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Archive for July, 2011

Free apps, mobile ad market aren’t adding up

Posted in Board Of Intellectual Capital, tagged , , , , , , , , on July 27, 2011| Leave a Comment »

Article from SFGate.

“Many of today’s hot startups are banking on mobile ad dollars to make their business work, but it’s an incredibly small market that’s only likely to support a handful of breakaway winners.

The constraint was underscored late last week, when Pandora Media’s CEO told Bloomberg that the online radio service can’t find enough marketers to fill all the ad slots created by its many mobile users.

Pandora boasts around 35 million dedicated users, who do 60 percent of their listening over smart phones and tablets. The obvious question is: If the 11-year-old Oakland company can’t find enough marketers to make use of its ad inventory, who can?

Other popular companies like Foursquare, Instagram, Twitter and Flipboard are mostly or exclusively free mobile apps that will mostly or exclusively depend on advertising.

So just how much is there to go around?

Research firm eMarketer estimates that mobile advertising will reach only $1.1 billion this year. By way of comparison, Google reported $9 billion in revenue last quarter alone, almost entirely derived from the broader online advertising market.

Will more money move to mobile and will some of these companies emerge as big winners? Sure.

Shifting ad dollars

But new media don’t create new marketing dollars, they just draw them from somewhere else. Advertisers are famously reluctant to shift money from something that’s been proven to work, to an area that’s untested.

The truth is, it’s still unclear to many what ad types and formats will be most effective on small mobile devices – general brand builders, discounts as you walk by a restaurant, ads for other apps?

The one thing that does seem clear is that mobile users are incredibly touchy about ads, resenting anything that appropriates the limited real estate of their screen, arrives as a text that counts against their allotment or interrupts what they’re doing. So marketers are rightfully treading carefully.

Jack Gold, a technology analyst with J. Gold Associates, says mobile advertising is a promising sector that, for now, is just that: promising.

The other thing to keep in mind is that, whether it’s TV or tablets, the biggest outlets with the best return on ad dollars grab the lion’s share of marketing. Everyone else is left fighting for the scraps.

Gold said the phenomenon unfolding now is strikingly similar to the late 1990s, as hordes of companies marched onto the Internet, confident they could garner the traffic (back then they called it eyeballs) necessary to build businesses on ads alone. History demonstrated in brutal fashion that the vast majority could not.

“It’s almost certain that you’re going to see another shakeout,” Gold said. “That always happens. Always.”

Read more here.

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New Google+ social network starts off strong

Posted in Board Of Intellectual Capital, FaceBook, google, Market research, Social Networks, Strategy, Technology, tagged , , , , , , on July 25, 2011| Leave a Comment »

Article from SFGate.

“Just three weeks after its launch, Google+ is off to a strong start.

Google Inc.’s latest attempt to break into social networking circles attracted more than 20 million visitors in its first 21 days, according to the Internet measurement service comScore Inc. And there is a report that Google+ now has 25 million members.

To be sure, those numbers still don’t place Google+ in the same league as the more established social media stars, especially the current king, Facebook Inc., which has 750 million active users.

But Facebook has made enough mistakes in the past to leave the window wide open for Google+, which is still in its experimental stages, to barge through and become a serious contender for the crown, said Sam Hamadeh, CEO and founder of a Privco, a New York firm that monitors private companies like Facebook.

Facebook may have a big lead now, but the two has-been kings of social networking – Friendster and Myspace – are reminders that there’s no such thing as invincibility in the world of technology.

“People used to be on Myspace chatting all day, updating their pages,” said Hamadeh. “And before that, people were on Friendster nonstop. Before you knew it, the winds had shifted and once the winds shift, they shift very quickly.”

Officially, Mountain View’s Google hasn’t issued any updated Google+ numbers beyond those that CEO Larry Page revealed during a July 14 earnings call – 10 million members, more than 1 billion items shared and received in one day and 2.3 billion clicks of the “+1 button,” Google’s answer to Facebook’s “Like” button.

‘Just the beginning’

“We’ve learned a tremendous amount having just gone to field trial three weeks ago,” Vic Gundotra, Google’s senior vice president for social, said in a statement. “The team has been listening to users and moving really quickly to launch dozens of new features and updates to the product. We realize this is just the beginning. And while we’re thrilled with the reaction so far, we have a long, exciting road ahead of us.”

Hamadeh, citing sources inside Google, said the fledgling social network hit the milestone 25 million user mark Thursday night.

And Andrew Lipsman, a comScore vice president, said the 20 million visitors to Google+ in the first 21 days was “an extraordinary number.”

