I would argue that only steps 1-8 are necessary for your own bottom-up analysis. You can live without step 2. Also understand that your results from step 3 are likely to be wrong – don’t let a fancy model fool you into thinking you can predict the future. Building a model is helpful for understanding the business and getting some sense for what is priced in so I don’t advocate skipping it entirely.
Fantastic infographic outlining the general thought process around early stage investments. Yes it’s a simplification but it’s a damn good outline. (link)
I especially like the “three asses rule”:
Every time you watch the Gangnam Style video, Korean pop-star Psy makes 0.325 cents.
Interesting article from Quartz about the most watched YouTube video ever and a peak at the economics of YouTube. According to the article, Psy has generated $8M from 1.23 billion views, which works out to 0.65 cents per view. Apparently the creator of a YouTube video keeps about half that. Not a bad deal for Psy or Google.
This morning @jasonmendelson tweeted a picture of Urban Airship’s Meeting Rules. They are:
0.) Do we really need to meet?
1.) Schedule a start, not an end to your meeting – its over when its over, even if that’s just 5 minutes
2.) Be on time!
3.) No multi-tasking… no device usage unless necessary for meeting
4.) If you’re not getting anything out of the meeting, leave
5.) Meetings are not for information sharing – that should be done before the meeting via emails and/or agenda
6.) Who really needs to be at this meeting?
7.) Agree to action items, if any, at the conclusion of the meeting
8.) Don’t feel bad about calling people out on any of the above; it’s the right thing to do
Howard Marks’ letters are always a treasure trove of good investment advice; his latest letter is especially good ( Howard Marks – “Ditto” ). If you like this letter, or are at all interested in investing (particularly value investing) you should read his book The Most Important Thing.
A few highlights:
This is just the tip of the iceberg, if you find this interesting it’s worth your time to read the entire letter.
Great lecture from Chamath Palihapitiya. Relevant to any early stage business.
I like his simple framework for growth:
– Acquisition (how do you get people in the front door?)
– Activation (how do you get an “a-ha” moment from the user as quickly as possible?)
– Engagement (how do you deliver core product value, keep them coming back?)
– Virality (don’t even think about this one until you’ve figured out the first 3)
It’s based on a continuous cycle of measuring, testing, and trying new things (see Lean Startup).
I also like his term for trying your own product “Dogfooding” (i.e. eating your own dog food).
Research In Motion, maker of the BlackBerry or the company Steve Jobs killed.
If RIM had a body, Apple could have it stuffed, mounted, and displayed in their corporate HQ – I guess they’ll just have to settle for RIM’s articles of incorporation? That’s not much of a trophy. In any event, there are people who speculate that RIM could turn things around; however the majority of people view it as a take over target for the intellectual property. They are trading at $11.90 with $5/share of cash on their books. Do you feel…. lucky?
A lot of press today about Apple testing TV set designs – something that has been rumored about for a long, long time. Let’s not forget that they already have a TV product (Apple TV) just not an actual TV. I think we can all easily imagine what an Apple TV would look like (just like every other TV but maybe a little slicker). The real trick won’t be replacing that god awful set top box Comcast “rents” to you but working through the jungle of distribution deals that stand in the way. It’s clearly not a question of technology – it’s navigating the vested interests of cable providers, cable networks, content providers, etc. – the folks that control the industry and have the most to lose. If anyone has a clear idea of how it will all work out, I’m all ears.
Cable networks make money by creating and selling content (shows) and selling advertisements against that content. Their ability to make money is a function of how many subscribers they have and how popular their content is. They basically have two revenue streams:
But how do you compare networks you ask? Easy – divide both revenue streams by their average subscribers:
| Subs (M) / Avg. | Affiliate Rev / Avg. Sub / Month | Ad Rev / Avg. Sub | |
| ESPN | 98.5 | $4.08 | $13.9 |
| Discovery Channel | 99.2 | $0.33 | $4.8 |
| WGN America | 74.5 | $0.12 | $1.7 |
Think for a minute how TV should be – you should be able to buy the channels you like a-la -carte but you can’t – despite a number of attempts to give consumers the options to buy the 10 channels they want, providers force us to buy packages where we get about 10 channels we don’t want for each channel we do want. The benefits for the cable providers are somewhat obvious – they can design cable packages where you’re always tempted to pay a little bit more to get the one or two channels the next package offers. They can also bargain harder against the cable networks if they say “we provide you 75M subscribers right now, however, if you don’t give us a good deal, we can change the packages around and we’ll only be giving you 30M subscribers”
In the example above, ESPN, despite clearly having a lot of negotiating power, will probably think twice before they upset the $400M / month gravy train from the cable providers and gamble on selling directly to consumers. WGN on the other hand probably owes a decent amount of their ~75M subs to the fact that they are bundled into a cable package (after all, who outside of Chicago would go out of their way to buy WGN a-la-cart?). Keep in mind subs don’t equal viewers.
You can see how this quickly does not become a question of technology or how to best serve the customer – it’s a question of navigating the heavily entrenched interests and nudging everyone to a new model.
The cable providers have the most to lose as new means of distribution are created (online TV, Netflix, Hulu, YouTube) this is why Comcast bought NBC Universal – not only to buy a valuable, content oriented media asset but to also give them strong bargaining power over their competitors (Dish Network, Time Warner, and DirecTV all really need to carry NBC’s networks or risk losing customers who want to watch 30 Rock).
This post was about 2x longer than I intended and I ventured to the fringe of my understanding – the environment is even more complex than this but you get the idea. Vested interests are likely to bog down even the best technology for some time to come. I’d bet Apple is spending as much time figuring out how to navigate this web of content & distribution deals as they are on the technology itself.
Photogenic Thoughts 