Tuesday, September 20, 2011

Netflix: It wasn't you, it was me

Netflix's fall from grace has been swift and abrupt, today falling to a new 52 week low following an unusual apology email from CEO Reed Hastings yesterday and an announced restructuring of the business. Netflix will now be separated into two businesses; Qwikster, the traditional DVD rental business now including video game rental, and Netflix, now simply the online streaming business. The rationale behind the split according to Hastings is to let “each (business) grow and operate independently,” presumably allowing investors to value the higher trading streaming business completely separately from the lower trading DVD. Streaming only now represents 40% of subscriptions and this business appears likely to continue to quickly grow, while the DVD business' growth trails off.

The company's slide began in the middle of July when they changed their pricing from a $7.99 option to purchase just streaming and a $2 add on to get DVDs as well. The company then somewhat slipped in a new pricing structure that completely separated the streaming and DVD business with each costing $7.99. The slide furthered when Netflix cut their guidance for subscribers late last week as a result of a backlash to the new pricing structure.

There have been numerous missteps and oversights throughout the last 6 months that have led to Netflix rapid decline. Dividing the two businesses was the logical next step for the company, but the initial step to getting there (the pricing switch) and the timing was communicated so poorly that it may have done permanent damage. Ultimately, Hastings appears to have overestimated his customers' loyalty to Netflix at the wrong time. Being the first to do something endears substantial goodwill and trust, but that can be quickly evaporate and be irrevocably broken. Competitors were already gaining steam on Netflix's business model and with complimentary products being offered (and losing Starz), Netflix may be left with a great business that set itself up for cannibalization.

America is generally a fairly forgiving country when someone is quick to admit their mistakes. We'll forgive the Hugh Grants and the Bill Clintons because they apologized and didn't ultimately affect the pocket of their fans. Netflix's poor communication struck a nerve as less disappointing but more deceitful, causing a loss of confidence and loyalty that actually hit their supporters financially. The stock is probably undervalued at its current levels, an overreaction to the uncertainty, but the long term future seems bleak with fractured consumer confidence and a leader substantially underestimating customer loyalty.

Monday, September 19, 2011

Google Wallet Launches

After much fanfare, years of development and tons of attention, Google Wallet finally launched today albeit in a limited capacity. The only two ways to currently use the service is through Citi MasterCards, and a Google Pre-paid card but the company plans to expand the offering over the next few months. While certainly cool, the criticism of Google Wallet remains that it is a solution without a problem. Almost universally likely to take place at some point, it's still as of yet unclear at what point.

Tuesday, September 13, 2011

14 Most innovative, innovative startups

VentureWire released their FASTech 50: Most Innovative Start-Ups last week. Companies across the spectrum of the tech world are featured and below are the 14 I found to be most interesting:

 

 
SaaS company that helps tracks IT costs and expense allocation in virtualization and cloud computing. All-star list of investors include Andreessen Horowitz, Greylock and Ignition.



Authentic8 not only has a company name that teenage girls on AIM would love, it also operates as a web browser in the cloud that protects against threats of attacks, such as phishing, by offering a disposable browser on a virtual server that is trashed when a session is complete

A true Big Data player that monitors how a company's data is being used and shifts it around so that important stuff can be quickly retrieved.
















Bluefin uses a technology to match social media commentary with what prompted them and offers the software as a service to advertisers, brands and TV networks attempting to target interested parties.

 

BranchOut allows for career networking on Facebook, leveraging the site to share job listings with friends and discover inside connections at companies.


Bump was originally designed as an easy way to transfer contact information, but has since moved into transferring almost anything. They have been particularly active in the mobile payments space and the transfer of money. Quite a few big names have bought into this bumping including Andreessen Horowitz, Sequoia, SV Angel and Y Combinator.


Corduro, a Google Ventures-backed mobile payments company, has built a cloud platform that allows it to offer a a variety of features namely for interaction with non-profits and charities. The company is wearing multiple hats allowing for cheap transfer of funds through a mobile device.


Couchbase is a NoSQL database software built off of an open-sourced platform used by many companies to cache data. The company focuses on social networking, gaming, advertising and delivering unstructured data quickly to users on couches everywhere.


