Posts from November 2008

My friend Steve Kane left an interesting comment on yesterday’s post about analog dollars and digital pennies. In it he noted the following:

any case, i’m not sure what comscore is counting, but most other
measurements services give youtube roughly 65 million *unique* visitors
per month

http://siteanalytics.compete.com/youtube.com/?m…

by
contrast, the CBS network alone amalgamates nearly 200 million viewers
— in just one week, and just in the three evening hours of prime time!

http://tv.zap2it.com/tveditorial/tve_main/1,100…

i’ve
never seen nielsen de-duplicate viewers numbers within a network, but
let’s say 50% of those 200MM are duplicated. heck, lets say 75%

regardless,
just one network, CBS, equals or betters youtube’s entire monthly
audience in just 21 hours (one week of three hour slots)

That caused me to go back to comscore get the exact numbers. YouTube’s monthly worldwide audience was 344mm in October according to comscore and 55mm visited each day. I don’t know what the weekly numbers are but I bet that they are about what CBS gets.

But this post is not about rebutting Steve. His comments are spot on and contributed to the discussion, which is a very good one.

What I hadn’t realized when I wrote the post yesterday is how large YouTube’s global audience is and how much of it is outside of the US. Here’s the raw stats:

YouTube’s audience maps pretty closely to the web’s audience around the world. It’s most popular (on a relative basis to worldwide audience) in europe and slightly less popular (on a relative basis) in asia and latin america. But it is signficant to note that YouTube’s audience in asia-pacific is roughly the same as it is in the US.

Unlike the CBS network, YouTube is a global media property and it reaches every corner of this planet. While many of the videos are in english, a growing number are in other languages.

What is also true about YouTube is that the size of the audiences for individual shows can be as large as a network TV show. CSI was viewed by 18.5mm viewers last week. YouTube has five pages of videos (20 videos per page) that have been viewed more than 25mm times.

I am not arguing here that network style television (long form, story driven) is not a superior form of entertainment. I think the succcess of Hulu to date proves that is. And we know that Hulu will be a much more attractive venue for advertisers for at least a few more years.

But I am amazed at the scale and reach of YouTube and what it tells us about video entertainment delivered over the Internet. If CBS wants CSI to reach 100mm viewers instead of 20mm each week, it can do that on the Internet with worldwide distribution. And I am sure that’s going to happen someday, hopefully soon.

Jeff Zucker, head of NBC Universal, was famously quoted earlier this year warning that the media industry had to work so "that we do not end up trading analog dollars for digital pennies."

It’s a great line and an even better observation. But I think it’s inevitable and it’s going to happen no matter how hard they try to avoid it.

Analog and digital, it turns out, are polar opposites. Analog has physical costs which lead to scarcity driven business models. Digital has zero marginal cost (or near zero) which leads to ubiquity driven business models.

In the world that Jeff grew up in, a studio created a TV show, let’s say Friends, and then a network bought the show and ran it once a week at a scheduled time where millions of people would make time, all at the same time, to watch it. That drove high CPMs and a great business model.

In the world we live in now, it’s completely different. Jeff’s network produced a hilarious SNL skit but did not air it last weekend. The skit featured Andy Samberg as Rahm Emanuel, and NBC has made it available via it’s JV with News Corp, Hulu. I watched early last week on Hulu. And since then, I’ve shown it (physically shown it) to at least a dozen people at various places and times, including last night at a friend’s house on his friend’s laptop. Hulu doesn’t show how many views this skit got, but Samberg’s Lazy Sunday clip was viewed over 5mm times before NBC had it pulled from YouTube and put it up on SNL’s website. That experience certainly was formative in the creation of Hulu.

The ability to watch a TV show or TV clip anytime anyplace is naturally going to lead to a lot more viewers than any individual show can get in the traditional TV viewing approach. The biggest weekly TV shows get around 20mm viewers. YouTube has over 300mm montly visitors according to comScore. Hulu is just getting started, but if it ever goes international (and I sure hope it does and soon), then it will eventually reach similar numbers of viewers.

The fact is there is so much internet inventory, particularly when you count the various social networks cropping up all over the world, that the $20 CPM may be a thing of the past. I know that some Internet inventory is sold at prices above $20 CPM, in fact some banners have even been sold on this blog at those kinds of prices. But I don’t think those prices are sustainable.

The Economist has an article running this week about online advertising (where I was reminded of the Jeff Zucker quote) that suggests that online advertising will be unscathed during the downturn. The article quotes a report by eMarketer that suggests online advertising will continue to grow at good clip next year:

eMarketer, a market-research firm, predicted that online-advertising
spending in America, which makes up about half the global total, will
increase by 8.9% in 2009, rather than the 14.5% it had forecast in
August. The firm thinks search advertising will grow by 14.9% and
rich-media ads by 7.5%, whereas display ads will grow by 6.6%. In
short, online advertising will continue to expand in the recession—just
not as quickly as previously expected.

I hope eMarketer is right but even if they are not, this downturn will accelerate the conversion of analog dollars to digital pennies because you can buy online inventory for a fraction of the cost of analog inventory, you can target it, you can measure it, and you can even create your own media if you want. And you can do this at a scale that traditional media can never create with its scarcity driven orientation.

