December 2008
37 posts
6 tags
Text Messaging and a $130 billion profit pool...
New York Times writes “text messaging is a wonderful business to be in”. With volumes growing at 30% a year to 2.5 trillion messages in the US, rates doubling from 10 cents to 20 cents, negligible variable costs and mostly fully depreciated fixed costs, text messaging is probably the largest source of profits for mobile telecom carriers.
Text messaging generated an estimated $130...
Woolworths UK shuts down
I had totally missed this news: Woolworths store closures begin. The whole traditional retailing business model has been hit hard by this recession.
Guess Wikipedia's hosting costs
Going over Wikimedia Foundation Financial Statements (as of June 30, 2008).
Wikipedia spent a mere $537k in “internet hosting”, that’s how cheap it is to run one of the top global web properties from a technology standpoint.
Day of reckoning for Private Equity
An excellent review of the current situation in the private equity industry on Financial Times: How to resuscitate the private equity industry.
3 tags
Bubble bubble
The Economist has an article on The beauty of bubbles, arguing that even asset bubbles popping leave behind lasting value.
Examples are the Florida Real Estate bubble in 1920, the railway bubble in 1840, the telecom bubble in 1990 or the more recent real estate bubble in UK and Dubai.
My favorite quote is from an IPO prospectus during the South Sea bubble of 1720, where the company described...
1 tag
Some Optimism for 2009
Zachary Karabell has some words of optimism on the economic climate: The Economic News Isn’t All Bleak.
The window of opportunity of a lifetime is opening in front of us.
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Our Brain is a Machine
Dustin Curtis has a very insightful article on How Niko Tinbergen Reverse Engineered the Seagull. It turns out that a seagull chick is not wired to look for its “mother” in order to get food, but for a thin, high-contrast elongation, which is a much simpler concept to program a brain with …
A seagull chick does not look for its mother; it has a reaction to certain types of neuron...
The Reckoning - Chinese Savings Helped Inflate... →
“This downturn will be marked in history as the time where many of the business...”
– Bits Of Destruction - Fred Wilson
Obama's Merry Christmas Address →
I am somewhat surprised that the video has fewer than 30k views.
Op-Ed Columnist - Time to Reboot America -... →
Get Ready for a Lost Decade - WSJ.com →
2 tags
Percentage distribution vs absolute numbers in the...
Just read an article on Times Online about yet another study confirming that in our digital age it is still true that 20% of best seller items represent 80% or more of total sales: Long Tail theory contradicted as study reveals 10m digital music tracks unsold
Anderson’s Long Tail theory is all about absolute numbers, not percentage distributions: it’s not about 80/20 Pareto...
Japan Exports Plunge Record 27% as Recession... →
App Store Pricing (It's not a free market!) | None... →
iTunes is the most astonishing world-wide pricing lab.
On metrics and business models
TechCrunch is reporting that in the US people spent 8.5 billion minutes on Google and 8.0 billion minutes on Facebook. This is indeed an outstanding achievement in such a short time for Facebook.
How unfortunate that minutes and engagement are only correlated to costs and not to revenues! Google will close 2008 with about $22B (based on analyst consensus) and Facebook with about $250 million or...
“Big brands on the way down, individuals on the way up.”
– Seth Godin
The Emergency Plan is The Plan
Surprisingly, not every entrepreneur has braced for a hard landing yet and keeps hoping their business will at worse stop growing or suffer slight declines. There ain’t no recession proof business. Plan for a 20% reduction in production capacity in 2009, longer collection times from clients, continued difficult access to the credit market.
The emergency plan is now the plan.
The Associated Press: Estonia to vote by mobile... →
“We’ve had one of these before, when the dot-com bubble burst. What I told...”
– Steve Jobs speaks out - On managing through the economic downturn
2 tags
WatchMorten Lund’s interview at LeWeb2008. Morten was an early investor in Skype (sold to ebay), founded Zyb (sold to Vodafone) and invested in over 80 startups all over the world.
Crazy and inspiring interview (notwithstanding his harsh words for McKinsey boys …). His blog is at lundxy.com.
4 tags
Madoff's $50B Ponzi Scheme →
Not sure how you can steal $50 billion with no one noticing.
4 tags
Social Scammers Have Arrived
Something weird happened today. I was checking out Facebook and a friend of mine contacted me on chat. He said he flew to London to meet a client but got robbed and didn’t have the money to buy the flight back to the States. I was quite worried for him and all ready to help.
I started realizing it was a scam when he asked me to wire money through Western Union.
Facebook became a de facto...
Postponing problems
The pension-related liabilities on US companies’ balance sheets are probably the biggest financial issue brewing. The system is based on the assumption that companies hold investments earning an 8% compounded return to meet all feature pension payments. That would imply asset value doubling every less than ten years, while stock markets are now significantly lower than in 1998.
The Senate...
2 tags
“I wish I could be more cheerful, but I was right a year ago, and I think...”
– Nouriel Roubini
First-time jobless claims jump to 573,000, a... →
1 tag
Another View: Taking a Page From Private Equity →
3 tags
Shrinking markets
Two of my favorite fast-shrinking markets are the newspaper industry and the music industry. Both are markets decreasing at a breath-taking clip: newspaper ad revenue fell nearly $2 billion or 18% in Q3 2008 and the music industry lost $4 billion in sales since its peak in 1999.
Those weaknesses are not just due to softer consumer demand or inefficiencies or mismanagement, but are driven by...
FT.com / Capital Markets - US Treasury bills... →
The next bubble brewing on treasury bills and bonds. Country default risk is small but greater than 0. With $7 trillion, or 50% of US GDP, of new government liabilities in TARP, bailouts, etc. in just one year, such risk can only be higher than before.
“This means if you had a monopoly over the top 1,000 search terms across all...”
– Hitwise Intelligence - Bill Tancer - US: Guest Post - Sizing Up the Long Tail of Search
The Velocity Factor | The Big Picture →
2009 Recession Will Be Severe 'There Is a Global... →
Roubini’s gloomy views on deflation risks, global recession and a “tsunami of foreclosures”.
3 tags
WatchInterview of Nassim Taleb, author of Fooled by Randomness and Black Swan. This is a classic. My favorite quotes: “banks are going to be utilities”, “i think it’s worse than what Roubini thinks” and “who’s buying? not me”.
FT.com / Comment / Opinion - Only new thinking... →
In case you thought we reached the bottom.
2 tags
When the government becomes a VC
Recently private investors pulled out from VC investments, as 3i, Carlyle and other private equity firms closed or downsized their VC operations. At the same time, with the IPO window shut, fewer big-ticket tech acquisitions, and rock-bottom operating expenses for internet startups, a new question has arisen: is the VC model outright broken?
The UK government is going to the rescue with a...
Bailout biggest inflation-adjusted cost ever
Interesting post at mindtanle comparing the $4.6 trillion spent so far by the US government with previous spending events like the Marshal Plan, the New Deal or World War II.
SpendingCostCost (Inflation-Adj.)%GDP (Year)
Marshall Plan$12.7 billion$115.3 billion5.20% (1947)
Louisiana Purchase$15 million$217 billionunavailable
Race to the Moon$36.4 billion$237 billion3.70% (1969)
...
China is slowing too
It seems like the real estate bubble is popping in China as well, slowing down the only growth engine that was left …
From Bloomberg:
“China is now at the heart of the global slowdown,” said Jim Walker, chief economist at Asianomics Ltd., an economic advisory firm in Hong Kong. “It means that global growth is probably going to be dragged down close to zero next year.”
Tough...