1)       The IPO is again a real option for a company to exit.  I have listened to this debate for 4 years, this pretty much proves it.  This is not like the year 2000 IPO window, but more like 2004.  In 2000 companies like webvan, pets.com and etoys.com went public, in 2004 companies like Salesforce and Google went public.  Linkedin is a mature, dominant, company with growing revenue that is stacking up every quarter.  This will open the door for other companies with similar qualities (Facebook, Zynga, Groupon).  What it won’t do is enable mediocre companies, with stale revenue curves to “sneak out” and raise a couple hundred million in the public markets.  Linkedin showed there was huge pent up demand for a quality internet company.  And for the naysayers talking about earnings, take a look at Amazon’s earning the first half of the last decade, it can take awhile to build a huge, profitable, enterprise.

2)      It’s all about revenue, and options.  Looking at their S-1 again this morning their revenue growth is more solid.  They did 60M in Q3 2010, in internet terms that is a decade ago.  I know firsthand they have been beefing up their data and professional services area, which means that it’s working.   At this point I would guess they are $30-40M a month which puts their offering valuation at 10x revs, a very doable number for solid company.  And the best part is that currently Linkedin is just expanding their current products.  New products could provide a whole new revenue stream once they get their toehold in the enterprise – application tracking, talent management and others tradeshow services.   There are still a lot of fresh tracks available in their domain.

3)      More money into the valley ecosystem.  The Linkedin IPO just returned a couple funds (that were already doing great), created some more millionaires, and provided Linkedin with an easy-to-value currency to buy up and coming startups in their space (Jobvite, Branchout and Quora are looking pretty good right now).  Whether or not the valley needs it,  this will add to the frothiness.  Overall I think it’s great though, it’s hard to build the great companies we aspire to do without the support (monetary and professional) that companies like Linkedin provide.

My train’s about to pull into the station so that’s all I got.  Is Linkedin worth $1039 a share? (it went up while I was writing this).  I am not really one to say, one day for sure, but I think today’s activity is a result of the recent hype created around new tech companies by the media and private secondary markets getting investors all worked up.

GO LNKED!

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Dear family and friends,

I hope this email finds you well and anticipating a lovely summer (or winter), wherever you may be.

By way of update, I now write to you from Kampala, Uganda. I am part of a team of graduate students from Harvard graduate programs who have been working to launch TAMTAM (Together Against Malaria) in Uganda. TAMTAM is a 501(c)(3) nonprofit dedicated to distributing free bed nets to underserved areas and collaborating with policymakers to improve bed net effectiveness in the fight against malaria. Our team of seven volunteers will spend this summer laying the foundation for TAMTAM’s commitment to malaria prevention in East Africa.

In case you would like to follow this adventure, we will regularly post to this blog: http://tamtam-africa.blogspot.com.

Please check out our new website at www.tamtamafrica.org where you can learn about our work. And should you (or anyone you know) want to help the fight against malaria more directly with TAMTAM, you may also contribute to our focus of providing bed nets to underserved mothers and children, who are most seriously vulnerable to malaria. From our website, US$7 buys one bed net, including production, transport to Uganda, and delivery to its owners. All donations are tax-deductible and we will begin shipping nets to communities in Uganda this very summer.

Please be in touch and send any updates from your end as well!

Cheers from Uganda,

esther.

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I’ve been meaning to write this post for awhile.  In the meantime everyone else put in their .02 on how twitter will make money(just do a google search, there was even a contest here).  The equation above represents the moderate success scenario.  The search component is the most variable since the number of searches could go way above 12B and CTR could be much higher if searches on twitter tend to be more commercially oriented.  For example, if i was doing a twitter search to get thoughts on the latest BlackBerry, I am probably looking to buy one.

Pricing on the $250 premium personal account is up in the air but I am guessing that celebrities, professional internet types and small businesses would pay that for premium functionality.  For the corporates, 25k a year seems about right, it may start at 10k and tier up higher depending on functionality (market reports, brand awareness, polling, and advertising on homepage).

