - and it's true with the software. If you value your sense of self, returning the iPhone is far more satisfying than using it."

 

It doesn't allow you to do things your way and that's what's critical with Mobile. I test drove a device in the store and after a few minutes with the UI (which is impressive) I wanted to download and add some programs to it. Bzzzzzt no cigar and this is why iPhone will only go so far until Apple opens it up to doing things the way other people want to. We'll see how long it takes them.

 

El Reg lobs iPhone at Genius Bar | The Register

Don't Ever Give Up!

As an entrepreneur the one thing you hear more often than anything else is "NO" followed by "you should just give up"... so lets take a look at Lance Armstrong's stats... and remember 2003 was a really tough TDF. Anywhere along the way he could have given up and after his medical issues and no one (except himself) would have blamed him. (Stats courtesy of Gary Kobat)

1971: lance Armstrong is born in Plano Texas.
1985: lance wins Ironkids triathlon.
1988: lance receives Olympic development invitation.
1991: lance wins national amateur championship.
1992: lance turns pro and finishes LAST in his first race.
1993: lance enters first tour de France, drops out.
1994: lance enters second tour de France, drops out again.
1995: lance finishes first tour de France in 36th place.
1996: lance enters fourth tour de France, drops out.
1997: lance joins postal service cycling team.
1998: lance returns to pro cycling, wins tour of Luxembourg.
1999: lance wins first tour de France.
2000: lance wins second tour de France.
2001: lance wins third tour de France.
2002: lance wins fourth tour de France.
2003: lance wins fifth tour de France.
2004: lance wins sixth tour de France.
2005: lance wins unprecedented seventh tour de France.

The Sum of Human Knowledge on a Crystal

Worth a read. Especially if you're concerned about privacy. 

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