Of that total, 5.3 million were in the United States and 2.8 million in India. And people from the Bay Area and Austin, Texas, two of the most tech-savvy markets, were three times as likely to be on Google+, Lipsman said.

Right now, the main users are the tech-savvy crowd that is always at the forefront of new and emerging technology.

Of the total Google+ audience, 63 percent were men and 58 percent were between the ages of 18 and 34, comScore said.

“It has clearly captured the attention of the technorati and as usage incubates among this crowd it will likely continue to proliferate to a more general audience,” Lipsman wrote in a blog post.

High marks

That technorati has generally given Google+ high marks for its design and privacy protections, especially compared to Facebook. Analysts say Google+ can be compelling.

“My usage has subtly changed as more and more of my personal network joins, and I’m commenting as much privately as publicly,” said Charlene Li, founder of the Altimeter Group, a San Mateo technology research and consulting firm.

One major feature in Google+ is the ability to create specific, private groups, called “circles,” of friends or people being followed.

“Google+ has the advantage of not requiring that people be a member of the network in order to share with them. They just get updates via e-mail,” Li said in an e-mail. But whether Google+ becomes a hit with more mainstream audiences is still a question.”

Read more here.

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The INTERNAL Warning Signs of Financial Distress: What To Notice

Posted in Board Of Intellectual Capital, tagged , , on July 20, 2011| Leave a Comment »

 A Guest Blog by Bobby Guy, Author, “Distress to Success: A Survival Handbook for Struggling Businesses and Buyers of Distressed Opportunities” (www.distresstosuccessbook.com; www.distresstosuccessblog.com)

When it comes to business, we all know the easy signals that indicate a company is in financial distress: a loan default, a business plan that just isn’t working, failed FDA trials at a one-product company, and the like.  For business owners though, the harder issue is to spot the more subtle internal warning signs of financial distress — and then to take corrective action while the best options are still available.

What are important warning signs that business owners should watch for at their companies? Here are ten examples:

  • When the company is having to float taxes or trust funds to pay other expenses (vendor obligations are one thing, but unpaid taxes and trust funds can result in personal liability for officers and directors)
  • When the company is bumping up against covenant requirements on its loans (even if it hasn’t blown a covenant yet, and even if the lender and preferred equity don’t know it yet)
  • When the company can’t meet the conditions to sign the draw request on its working capital line (and remember, the  reason lenders require representations and draw request certificates is because officers have potential personal liability for signing a materially false request)
  • When the company cannot come up with a cash flow forecast, or its forecast is negative after considering all available cash and credit sources — said another way, when the burn rate is higher than projected cash and there is no reasonable expectation of change prior to exhaustion of all available capital (many companies fail not because of a bad business idea, but because they have a cash crunch, or lack the financial controls to do accurate cash forecasting)
  • When the company’s team cannot tell senior managers the company’s current financial position within about four business hours (you might be surprised, but I’ve seen companies with hundreds of millions in loans and assets that were unable to calculate their current financial position at all — is it $0? Is it positive? Is it negative?)
  • When there is any doubt about the company being able to make the next FOUR payrolls (that’s right, not one, but four – missing a payroll is often the death of a company, and if the next payroll is the problem, the financial distress process is acute and early warning signs are no longer the issue)
  • When the company and affiliates are using restricted acquisition capital to pay working expenses (as an example, when the company’s  source of cash to pay expenses on current assets is money borrowed on new deals which has restricted use; more than an early warning sign, this may also have certain legal implications, but for our purposes here, the importance is that the company is having to tap restricted sources to stay afloat)
  • When viability of the company is based on a single definable event, and there is a reasonable likelihood the event won’t take place (realize this is the definition of when a company begins undergoing a “restructuring,” and often companies do not recognize they are in a restructuring until long after it has begun)
  • When the company is having explosive growth, but has limited working capital to fund it (the definition of working capital is the amount of money it takes to stay alive in Monopoly until your property begins generating income or you pass go to collect $200; just like in business, working capital needs increase in Monopoly as the gameboard builds up with more expensive rent;  also, if you draw the “Chance” card requiring you pay for repairs, the expense is a fee multiplied by the number of properties/hotels you own — so your capital needs increase based on the growth of the business)
  • When the company’s lender asks the company to hire a financial advisor, or transfers the company’s loan into  special assets (realize there is no requirement that the company be in default before the bank brings in the special assets department; banks look for early warning signs, and often recognize the signs that their borrowers are in trouble before management teams are ready to acknowledge it)

How should a company’s management respond if it begins to see these signs?  If a company takes quick action, its probability of success, and ability to avoid failure, increases dramatically.  Management also has the opportunity to present itself as part of the solution.  Early intervention is key, and when a company sees the signs, it needs to begin contingency planning — preparing multiple potential exit strategies and solutions, instead of relying simply on the original plan of uninterrupted success.