Note that this doesn’t change the user experience for any of us that use it today.  It also doesn’t explicitly have Twitter charging for API access, but it may make sense to set stricter limits on requests to the API targetted at people who are data mining for profit.

I am reading Warren Buffet’s recently released letter and thought I would share my favorite quotes and data.  For the year, the Book Value of BH’s companies outperformed the S&P by 27.4%  (down 9.6% vs 37%)

Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.

…

Take a look again at the 44-year table on page 2. In 75% of those years, the S&P stocks recorded a gain. I would guess that a roughly similar percentage of years will be positive in the next 44. But neither Charlie Munger, my partner in running Berkshire, nor I can predict the winning and losing years in advance.

…

the insurance group delivered an underwriting gain for the sixth consecutive year. This means that  our $58.5 billion of insurance “float” – money that doesn’t belong to us but that we hold and invest for our own benefit – cost us less than zero. In fact, we were paid $2.8 billion to hold our float during  2008. Charlie and I find this enjoyable.

…

But there’s another less pleasant reality: During 2008 I did some dumb things in investments.  I made at least one major mistake of commission and several lesser ones that also hurt. I will tell you more about these later. Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.

…

Since our purchase, MidAmerican’s wind-based facilities have grown from zero to almost 20% of total capacity.

…

Similarly, when we purchased PacifiCorp in 2006, we moved aggressively to expand wind generation. Wind capacity was then 33 megawatts. It’s now 794, with more coming.

…

As we view GEICO’s current opportunities, Tony and I feel like two hungry mosquitoes in a nudist camp.

…

Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans). Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay. Homeowners who have made a meaningful down-payment – derived from savings and not from other borrowing – seldom walk away from a primary residence simply because its value today is less than the mortgage. Instead, they walk when they can’t make the monthly payments.

…

Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.

…

Local governments are going to face far tougher fiscal problems in the future than they have to date. The pension liabilities I talked about in last year’s report will be a huge contributor to these woes. Many cities and states were surely horrified when they inspected the status of their funding at yearend 2008. The gap between
assets and a realistic actuarial valuation of present liabilities is simply staggering.

…

Indeed, the stupefying losses in mortgage-related securities came in large part because of flawed, history-based models used by salesmen, rating agencies and investors. These parties looked at loss experience over periods when home prices rose only moderately and speculation in houses was negligible.

…

Our advice: Beware of geeks bearing formulas.

…

Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that  occurred in the last half of the year. I still believe the odds are good that oil sells far higher in the future  than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover,  the terrible timing of my purchase has cost Berkshire several billion dollars.

…

The investment world has gone from underpricing risk to overpricing it.

…

When Berkshire purchased General Re in 1998, we knew we could not get our minds around its book of 23,218 derivatives contracts, made with 884 counterparties (many of which we had never heard of). So we decided to close up shop. Though we were under no pressure and were operating in benign markets as we exited, it took us five years and more than $400 million in losses to largely complete the task.

…

my belief that the CEO of any large financial organization must be the Chief Risk Officer as well.

…

On Sunday (of shareholder weekend- acp), in the mall outside of Borsheims, a blindfolded Patrick Wolff, twice U.S. chess champion, will take on all comers – who will have their eyes wide open – in groups of six.

The man continues to impress in his thoughts, transperency, business judgement, and humor.  I encourage all of you to read the letter in its entirety.

The article is “Are You on Twitter Yet?”

Yes I already graduated, but I just can’t seem to get away from getting in the paper!

This is the second installment of a 3 part series on Twitter that will go over WHAT Twitter is, HOW it’s designed and thus how it should be evaluated, and WHO is going to pay for it.  If you are on Twitter you can follow me here

In this second Twitter’ific installment I want to analyze what Twitter actually is.  And to just get it out there I am going to say it – Twitter is not a consumer website.   Twitter.com, however, is a Consumer Internet website and should compared to other clients like Tweetdeck, Twitterific or Twhirl. According to TweetStats, about ~50% of updates come from the twitter.com website.  It would be very interesting to know what % of the total traffic is via API vs Twitter.com.  My guess is ~80% (excluding the hundreds of bots out there).

