Facebook and Business Model 2.0
January 5th, 2009
Tim O’Reilly probably meant no more than to market his omni-present conferences when he coined the term “Web 2.0,” but the results have included giving some kind of ill-conceived business model faith to tens of thousands of hapless would-be entrepreneurs, and a smaller number of even more at-risk investors.
As though the Ferris Wheel (or, more aptly, the Great Mandala), had not already spun this way before, the idea of creating jillions of companies with no business model, no profits, and only some kind of ginned-up success metric (like eyeballs, remember?) was already proven to be a terminally bad one. To put it bluntly, when business models and profits are ignored, everybody gets hurt.
I said a couple of years ago that there were only seven customers in the Web 2.0 world, and today, if anything, that number may be shrinking. In lieu of being bought by one of these acquirers, what do these metric-heavy, cash-light companies do?
This week, a “new” analysis of Facebook has everyone talking: burning cash at gargantuan rates (perhaps $50-80MM per year), with the original investor money nearly gone, and the hoped-for Mystery Model not yet arrived, it may suddenly be Ox Sxxx time for the poster child of the 2.0 group.
One could be empathetic and note that online ad dollar growth has slowed into reverse thanks to the current economic woes, but guess what? That’s called business. It isn’t clear that matters would be enough different without this blip to matter.
How many companies are out there, just as there were in 1999 and early 2000, with a single lonely revenue line in the business model called Online Ads, for which the spreadsheet numbers will never get into the same room as the accounting figures? Is there any light at the end of this tunnel?
One answer is subscriptions, but these are generally reserved for content that no one else has, that has value for the purchaser (like the SNS newsletter, one hopes). But I don’t know if Facebook, with its many challengers in socnet country, is that irreplaceable, or has customers in a demographic willing to pay - for anything.
What happens to Facebook, and those thousands of other companies, if there are no ads, and no subscribers? I guarantee that their bills will continue to pile up for storage, electricity, bandwidth, support.
I spent about a decade not so long ago giving advice to technology startups, and helping them create alliances. (I still do this a bit, but on a more selective level; one of my clients recently sold to Symantec for over a billion dollars.) And one of my favorite non-obvious suggestions to new CEOs was this: Never launch a business in which success creates the greatest risk of failure.
Enter Facebook. The more popular it is, the more expenses it has.
It Isn’t What We Are Learning - It’s Who Is Learning
January 4th, 2009
There is a lot of important conversation going on currently about what we have all learned about regulation in the financial industry, and what happens with a lack of it, what we could have done differently, why we (and the regulators) ignored often-prescient warnings, and so on.
This all presupposes that learning is, in some way, going on. But I don’t think the people who personally put us here - and there is a rather clear group of them - have been punished. In fact, I’d challenge our readers to name a SINGLE person involved in the real crises who has been identified and punished for his misbehaviors.
On the other hand, there are many of these folk who got bonuses, continued to collect CEO pay, and so on. If they have learned anything, it is that there was no downside to blowing up the local and world economy, other than a short respite before they have a chance to start all over again.
And this is the real question: Who, exactly, is learning lessons? We know from his current interview series, a pathetic attempt orchestrated by Karl Rove to re-define the Bush Legacy, that the Decider has not learned a thing from his countless mistakes, but he was learning-averse from the beginning.
In fact, given the roles of all those, including the Bush administration miscreants, are there any perps at all who have seen the light? Who now recognize the error of their ways, for creating trillions of dollars of damage to the global economic system? Why are we treating this like some kind of victimless crime, when their actions have had more victims than any past economic debacle, perhaps shy of the Great Depression?
Why are we acting as though no one caused these problems?
I guarantee you, once a group of hands-on bundlers and schemers, corrupt regulators and paid-for politicos are put in front of the public, not a single one will show not only remorse, but any sense of learning, at all.
And so the question comes to my mind: if the people who brought on this catastrophe have not learned by it, why should those wno didn’t cause it have to go through the learning process? The answer is simple: so that we can identify people like this ahead of time, next time, and prevent them from getting anywhere near their current seats of power. Self-dealing presidents, incurious regulators, power-hungry sycophants in top jobs, incompetent or unethical corporate leaders; we will need to identify the types much earllier, next time around, and make sure they don’t take us down this path again.