That’s it for now. I am going hunting for a few digital pennies now.

We had a bunch of people over yesterday for thanksgiving and at one point my daughter and a friend of ours started talking about their Blackberry Bold phones. They like them but sort of miss their older blackberries. My friend Phil misses the raised buttons of his old Curve. My daughter misses the feel of her even older 8700.

I’ve been using one blackberry or another since the original pager style Blackberry that I got in 1997. I’ve made a few detours along the way. I’ve tried the iPhone twice, the Sidekick (which I really liked), a windows mobile phone (which I really hated), and the Android-based G1. But I keep coming back to Blackberry, largely for the keyboard which I am addicted to.

I didn’t even think about getting a Blackberry Storm. David Pogue’s comment about the Storm is exactly how I feel about it.

Hello? Isn’t the thumb keyboard the defining feature of a BlackBerry? A BlackBerry without a keyboard is like an iPod without a scroll wheel. A Prius with terrible mileage. Cracker Jack without a prize inside.

If I wanted a touch screen phone, I’d get an iPhone. I certainly don’t want a touch screen Blackberry.

My Blackberry Curve recently died on me and instead of getting a Bold, I got another Curve. I think the Blackberry Curve is the perfect phone for me. Other than the lack of a decent twitter client for Blackberry, it does everything I need.

So when I saw the news today that there’s going to be a new Curve coming soon, called the Blackberry 8900 (fka the Javelin), I got very excited.

It’s basically my beloved Curve with a faster processor, a better screen, and a better camera. I’m getting one of these as soon as they are available on T-Mobile. Until then, my curve will do me fine.

One of the things I’ve been saying recently on this blog is that the Dow is full of tired companies and tired stocks. I think the Nasdaq is much more representative of the current american economy than the Dow. And when I came across this chart on Andrew Finkle’s blog this morning it got me thinking.

This shows the Dow from 1924 to 1939 and the Nasdaq from 1995 to September 2008 (two months ago). It’s too bad that the red line doesn’t go all the way to this week because it would be even more striking. That’s because the Nasdaq traded all the way down to 1300 as of last friday and is now at 1500. It’s not exactly tracing the 1929-1939 Dow, but it sure is damn close.

So the obvious question is where did the Dow go from the early 1938 bottom?

Here’s a chart that I found on the woodshedder blog:

From 1938 through the end of the war in 1945, the Dow was locked in a narrow trading range between 100 and 150 and it retested the 1938 lows in early 1942.

If the Nasdaq is the new Dow, and it sure seems like it is on many levels, then this would mean the Nasdaq will trade in the range of 1300 to 2000 for the next seven years and will retest last friday’s lows at least once more before starting a slow but steady climb sometime around 2012.

It also means that the Nasdaq isn’t going much lower from here.

Now I want to say that while history does repeat itself, it’s dangerous to take too much from exercises like this. They are fun and amazing at some level. But I wouldn’t bet the farm based on an analysis like this.

I much prefer to think about fundamentals. The best companies in the Nasdaq, like GOOG, AAPL, AMZN, CRM, ABDE, and others reached levels last week that strike me as big time bargains.

GOOG traded as low as $250/share on Monday. That’s a market cap of $78bn and an enterprise value of $64bn. That’s for a company that had operating cash flow last quarter of $2bn and certainly has the ability to earn $8bn per year of cash flow even if revenues flatten out or decline slightly. When one of the top companies in the world trades at 7.5x cash flows, that’s a signal that it’s time to start buying. Think of it this way. If you had the money and you could buy all of Google (I don’t and you can’t), you could lay out the $64bn and wait 7.5 years to get your money back and then you’d own the whole company forever after that. That’s a steal in my book.

So my gut tells me we may have seen the worst of the selling in the Nasdaq for now. But it’s also instructive to think about the kind of patience you’ll need to have with these stocks if you buy them in here. If the crystal ball of the Dow from 1929-1945 is accurate, then at best these stocks will go up around 50% in the next seven years. That’s an annual return of around 6% for the next seven years. If you are good at trading (I’m not) then of course you can do way better than that.

And of course, as I pointed out in this blog post from last week, an index is not representative of what can happen with individual stocks in it. I don’t know how invidual Dow stocks did from 1938 to 1945, but I am sure there were some that did way better than up 50%. My bet is companies like Google, Apple, and Amazon will outperform the Nasdaq as a whole from here on out. They are leaders in their markets, have dominant franchises, have strong balance sheets, and positive cash flow that I believe will survive the downturn intact. That’s why I’ve been buying them and have stepped up my purchases in the past couple weeks.

I’m battered like everyone else and have not been spared the losses that most have taken for the past year. But I am optimistic and thinking about how to make money going forward. Because as my friend Fred said to a large gathering a few weeks ago, you can’t leave cash under a mattress. You have to invest capital to make money. And that’s what I am doing with my stock market investments, my real estate and hedge fund investments, and most importantly, with our venture capital investments.