Factual structures and verifies data across a spectrum of verticals, from CEO compensation to number of bottle beers consumed, to conceivably number of bottled beers consumed by CEOs. Factual uses both public and private sources and making the information available to mobile and web app developers.


A search engine that ranks data based on what is important to the seacher, determined by Facebook, Twitter, Gmail and other aggregates of data. Founded by an 18 year old last year. Kids today.



Mobile advertising that isn't annoying. Kiip is built into games and provides ad-based offers based on when players reach certain milestones.




Oblong Industries have created real life Minority Report screens that can move information based on hand gestures.





Social Shield helps parents identify and monitor their children's activity on social-networking sites, identifying risky online behavior and verifying their friends are actually their friends





TayKey monitors what people are talking about on over 150 social media sources and puts relevant ads in front of them in seconds
 





Monday, September 12, 2011

Do we deserve -- or even want -- more jobs?

An article discussing the state of employment in the country by Jason Calacanis was forwarded to me by a friend last week. I finally took the time to sit down and read the slightly jarring piece discussing the state of youth in the work force, again that Where Have the Good Men Gone? group, and the attitude towards work. I fit squarely into the age demographic Calacanis discusses and its nearly impossible to not nod to an alarmingly number of the points.

The old theory around inheritance is that the first generation will work their ass off and make the money, the next generation works because of guilt from witnessing their parents and then the third generation ultimately ruins the nest egg. Calacanis highlights this but instead of taking it to privileged estates, turns it on society as a whole and addresses the implications of this shift.

Cam Newton (22 years old; squarely in this generation) threw for 400 yards yesterday and seemingly shut a lot of his critics up, but his quote that he views himself as "an icon and an entertainer" remains frightening to people around the NFL. It's a single quote that summarizes a lot of attitudes towards work. "I see myself not only as a football player, but an entertainer and icon;" a qualification as if winning both the Heisman Trophy and National Championship was limiting to an extent. That being the top in his profession wasn't fulfilling enough.

In a Grantland article a few weeks back, Hua Hsu wrote, "To be a king nowadays, as Wayne, Jay-Z, and Kanye West have shown, is to comprehend the limitless uses of your image — to circulate beyond the music." Lil Wayne was bored with being the best mixtape freestyler and expanded into autotune and guitars. Jay-Z was bored with his position atop of the rap game and became not a businessman but a business, man. Kanye West was bored in the DJ booth and became a rapper.

These are people challenging themselves to do more than what originally made them great and a relentless pursuit of success is admirable. People at the top of their profession appearing to lose interest in being the best at one thing and instead challenging themselves to expand across a spectrum. Vertical integration vs. horizontal. Obviously different than what Calacanis highlights, but with an undoubted trickle down effect reflecting our generation that reveres Newton, Wayne, Jay and Kayne.

What defines you is something people in a quarter life (don't think that's an actual a term, but appears a more and more common occurence) crisis seem to struggle with disproportionately. Not being pigeon holed by your profession is commendable, but the implications in aggregate may threaten the economy in a deeper and more culturally driven manner than inflation or a jobs bill ever will.

9/12/2011


Friday, September 9, 2011

Groupon, Grouper and the intuitive company

Despite their successes, some companies seem to not make sense no matter how many times they are explained to me or their markets are outlined or they are championed by VCs or Wall Street or whoever. One of my buddies described Groupon (or Living Social etc) as "voluntary spam," and not only do I not know anyone that has purchased a Groupon, I don't know anyone who enjoys getting their emails. I'm technically a subscriber to their mailing list, but it's the first email I delete in the morning and I don't look at any of the offers. The company is obviously doing something right, despite pulling their IPO, but I simply do not understand how the product itself has proven to be a hit when it seems to be a novelty at best and annoying at worst.

Grouper on the other hand is a company that is almost too intuitive to not have been created already. A friend originally introduced me to the concept a couple months ago and instantly it seemed like a company that, if done properly, would achieve tremendous scale. Early results are that it has been done properly.

The basic way it works is as follows:
1. You log into Grouper through your Facebook
2. Grouper looks for people of the opposite sex “taking into account age / education / personalities / interests / attractiveness”
3. Sets you and a group of two friends up with another group of three with similar interests for a dinner / night out

Conceptually it tries to pair you with friends you don't yet know.