Bobby Guy
www.distresstosuccessbook.com

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Netflix faces angry customers after price increase

Posted in Board Of Intellectual Capital, tagged , , , on July 17, 2011| Leave a Comment »

Article from SFGate.

“For years, Netflix prospered from a love affair with its happy, loyal customers. Now, some of those customers want to break up over plans to raise subscription rates by as much as 60 percent.

“Dear Netflix: After three years, I’m sorry but it’s over,” wrote Adam Lundquist. “It’s been great, but it’s over. It’s not us, it’s you. Enjoy the bankruptcy.”

That was one of more than 8,000 comments posted on the company’s blog before the forum reached maximum capacity.

Currently, subscribers pay $9.99 per month for unlimited access to a library of movies and TV shows that can be viewed instantly over the Internet, plus one DVD at a time sent by mail. Subscribers who want high-definition Blu-ray discs, or two or more DVDs at a time, pay a few dollars more.

Starting Sept. 1, subscribers will be charged $15.98 per month to keep both the streaming and DVD-by-mail features. Or, they can choose one or the other for $7.99. For new subscribers, the rates took effect immediately.

Netflix says the increase is needed to support the DVD-by-mail side of the business while allowing the Los Gatos firm to continue strengthening its streaming video offerings, which are crucial to future growth both in the United States and internationally.

“We went from being an ultra-extremely good value to an extremely good value,” said Steve Swasey, Netflix vice president of corporate communications. “It’s $6 a month. It’s a latte.”

Anger goes viral

That’s not what faithful subscribers wanted to hear, and their anger exploded onto the Internet.

Netflix’s Facebook page had nearly 50,000 comments by Wednesday evening, many from customers who said they had already canceled their accounts and were jumping into the arms of a competitor like Amazon.com, Hulu or Redbox.

“How sad that after years of holding a subscription … and being a walking advertisement for Netflix, that we are stopping the use of your services,” posted Rebecca Kiel-Hollifield. “Greedy, greedy, greedy. Way to show your long-term customers, who helped pave the way for your extreme success with a higher price … Goodbye, Netflix, hello Redbox!”

“I am so ticked off. I have been a loyal member for 10 years, and feel like I was kicked to the curb. I hate wishing bad on anyone, but it would serve them right if they lost 60 percent of their customers to match the price increase,” wrote Robert Michel Lankford.

Many of the comments started as a sort of “Dear John” letter, and indeed, the term “#DearNetflix” became a top trending topic on Twitter.

“Dear Netflix,” wrote Carin Lane. “You were doing so well. I liked you. I even paid you when I wasn’t using your service much. You had it so good. Now you’ve gone and committed corporate suicide. Why? Do you not like me anymore? … I simply don’t understand this. You seemed smart, but this is such a dumb move. Well, I canceled this morning, like you apparently want us all to do. Bye!”

Some created new Facebook pages pushing a mass cancellation of Netflix accounts on Aug. 31, although a similar call against Facebook over privacy problems last year hardly caused a ripple in the social network’s march to 750 million users.

Swasey said Netflix was not surprised by the backlash, but noted the critical comments came from just a fraction of the firm’s 23 million subscribers and are “not representative of the majority.”

It’s not a charity

And not all comments were critical of Netflix. “They are a business, not a charity,” wrote Tyler Loman. “If you can’t afford it then maybe you should re-evaluate if you could even afford the old price.”

Mike Kaltschnee, who for the past seven years has run an independent Netflix news blog called HackingNetflix.com, said the company mishandled the way the price change was announced, letting the blogosphere take control of the story.

The response came because “people have invested a lot of energy in recommending the company,” Kaltschnee said. “I don’t think a lot of people are going to quit.”

Indeed, of the more than 7,500 HackingNetflix readers who responded to a poll, 33.9 percent said they will quit Netflix, but 30.9 percent said they will go for the streaming-only plan; 20.2 will sign up for the combination option; and 10.4 percent favor the DVD-only subscription.

Wall Street investors gave a big thumbs-up. Netflix stock rose $7.46 to close at $298.73 after hitting an intraday high of $304.79 on the Nasdaq Stock Market.

Analyst Tony Wible of Janney Capital Markets said the new subscription rates are fair because the former rates were “irrational.” He said the new rates are needed to make the business more sustainable, especially as Netflix deals with higher streaming licensing fees and other looming costs.

