On Tuesday, I saw Steve Cheney, head of Biz Dev at GroupMe, speak at a digital media event. GroupMe allows one to create a “private space:” an ad hoc social network (group) with a focus on intimacy and privacy. You would use the product when you have things (location, photos, remarks) you only want to share with a small group of folks.
Given this value proposition, I’m wondering if Facebook’s March acquisition of Beluga, a competitor to GroupMe, makes strategic sense. These applications act as the “anti-Facebook” a small, intimate, and PRIVATE group of friends who share data that is NOT disseminated to their entire social graph. Yet, Facebook forces Beluga users to sign on with their Facebook accounts, inextricably tying the app to THE social network itself. I believe this is a mistake because Facebook’s very presence as the owner of Beluga casts fear, uncertainty, and doubt about whether information remains private within the group. Just read the concerns from some of the one star ratings from the App Store:
Whether the suspicions are unfounded is irrelevant: perception is reality. Facebook would argue that the app meshes well with its new groups feature. Perhaps then, these suspicions merely reflect the privacy concerns related to Facebook groups.
For a product where differentiation is tough and network effects do not apply, GroupMe ought to capitalize on this mistake and position itself as an independent, truly private service, the “anti-Facebook.”
Andreessen claims LinkedIn “has a lot of growth ahead of it.” Perhaps, but with a trailing P/E of 1,162, future expectations for growth are already priced in the stock and investors risk over paying for this speculative growth. However, his quote that the “stock market hates technology” is interesting.
Take, Microsoft as an example: MSFT has a 9.5 trailing P/E under (consider the S&P’s historical P/E avg of ~16)
I valued Microsoft’s equity by anchoring on book value and calculating the present value of future residual earnings (or excess profit):
You can play around with the long term residual earnings growth, but even at a conservative 3%, I get a share price around $36.45. Microsoft is trading today around $24. Short LNKD, Buy MSFT!
Mr Paul and the tea-party movement are each in their separate ways creatures of Cold War-era conservative-libertarian “fusionism”, which remains a powerful ideological and institutional force on the right.
Fundamentally, creativity is a novel recombination of past elements, experiences, and templates with the new. Via my class on strategic intuition at CBS, here is a great documentary on the genesis of creative thought:
Creativity = sampling, remixing, recombining old elements with the new. Did Samsung add enough new value to their product to differentiate it from the IPhone? Did Apple add enough new value to distinguish their products from Braun? Difficult questions, but understanding the origin of creativity helps frame the debate.
Taking a break from technology: I ride the NYC subway everyday to school. These subway adverts well reflect the crass paternalism so prevalent in this city. Amazingly, the NYC department of health sees no irony in discouraging drinking soda and alcohol while another segment of government promotes gambling (arguably a more detrimental behavior flaw) in the state’s lottery monopoly.
I just read this article about the new Spider-Man musical, the most expensive production ever on broadway. The article provides a few clues that allow for a “back of the envelope” break even analysis. On the surface, this production has all the hallmarks of a financial disaster, but let’s find out for ourselves:
First the article mentions that the theatre holds 1,900 people. We also have a seating diagram and ticket prices. I’ve taken averages when multiple prices were shown for sections, I’m sure (hope) they use revenue management so ticket pricing is even more complex than my estimates:
Premium: 10% of the theatre, $311 dollars per ticket; Zone A 20%, $291; Zone B 15% $205; Zone C 22.5%, $340; Zone D and F 10%, $104; and Zone E 22.5%, $219. From these prices, a sold-out show generates 486,827.50 in revenue.
Second, the article mentions a two week delay costing 4 million dollars. I assume this includes salary for the cast and other variable costs. The show runs Wednesday through Sunday, so we know that the variable cost of a single show is 400,000. Using the revenue above, the contribution margin towards fixed costs is roughly $87,000 per show.
The show cost 65,000,000 over the past nine years to produce which we will consider the fixed cost. Then, it will take 65M/87,000 = 749 shows to break even. At five shows per week, it will take nearly 150 weeks to break even, or about three years.
Given a nine year, 65M dollar investment and assuming the show runs for five years, investors in the production enjoy an 8% IRR. Even with these generous assumptions (perpetual sold-out shows, stable ticket prices), that is not a great return.
Value this analysis by what you paid for it: I know little about the theatre industry, and have not included marketing costs and ancillary revenue.
Concerning the net neutrality debate: Prohibiting paid prioritization, or the idea that ISPs take payments for delivering website traffic faster than others, and allowing for traffic shaping at the provider level to optimize the consumer experience can coexist!