MyTwitterFeeds

Twitter is a social media conversation PLATFORM. I make this distinction because platform strategy is much different than website strategy.  Now many of you might point out that Facebook has a platform.  Correct, Facebook launched a platform in 2007, but people still go to Facebook.com to interact with their community.  Facebook Connect is interesting and might change this dynamic, but for now Facebook is very much still a destination site.

Most of my thoughts come from a class called “Managing Networked Businesses” I took last spring taught by Prof Tom Eisenmann.  He researched businesses based on platforms with network effects and analyzed which characteristics/factors are the most important.  With all the new internet platforms coming out it was a very timely course. A group shot of many of us with Prof Eisenmann is here

So how do I analyze at Twitter as a platform?  First, I want to classify what type of network it is.  Currently it is one-sided.  That is to say that all users generally perform the same functions on the platform (send and receiving tweets).  An example of another one-sided platform we all know is the phone system.  The network effect amongst Twitterers is very high.  The platform becomes more valuable to me the more people I follow and the more who follow me.  Tweeting isn’t very fun if you don’t have anyone to talk to.

User Acquisition

I don’t know the founders of Twitter, but I believe they are correct in trying to scale the community as quickly as possible for three reasons:

1)  As more users join the platform the value we each see as a user increases.  For example, I like Twitter a little more today because old man Gidney finally decided to join.

2)  The switching costs for users go up the more followers you have.  If a Twitter competitor, even with a better service, came on the scene it would be tough for me to switch.  I would have to get all my followers to go with me at roughly the same time.

3)  I believe Twitter is a Winner Take All Platform. The network effects, as stated before, are very strong and positive. Second, users don’t demand much differentiation. Sure there are requests for more features, but many are innovations can occur in clients.  And third, multi-homing is moderately high (Multi homing is the ability to use two platforms, like owning both a Wii and an XBOX).

While I could sign up for a JAIKU account (which has been recently sunset’ed by Google) fairly easily, the cost of building another following would be high and, frankly, I don’t think we have enough time in the day to be active on multiple networks. Someone else could come along and sit atop two distinct platforms, a la FriendFeed, but then complexity starts to creep in.

I know I probably lost some of you with the terminology. But just think of it this way, once you build your community on Twitter you aren’t going anywhere else. The folks over in SoMa would really need to screw up to lose someone with 100 followers to another competitor. And to clarify, I don’t view Facebook Status and Twitter as competitors in the platform context, very little conversation occurs on Facebook status, and the way people use the two is very different.

So now what?

The folks at Twitter seem to be on the right track.  They are on the verge of crossing the chasm and can now start to experiment with monetizing the millions of thoughts and discussions occurring on the platform every day. For ways I think they can do this wait for my next post. And as always feel free to comment below, this is definitely a “thoughts in progress” work.

]]> http://bitsandbids.wordpress.com/2009/01/27/oh-twitter-how-art-thou-2-of-3/feed/ 4 aprewett79 twitter_logo_s My Tweetdeck http://bitsandbids.wordpress.com/2009/01/21/oh-twitter-what-art-thou-1-of-3/ http://bitsandbids.wordpress.com/2009/01/21/oh-twitter-what-art-thou-1-of-3/#comments Wed, 21 Jan 2009 22:48:35 +0000 aprewett79 http://bitsandbids.wordpress.com/?p=56 ]]>

This is the first of a 3 part series on Twitter that will go over WHAT Twitter is, HOW it’s designed and thus how it should be evaluated, and WHO is going to pay for it.  If you are on Twitter you can follow me here

At Sunday dinner with the family this week my brother in law was giving me a hard time for “tweet’ing”.  This provoked the proverbial question from my Mother:  “What is that?”  I told her that I am writing a blog post about it soon and will send her the link – I put myself on the clock.  (BTW, this is not meant as a HOWTO.  For that you can look here)

So the purpose of this entry to explain to a layman what Twitter is and why people “Tweet”  – what value do people get from participating?  At the highest level I like to tell friends that Twitter is like Facebook status, decoupled.  Of course this doesn’t help my Mom since she isn’t on Facebook and even if she were doesn’t see the point of updating one’s status.