But he said Netflix should have called the change a price increase instead of trying to pass it off as an improvement in service, which it wasn’t. “People are smart enough to see through that,” he said.”

Read more here.

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EBay’s Zong deal heats up mobile-payment battle

Posted in Board Of Intellectual Capital, Business models, Economy, Investments, Market research, mobile 2.0, Mobile Phone Usage, Strategy, tagged , , , , , , , , , , , , , , , , , , , , , , , on July 14, 2011| Leave a Comment »

Article from SFGate.

“EBay Inc.’s purchase of mobile-payment startup Zong Inc. for $240 million is stepping up pressure on companies such as Google Inc. and American Express Co. to make their own acquisitions in the market.

Google has held exploratory discussions with mobile-payment startups, according to two people with knowledge of the meetings. Credit card companies, including American Express and Visa Inc., also are meeting with takeover candidates, though deals may not be imminent, people familiar with the talks said.

More consumers are looking to pay for things like movie tickets, apps and other items with their phones – rather than cards or cash. That’s pitting financial-service providers, which benefit from transactions, against technology companies like Google. Both sides aim to use mergers and acquisitions to shore up their positions, said Richard Crone, who runs Crone Consulting LLC, a firm focused on mobile banking and payments.

“There’re much more M&A and roll-ups to come in this space,” Crone said. “You will see the activity happening before the end of the year.”

The total value of mobile payments will reach $670 billion by 2015, up from $240 billion in 2011, according to Juniper Research. That includes transactions for digital and physical goods, money transfers and payments using near field communication – a wireless technology that lets users tap their phones against a reader to make a purchase.

Mainstream acceptance

Many companies are shopping for startups that help users charge purchases to their phone bills. Within a year, 40 percent of all U.S. mobile subscribers will put items other than ring tones on wireless bills, according to Chetan Sharma, an industry analyst in Issaquah, Wash. That’s up from 30 percent now.

Potential acquisition targets include Boku Inc.; Payfone Inc.; BilltoMobile, which is majority-owned by Danal Co.; and Amdocs Ltd.’s OpenMarket Inc., Sharma said.

Syniverse Technologies Inc., MindMatics AG’s Mopay unit, Bango and Vindicia Inc. could be candidates as well, according to Crone. Acquisition targets will sell for 10 to 20 times their trailing 12-month sales, he said. It’s unclear how that measures up against the Zong deal because eBay didn’t disclose the startup’s revenue when it announced the purchase last week.

Still, some startups may struggle to attract a deep-pocketed suitor or land that kind of premium. And large technology and finance companies may choose to develop the capabilities themselves.

‘Pressure to act’

Representatives from Google, American Express and Visa declined to comment on any potential deals, as did Bango, Boku, Payfone, Syniverse and Vindicia. OpenMarket didn’t respond to requests for comment.

Ingo Lippert, CEO of Palo Alto’s Mopay, said the Zong deal will likely give rise to more acquisitions, though his company is “solely focused” on operations.

“We’ve been forecasting consolidation within the mobile-payments space for some time,” Lippert said in an e-mail. “With Zong’s acquisition, companies testing out solutions within the mobile-payments market will now feel increased pressure to act.”

Investments in payment startups began picking up several months ago. In February, Visa agreed to spend about $190 million, plus performance incentives, to purchase PlaySpan Inc. The company handles purchases of virtual goods in online games and social networks. In April, American Express led a $19 million funding round in Payfone, a developer of a mobile-payment service.

EBay’s buying spree

Last year, eBay acquired Red Laser and Milo, two comparison-shopping applications that allow users to scan product barcodes and read reviews. With Zong, the company will get a bigger foothold for its PayPal payment service on phones, especially in developing countries.

Zong lets people pay for things by putting them on their mobile-phone bills. That’s attractive in emerging markets, where credit card adoption is low.

“The phone is ubiquitous, and credit cards are not,” Rodger Desai, CEO of Payfone, said.

U.S. carriers lets third-party services such as BilltoMobile operate on their networks. Verizon Wireless, for instance, allows charges of as much as $25 a month. BilltoMobile also declined to comment on whether it was a takeover target.

Carrier bills contained $3 billion worth of charges for virtual goods last year, and these charges are rising at 38 percent annually, Crone estimates. Those purchases can include ring tones, dating-site subscriptions and weapons for mobile video games.

Purchases of apps charged to wireless bills reached $5 billion last year and are growing at 68 percent a year, Crone said. Consumers in countries such as South Korea are increasingly charging physical goods to carrier bills as well.

“We are seeing very rapid growth,” said Jim Greenwell, CEO of BilltoMobile.”

Read more here.

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