Archive for March, 2006

Henry Blodget has a smeared reputation but a really, really insightful blog, creatively called The Internet Outsider.
 
He recently suggested that if Microsoft doesn’t spin out MSN, MSN will die a slow & ugly internal death, being crushed by the twins, Vista and Office.
 
This follows a similar comment from John Battelle.
 
Here’s the link to the Blodget post… and below is a copy of my response to him. 
 
(John, if you’re reading, I’d post this on your blog, too, if I wasn’t so late to the party. <chagrinned look> )
 
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Henry–
 
I just returned from speaking at the MIX06 conference as well.
 
I enjoy your stuff, think I can bring something to this discussion.
 
Seems like a lot of folks have been commenting about spinning MSN out.
 
My company, MessageCast, was purchased by Microsoft — actually MSN — about 10 months ago… so it wasn’t so long ago that I was an outsider.
 
I have long thought MSN needed to be spun-out. Focus efforts, shed reputation, unlock shareholder value, etc.
 
So when I got to Microsoft, I dug into this. I was surprised at what I found out… and now my opinion is no longer black & white.
 
I guess the best way to say this is — for the very first time — Microsoft really gets that MSN is the "tail wagging the dog" going forward.
 
That’s the critical difference.
 
MSN won’t get subsumed because:
 
(1) …that’s where the money is. MSFT finally gets that it will be faster for MSFT to double revs *not* by increasing Word sales 10% a year… but by taking 10% of a $400-$600 billion ad market *ripe* for the picking.
 
(2) MSFT is watching GOOG do this right in front of their very eyes (take 10% of ad market). Which — for the first time in years — makes MSFT an underdog again. MSFT secretly likes being the underdog… is most dangerous when it’s the underdog. Examples: OS/2, WordPerfect, Lotus, Novell, Netscape, etc.
 
(3) Vista and Office are late and heads are rolling. The dev stars in the company are clearly from MSN… where Messenger gets updated a few times a year… Spaces came out of nowhere to dominate consumer blogging… Hotmail is still cranking… etc.
 
Long-time MSFT observers have seen the company transition before.
 
Internally — my 2 cents — feels like they’re actually doing this again.
 
–Royal Farros.
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Bash or Compliment?

Posted: March 24, 2006 in Uncategorized
Here’s another comment on Marketwatch’s Frank Barnako piece this morning.
 
I can’t tell if it is pro or con Google?
 
It’s short, read it for yourself:  "Google faulted for ‘insularity’".
 
Already that sounds bad.
 
It pairs "intense focus," which is generally considered good and I wish the Vista and Office teams had more intense focus over the last few years… with "insular," which now makes "intense focus" sound myopic.
 
It says that Google has an "unwillingness to engage external people in its world," which is odd because Google’s main business is engaging (connecting) external people with the external world.
 
It even criticizes Google for driving "visitors to other sites rather than holding onto them with content."
 
Aren’t search engines supposed to do this?
 
Finally — almost as an after-thought — the piece acknowledges that all of this lets Google MONETIZE MILLIONS OF EXTERNAL WEB SITES AND BLOGS.
 
Oh, yeah, I forgot, Google’s done pretty well doing that.
 
I can’t tell if the JupiterResearch piece Frank was reporting on — or just Frank’s reporting — was more schitzo.
 
But, this is a great example of how information can be spun in any direction. 
 
 
P.S.  Probably good examples of this in my blog, too. <chagrinned look>  Evil or human nature?  Probably some academic/Darwin thing to interpret and editorialize basic information before the next guy… ?  Ah, welcome to the blogosphere! <smile>

Big Dollar Shift

Posted: March 24, 2006 in Uncategorized
Marketwatch’s Frank Barnako had this segment in his morning Internet Daily column:
 
     Online advertising to take more TV ad dollars
 
     "Four out of five national advertisers say they are looking to spend more money on Web advertising, and they worry that video on demand and digital video recorders threaten the effectiveness of traditional 30-second TV spots. In survey results presented at a forum sponsored by the Association of National Advertisers, three out of four advertisers said they now have less confidence in TV ads than they did two years ago. Instead, nearly half said they are weighing alternatives including interactive advertising during TV programs and online ads."
 
 
This is the kind of survey result you would expect to see in a revolution.  These will be big dollars shifting online.
 
Note, I consider, "interactive advertising during TV programs" to be online advertising. 
 
Said another way, online advertising is anything electronic that can be directly measured… which we’ll be able to do with interactive TV.
 
 
P.S.  I’ve enjoyed Frank Barnako’s stuff for years.  However, he’s probably the only press person I’ve never been able to get a hold of… so I have to admit, like the Wizard of Oz, I’ve often  wondered if he’s actually real. <ouch>

Mix It Up

Posted: March 23, 2006 in Uncategorized
Spoke at the big Microsoft MIX06 conference this week. 
 
I was on the, "Show Me The Money!" panel with a bunch of really smart guys:  
 
     Adam Trachtenberg of eBay, Jeremy Zawodny of Yahoo!, Michael Arrington of TechCrunch, and Tim O’Reilly of O’Reilly Media, Inc.
 