That’s the lesson, more than which bonds to regulate and how, which we should all be focused upon now.
The Big Mistakes They Still Don’t See
December 29th, 2008
Imagine this: SNS members now know that the real causes of the current economic crash, on a global dimension, came from the Japanese carry trade and huge petrodollar increases inflating the global liquidity bubble until it was unstable.
Amazing that Fortune magazine would put a cover up claiming that a) the sub-prime mess was the whole story (it was a minor subplot), and then feature an unknown woman banker who saw the sub-prime mess coming.
If Fortune is that embarrassingly blind, no surprise that no one else is seeing causes and effects very clearly. And Fortune is in good company: Portfolio put Michael Lewis’ story on calling the subprime mess on their cover, too. Oops. Myopic at best.
So, what are the key causes that seem still uncovered, or poorly understood, and what was their role? Without going through them in detail, here are the major bones in the corpse:
1. Free money. Japan knowingly blew up the global economy. Why, is another matter.
2. The Trigger Theory. Using OPEC to get supply and demand close, oil industry players gamed oil pricing, driving it from market rates ($50-80) to $147. The first investigation of these players was announced this week; it looks like the SNS Trigger Theory is in the process of being confirmed. I just hope you read about it in the media, outside SNS.
3. Greenspan. This has been covered, but often completely wrongly: Greenspan is guilty of trying to manipulate equities markets, and using rates to do it. He and others have tried, quite successfully, to put out a smoke screen stating the opposite: that he didn’t manage the Nasdaq bubble quickly enough, etc. He personally created the local refi bubble in the U.S., leading to the sub-prime mess. But don’t forget that many nations experienced real estate bubbles, since the real cause was a global liquidity bubble.
4. Musical Chairs. Banks were playing fast and loose for years before the sub-prime debacle, but when it put a spotlight on their problems, they froze up. The main reason the TARP bailout has been so ineffective, the reason they are not using these funds for loans, is that they were already breaking reserve requirements, running debt off their balance sheets, and participating in contracts that put them way out of compliance with the few regulations left. The real story, not yet told, is how sick the banks were before the sub-prime mess.
5. The fear of inflation. Since the real problem, at the beginning, was too much liquidity in the global system, it makes sense that, even though we are temporarily facing credit restrictions, the long term problem has neither gone away, nor been attacked or resolved. In other words, as soon as the short-term credit problems are eased, the world will be facing a huge inflationary bubble again. And no one seems to be talking about, working on, or writing about, that either.
Finally, I’ll share a little frustration. Everyone, literally including the Pope, who has ever said the sky is going to fall, is now promoting themselves as having foreseen the current crisis, with its proper causes. The pope said it was lack of ethics, back in 1985. Well-known bears like Rubini, complaining for sometimes a decade or more without making specific predictions, are permanent bears, and we have a lot of permanent bears on a planet driven by rich shorts from Connecticut, most of whose houses are now for sale.
Maybe someone else saw this catastrophe for what it really was, as cause and effect, and said so publicly; if so, hats off to them, we need their insight. The rest of you amateurs ought to admit that you didn’t see the forest for the trees, and stop all of your unwarranted claims. Get off the TV and the covers of Fortune etc., and leave the FT alone. We need less stupid chatter, and more intelligent help from those who legitimately got it right.
KPLU: 2009 Technology Predictions
December 23rd, 2008
From NPR and KPLU Radio:
2009 should be a good year for videogames and cell phone applications. Voice recognition, diskless computers and wireless broadband will take great strides forward. Strategic News Service publisher Mark Anderson shares his top ten predictions for the new year with KPLU’s Dave Meyer.
The Southern Resident Orca Population Crashes In 2008: Starvation
December 18th, 2008
From the Island Guardian
Published 12/16/2008
By Mark Anderson
The plight of our resident killer whales has become as simple to understand as is the most likely means of saving them. After years of argument driven as much by money as by science, we have suddenly, unfortunately, reached a moment when the causes and remedial actions are relatively clear.