I’ve spent a lot of time reading about what went wrong in the financial markets in the past year. A lot of the best stuff has come in the form of letters and presentations from hedge fund managers who have been at the front lines in this crisis. Most of that stuff is highly confidential and not bloggable. But there is one chart that I keep thinking about that I wanted to share with you.

I saw this chart in a presentation by a leading hedge fund manager. This is a Bloomberg chart that anyone with access to a Bloomberg terminal can recreate and I apologize for the grainy quality and somewhat out of date nature of this.

This is a chart that goes back to January 1994 and charts the S&P vs the rest of the world (minus Japan). Apparently taking out Japan doesn’t change this chart much but it’s cleaner without it.

This shows that for seven years from 1994 to 9/11, the US outperformed the rest of the world by a lot. And from 9/11 to the end of last year, the rest of the world outperformed the US by the exact same amount. It was one big round trip. And that round trip ended in a mess.

I am not going to try to explain why this round trip ended in a global financial meltdown, but it mostly has to do with massive leverage and liquidity and we finally hit the breaking point.

You’ll notice that in the past several months, the US has started to outperform again. This is probably due to positions around the world being unwound and dollars coming home (or something like that). I don’t know if you can make too much of the recent time period.

But the big question is where do we go from here? As we start think about how to position ourselves collectively for the next move up (whenever that comes and it could be a long while), I think this chart is worth paying attention to.

And if you haven’t read it yet, I suggest everyone read Fareed Zakaria’s The Post-American World. It gives an interesting context to this whole issue. Here’s my blog post that I wrote this summer after I finished it.

Yesterday I saw (and twittered) a comScore report on online spending this holiday season. So far this holiday season (comScore calls Nov & Dec the holiday shopping season), $8.2bn has been spent online which is down 4% versus the same time period last year. The report goes on to say:

comScore’s forecast is that holiday online retail spending for the November – December
period will be flat versus year ago, significantly lower than last year’s
growth rate of 19 percent and below the retail e-commerce growth rate of 9
percent that has been observed for 2008 year-to-date.

That got me thinking. Flat year over year growth is pretty bad news for an industry that has been growing at 20% per year. But at least it’s not negative. Flat is the new up 20% I guess.

But on a more serious note, I’ve been meaning to post some data that I am privy to by virtue of our role as board members on a bunch of privately held companies. Not all of our companies are generating revenue but quite a few are at this point and the numbers we are seeing out of them are actually pretty promising.

I am not going to cite any confidential information and I am not going to identify any companies by name in this post. But I’ll give you all some anecdotal evidence that things may not be as bad as everyone thinks.

We have two companies in our portfolio that are setting record revenues every day or two. We have a company that is having it’s best booking quarter ever. We have an advertising based company that is having its best ad sales season ever. We are also seeing search advertising holding up remarkably well in the face of this downturn.

The fact is that we are not really seeing any signs of major meltdown in any of our portfolio companies yet. Its important to recognize we are only a month or two into this mess and that we won’t see the real impact of the downturn until we hit 2009 spending budgets.

It’s also important to note that these are all small companies by any measure and they are selling new things in new ways. They are probably less economically sensitive than big established companies. It’s hard to imagine companies like Cisco and IBM being as immune to the downturn as small startups.

But amidst all the doom and gloom, I want to be sure to point out that disaster hasn’t struck everywhere just yet. If comScore is right that e-commerce this holiday season will be flat, that’s not a total disaster either. With the best tech/online/e-commerce stocks trading at values that expect declining profits and cash flow year over year, I think it’s worth noting that this could turn out differently than conventional wisdom. In fact, it always does.

I have been slammed with people asking me for invites to Boxee. I’ve tried to comply with every request so far and have given out easily 250 invites in the past week.

Now the folks at Boxee have done something to help me out. There’s a page at Boxee for friends of this blog. Please go here and enter your email address and I promise you’ll get an invite within 24 hours.

Soren and Howard have been busy building out stocktwits and today they sent me a link to a firefox extension that makes twitter a bit smarter. When you add the stocktwits extension to firefox, a stock tweet will look like this:

Those tickers are now hotlinked to stocktwits. This gets me excited. Because someone could do so much more with this idea. We have a few companies that are trying to extract meaning out of content on the web. Adaptive Blue recognizes pages about things (books, music, film, stocks, wine, people, etc). Outside.in recognizes posts and articles about places (neighborhoods, schools, parks, etc). And Zemanta recognizes concepts in blog posts and recommends content to add to your post.

What if they and others put out similar extensions? Then twitter would get smarter. The links that people send around on twitter are one of the best things about the service. It’s like a live collaborative RSS reader. But if every tweet had links in that were added semantically, then we’d really have something.

Those of you who are using Boxee on Apple TV know that the new AppleTV firmware (v2.3) broke Boxee. That’s been fixed and the details on are on the Boxee blog.

Also, I’ve been inundated with requests for Boxee invites and I’ve been sending them as fast as I can. We are going to set up a special page on Boxee to get invites from me and that should make things easier. I’ll post the details as soon as we have that invite page working.