Was Q&A styled panel, which is always my favorite because — like any good talk show — the conversation can be spirited and entertaining.
 
And it was. <smile>
 
Big question seemed to be how to define Web 2.0… or better said, how to tell the difference between Web 1.0 and Web 2.0 companies.
 
Concepts like "wall gardens" vs. "community" — or "come to me" vs. "I’ll come to you" — or refresh vs. non-refresh (i.e., webpages using AJAX to feel more like desktop applications than, well, webpages) — were bandied about.
 
We also debated subscription vs. ad models… one is obviously good when you’re cranking out services, the other when you’re creating content.
 
In the context "Show Me The Money!", though, everyone seemed to agree that it’s a more "relevant" world… not that Web 1.0 wasn’t relevant, but that Web 2.0 is so much more relevant.  Advertising has to be razor focused.  Services have to be contemporary and compelling.
 
Ah, the more things change, the more they stay the same.
 

Being Blind

Posted: March 18, 2006 in Uncategorized
Was brushing up on some telephony stuff.  Came across a review from a blind user — yes, a blind user.
 
My mind started wandering.  Sure, we all know what it means to be blind… but do we really know just how dramatically and radically different every hour of every day would be?
 
As if normal life isn’t challenging enough… shopping for food… doing your laundry… balancing your checkbook… meeting new friends… think about how difficult it would be to conduct simple, normal business?
 
Close your eyes and walk around your house or office.  It soon becomes a frightening experience.
 
I have always been mesmerized watching a blind person perform what is considered the most simplest of functions:  Walking down a street.
 
I now know why:  I am looking at pure courage and indomitable spirit.
 
I think blind people — really, anyone that lives with a life-changing handicap — are my heroes.

Who Will Seize The Day?

Posted: March 17, 2006 in Uncategorized
Not very long ago, GOOG was heading to 500 (hit 475.11 on Jan 11th).
 
Then, GOOG did an abrupt about-face and plummeted toward 300 (337.83 on Feb 15th), only to spike just under 400 on Feb 28th, only to have the bottom drop out these last few weeks.
 
Talk about a nose-bleed rollercoaster ride, eh?
 
Problem is, everyone is right about GOOG… bulls and bears.
 
GOOG had gotten ahead of itself.  $2b in quarterly revs means an $8b run-rate.  A generous 12-to-1 Price/Sales ratio would mean a market cap of $96b… just about where GOOG is now.
 
On the other hand, GOOG deserves to be ahead of itself.  I was taught that a "reasonable" P/E approximately mirrored annual growth… so, if your company was growing at 10% a year, you would command a P/E of 10.  GOOG’s bottomline seems to be doubling, yet its future P/E is trading at less than 28, which feels like a howling bargain.
 
So, how do you make heads or tails of GOOG’s stock performance?
 
First — as the world’s most optimistic guy about online advertising — realize that we’re in a long-term up pattern… and companies like GOOG, YHOO, and MSFT are going to benefit.
 
(Along with this realize that MSFT, YHOO, but in particular GOOG, really have phenomenal operating performance… these are real companies with real growth and really great profits.)
 
Next — here’s the squishy one — figure out which side, bulls or bears, has "seized the day."  That usually explains mania movement in stock price.  Clearly, the bears have been more vocal since GOOG’s last earning announcement.
 
Finally, assess the information that each side is, well, assessing. 
 
Poor George Reyes (I mean that figuratively — with his stock options, he’s hardly poor <smile>)… he says some pretty standard, reasonable things about big companies and growth at a recent investors conference — even emphasizes his continued bullishness for the GOOG business — and, BLAM, GOOG is down 10% or so.
 
The now infamous Barron’s article a month or so ago was so generic as to question why it was even written.  Its premise?  That if GOOG missed its earnings, the stock would go down?  Geez, if any company misses its earnings their stock is going to go down. 
 
Imagine if Barron’s wrote the converse:  "Hey, if GOOG surpasses earnings, the stock could go up!"  At the time, though, I’m not sure that would have sold as many papers.
 
Bottomline:  GOOG will report continued growth this year, helping the bulls "re-seize the day." 
 
What else would you expect the most optimistic guy in the world about online advertising to say?
 
 
P.S.  The final weirdness about the Barron’s GOOG article? 
 
Someone from Marketwatch or TheStreet did a follow-up story with the lead bear analyst in the Barron’s article.  He said he was interviewed the day GOOG hit 475 and that all of his comments pertained to GOOG at a market cap of about $140b.  By the time the Barron’s article had come out, GOOG had already dropped 100 points — not only making his comments moot — but the analyst had already publicly revised his position.  That doesn’t look good for traditional paper-based journalism.

Top of the Morn To You!

Posted: March 17, 2006 in Uncategorized
As one of two Greek-Irish guys in the industry that I know about (Jason Calacanis is the other), today is of course a national holiday… Happy St. Patrick’s Day!
 
Truth is, we all have a little Irish in us, eh?