I am writing this in the aftermath of a rather successful meeting organized by Puget Sound Partnership on the subject of “What is killing the whales, and what can be done about it?” This Friday Harbor Labs gathering inluded William Ruckelshaus, chair of the government-mandated study group, and representatives from National Marine Fisheries Service, NOAA, other scientists, and interested NGOs such as The Whale Museum and Orca Relief. Joe Gaydos, head of SeaDoc Society, moderated.
The Tech Trends To Expect in 2009 - CIO Today
December 16th, 2008
From CIO Today: Mark Anderson shares his technology predictions for 2009
With consumer spending on entertainment slowing down, consumers will happily spend more to improve their at-home entertainment experience instead of splurging on outings to restaurants and movies. That means bigger TV screens to connect to video game consoles for family rounds of Rock Band on the Playstation 3, Xbox 360, or Nintendo Wii.
Tech Trends to Expect in 2009
December 12th, 2008
From BusinessWeek:
Mark Anderson predicts the year’s coming developments, from expanded home entertainment to voice recognition to new, lightweight netbooks
Read the article and watch the video.
The Inspiration behind Netbooks
December 11th, 2008
Mark Anderson outlines the origins of the Netbook for BusinessWeek journalist Steve Hamm:
“Suddenly, Netbooks are all the rage. Turns out the UMPC (ultramobile) form factors were a bit too small and too expensive to make a mass market, but the Netbook is JUST RIGHT.”
NY NY
December 8th, 2008
Every time we arrive in New York for our Predictions Dinner, it is more fun. The city is all dressed up for Christmas; some would say this is New York at its best. The hotel is incredible, and the choice of things to do is literally unequalled world wide. I am looking forward to seeing many members of the press, and of SNS, at our dinner Thursday night, at the Waldorf.
Among those attending are CEOs and top officers of many technology companies, plus representatives of Reuters, the Wall St. Journal, Wired, Portfolio, Conde Nast parent co., Strategy + Business, Fast Company, the Economist, Business Week, Fortune and other global business press. I’ll be doing separate interviews with the BBC, Businessweek, the WSJ, and other media during the week.
One of the high points of the week, for me, will be my chance to have another conversation on the current economic crisis with Bill Janeway, during the first half of our dinner “entertainment.” Bill has, I think, the best historical knowledge of economics of anyone living, as well as a personal history of successful investments for Warburg Pincus and others in global technology companies.
If you are one of our group planning on attending the Thursday night dinner, I look forward to seeing you there. For our other members, I will be publishing a list of my Top Ten Predictions for 2009 as soon as I get back to the office.
A Few Last Desperate Consistently Self-Oriented Moves
December 5th, 2008
Many people have been forced into having their own verbal and intellectual lenses for explaining the behaviors of George Bush.
He can’t just be insane, so — what is it? What explains his behavior?
Today, as Congress fished around for money to save the U.S. auto companies, in a pickle because they had not invested earlier in alternative - energy projects, George Bush gave a speech, suggesting that Congress take the money from alternative energy projects to prop up the dying carmakers.
Is he really an idiot?
Some day, in the not so distant future, several things may happen:
1. As laid out in Harper’s this month, the President, the Real President (Cheney) et. al may face domestic or international criminal charges for war crimes.
2. Not that George can not pardon himself or others for international crimes, as in the Nurnburg Trial. Even if he escapes domestic prosecution, he may end up like Pinochet, hounded worldwide by courts elsewhere, kidnapped, dragged around, arrested and jailed elsehwhere, etc.
3. The simplest way to understand the entire Cheney/Bush regime is to assume that family ties to the Saudis were more important than catching bin Laden, that oil in general was more important than anything Bush swore to uphold on that Bible during his inauguration, and that Bush et. al (the heading on future lawsuits, ad infinitum) were embarked on an intentional, planned, consistent program of looting taxpayer monies for their personal and private benefit.
It is impossible to forget: We still have a month and more to go. There are plenty of miscreants on a master scale who would like to have a parting shot at screwing everything up for normal people in return for private gain, at the cost of a single large check to the Bush Library (Bush doesn’t read books; what a joke).
Bend over, and Get ready. George never cared for us then, and he still doesn’t today. He serves only his family, and a few close “friends.”
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