What is Twitter?

I asked a few friends (on Twitter of course) and received responses ranging from micro-blogging, to newsfeeds to a place to annotate The moments when you pause, look up and think “That’s cool. I must tell someone about that”.  I think these are all great explanations, especially when you just start out on the service.  As I developed a community on Twitter, however, my usage patterns changed.  I think my friend SteveD503 put it best:  “I compare Twitter to casual conversations I had in my college dorm that established and strengthened my network’s weak connections.”

The greatness of Steve’s comment to me is two-fold:

1)  As  you gain followers Twitter really does become a conversation
2) I am a big believer in the strength of weak ties.

On a more functional level I like to describe Twitter as a “time agnostic” instant messaging platform.  I can have a conversation with a friend over the course of a day without having to devote concentrated time to it.

Why do people use Twitter?

Currently I would describe Twitter as a service comprised of early adopters.  A majority of the people still sign up because their friends are on it (network effect) with little clue what they will actually do.  Early adopters like to try out new services and take pride in knowing what’s new in tech generally.   As people get into using Twitter I think they continue to stay engaged for 5 primary reasons:

1.  To stay in touch with friends on a conversational level (casual conversations a la Steve)
2.  To get interesting news from people who may be thought leaders in an industry
3.  To get breaking news (I found out about both the Mumbai attacks and US Airways crash via Twitter)
4.  To market their blogs, sites and products.
5.  To monitor what people are thinking about.

I will get back to #4 and #5 in a later post.  If you think I am missing some important uses let me know.  People use Twitter very differently – that is for sure!

The year, however, was definitely not a time of stability for me.  On the back of an envelope I came up with a list of 38 visited cities and 57 places crashed at.  In June, I left my only home in Boston but luckily I have a lot of great friends who opened up their aerobeds and couches to a vagabond.  I have since picked up a sublet in the Russian Hill neighborhood of SF and hope to settle down a bit.  Adding to the instability is my career – of which the true beginning of is still as ambiguous as the state of the equity markets. (and probably somewhat correlated)

2008 was also a year of celebrations.  First and foremost, Mr Owen Hanski was born in March.  He is a little chunkster, but is already toying with the girls hearts in daycare and will no doubt grow to be an awesome little dude.  Weddings were also plentiful and hosted in amazing settings all over the US.   Kent’s Palm Beach wedding in January and Catherine’s in December bookend’ed and awesome year of nuptials.  My guess is that for the next few years most of my travel will be dictated by weddings, which is an awesome reason to travel in my mind.  And of course, a somewhat bittersweet celebration was my graduation from HBS.  I was glad to move on but one cannot wish to remain in such a fun and intellectually stimulating community.  Luckily for me, the SF crew is doing a great job of transporting the experience to Bay Area.

I am looking forward to many things in 2009.  And judging by NYE 2009 it will be another fun, but maybe a little less crazy, year.  I have one goal for the year – to get a letter to the editor into the Economist.  Some say it should be to get a job, but that will come along also.  Thanks for reading my posts, and I hope you enjoy some of the posts I have coming up….

Adam

My life in 2008

It wasn’t perfect by any means.  The #Mumbai channel was full of re-tweets (people just forwarding on information) and other useless tweets.  But, for someone like me who likes to sift through large amounts of information, the on-scene twitterers provided great details.  Some contrarians are downplaying social media’s role in the events by making the distinction between data and actual, reliable, news reporting.  While they make a valid point, the growing following and influence of bloggers and twitterers during major news events is hard to ignore.

What is certain is that new social media sources will only continue to grow in importance as more tools emerge to intelligently distill the most valuable data from new social media sources.