Grouper tries not to position its offering as a date, but it's just that. It's a date masked as a group hangout, and it is perfect for the socially networked generation where everyone seems to know everyone through someone. The generation directly out of college, the Where Have the Good Men Gone? generation, it's a logical leveraging of social networks. Online dating for people in their early 20s still has a stigma as weird, but a group hangout seems much safer. Much more acceptable. There are obvious logistical issues to the actual night out (like friends boxing each other out, jockeying for the attractive girl in the group) but the concept itself remains novel and should prove to be extremely successful, because it's not online dating. It's a group hangout. A group hangout that will ultimately make the founders a lot of money.

Wednesday, September 7, 2011

9/7/2011

50 most innovative startups
http://blogs.wsj.com/venturecapital/2011/09/07/introducing-venturewires-fastech-50-most-innovative-start-ups/?mod=wsj_share_twitter

Erksine Bowles named to Facebook board
http://vator.tv/news/2011-09-07-facebook-names-a-new-board-member-erskine-bowles-0

Toasting Timbo 7 - Casino Night

Timbofund is a charity in honor of my buddy's friend Tim McWilliams, or "Timbo", who passed away in '05 due to complications from a Traumatic Brain Injury he sustained three years earlier.  All proceeds from the event will go to patients and families going through a TBI recovery process. 

The Foundation’s only fund raiser of the year will be on Friday, September 23, 2011 from 8:00 pm - 1:00 am at Pier Sixty in New York City. Toasting Timbo 7 (TT7) will be a "Casino Night" with Blackjack, Texas Hold 'Em, Craps and Rouletter.  We hope you'll join us for a night of great food, drinks, music and friendship to support the Large and Small Grant Programs  that are the heart and soul of the Foundation.
 

Always a blast, tickets below

http://www.timbofund.org/toasting-timbo/tickets/

Tuesday, September 6, 2011

David Carr, TechCrunch, the Red Sox and CrunchFund

The short version of the long story in what has transpired within TechCrunch is their editor Michael Arrington announced CrunchFund to invest in startups, originally with AOLs full support (and $$$). There was a public outcry with one of the largest personalities in the startup world having the potential to influence the companies he invests in. Earlier this year, Arrington announced he would invest in certain companies that he writes about (with disclosure of his investment) but a full fund has created a larger issue.

David Carr wrote a long article hashing out his opinion on the conflict of interest, which was followed up by two rebuttals (one and two) from writers on the TechCrunch staff. Paul Carr from TechCrunch (in article number two) writes, "In particular, Mike (Arrington) is delighting in the irony of a New York Times writer attacking TechCrunch for a lack of disclosure when the Times regularly covers the Boston Red Sox without disclosing that they have a minority stake in the team." It seems unusual for Arrington to delight in this supposed irony. The comparision between the coverage of a sports team and a partial ownership of a team to the coverage of startups and a partial ownership of a company falls flat upon any real analysis. Conceivably the only way a company like the New York Times could influence a team is by increasing their coverage and therefore awareness and then potentially valuation. The issue with this in terms of the Red Sox is 1. NYT maintains little to no power in the world of sports coverage and 2. Fan size, TV market, wins and losses are the ultimate drivers of valuation for a team. Conversely TechCrunch has an enormous amount of power and influence over public perception of small companies (I called a company for a meeting last week based on exposure from a TechCrunch article) and valuation for these companies is initially driven in large part by perception of potential and less on wins and losses (P/L).

It appears likely that Arrington will officially stepdown soon and I admittedly know nothing about the TechCrunch culture, how their specific editorial process works or more generally about working at a news organization. The rebuttal articles do, however, come across as myopic and naive.

Pete Rose claims he only gambled on his own teams to win. It didn't matter. Rose broke a sacred rule in baseball by having a financially vested stake in the outcome of a game beyond his employment. In the AJ Daulerio/TMZ world, journalistic standards have obviously shifted quite a bit but regardless of the editorial process at TechCrunch and the autonomy their writers have, it does seem too conflicted to have the head of TechCrunch betting on his own teams.

9/6/2011

http://www.nydailynews.com/gossip/2011/09/01/2011-09-01_ti_back_in_federal_custody_after_using_luxury_bus_to_report_to_halfway_house.html#ixzz1WojJM5bB