Just a bit of a disclaimer: as an executive/blogger, I frequently get information way before many in the media do (not bragging, just stating common sense), but for obvious reasons I sometimes step away from my Wordpress account.
Does it eat me away sometimes? Yes.
I don’t publish things like “I have a major scoop on a huge company” cause that is lame, but the flip side is that what I do post is more representative of what is going on in the trenches, I like to think (and some people I respect and look up to seem to tell me so, too).
Anyway, after some reflection, I’ve decided to post this, because it serves the greater good, there was nothing to lead me to think that this is confidential and mainly, I would presume Facebook wants this to get out there asap to help them manage the matter better and move forward with the task at hand sooner.
So here goes.
At TC40, during Michael Arrington’s one on one interview with Mark Zuckerberg, the Facebook CEO announced that Facebook’s VC would be setting up a $10M fund and hand out grants to some deserving ideas and entrepreneurs.
The writer in me reported it live here, while the entrepreneur in me emailed FB about a potential working arrangement, specifically, for one of our units, at StreetMojo.com, which in short connects users looking for free stuff with marketers offering free stuff.
That’s the first sector we’ve deployed the application in, but with minor tweaks, I firmly believe that (along with our two search products at MetaMojo.com), these assets represent billion dollar opportunities… if they are on a larger network.
As a side note, from a portfolio management perspective, that’s why when it comes to StreetMojo.com and MetaMojo.com, I think it makes more sense to sell those assets and have them in a larger company; whereas WatchMojo.com - the web video unit - it makes more sense to remain independent and grow, grow, grow.
But (I promise this is relevant), since I’m investing my resources almost exclusively on WatchMojo.com, then it made a lot of sense to get a grant from Accel, Greylock and Meritech and grow those on Facebook. If Once they see what I have in mind for StreetMojo.com and just how huge it could be, then they are welcome to invest in Series A round (that’s assuming the VC that might be investing in Mojo Supreme mainly for WatchMojo.com does invest, and if they do, does not mind this little exercise in insanity). As I sat there in the Palace Hotel listening to Zuckerberg describe fbFund, it hit me that this would in fact help me realize my vision of having Mojo Supreme as an incubator and holding company with partnerships and joint ventures with different firms and backers…
Anyway… expectedly, FB probably got a lot of inquiries… I think it was great how Zuckerberg announced it, like Santa Claus telling kids that he had extra boxes to get rid of… but I was surprised at just how open it was: “send in an email”.
WTF?
If you think about it,
- VCs have clear legal statements saying that they can do whatever they want with your business plan, and that if you submit it, it’s your loss.
- Book publishers tell you don’t submit manuscripts for a reason.
- TV and film companies? Ditto.
So today Facebook realized that they had a potential situation on their hands with thousands of ideas coming in. I can imagine, judging by just how much the TC40 companies were similar, that a lot of the submissions were similar to one another, and to things that FB itself is planning to do.
==
Thank you for your submission for an fbFund grant and support of the
Facebook Platform. Our goal for this program is to encourage as many
developers as possible to write innovative and engaging new applications
on top of Facebook Platform. Additionally, we hope to enable an even
broader class of developers to become entrepreneurs by giving you the
financial resources necessary to pursue a new venture that relies on
Facebook Platform.During this process, however, it has become clear that we will receive
proposals which contain similar or even identical ideas. As a result,
and in order to protect other developers and us from claims that we or
anyone else copied material without the creator’s permission, unless we
agree otherwise in writing, we can’t promise that any materials or
information you submit here will be kept confidential, or specifically
that we or others might not develop similar or identical products or
services. Accordingly, we ask that you not submit any materials or
information you consider to be confidential or proprietary to this
e-mail address.This said, if you would like us to delete any materials you have just
sent us, please send us an e-mail within 48 hours instructing us to do
so with an email subject “DELETE”, and we will delete those materials
without review by anyone here. If we do not receive instructions to
delete your materials within 48 hours, we will rely on that fact as
indicating that you wish us to review your materials, with the
understanding that we accept no obligations (whether of confidentiality,
payment or otherwise) with respect to any materials, information or
ideas included in your submission.Again, we are very excited to be offering this program and wish you the
best of luck whether or not you are an fbFund grant recipient. We can
only give a limited number of grants and not getting one does not mean
that we don’t believe in your application nor that it can’t be
successful - it simply means that we have a limited amount of resources
and weren’t able to give money during this cycle to you. You are
welcome to apply as many times as you like as each funding cycle
represents a new opportunity to receive a grant. Additionally, there
are other programs, if not ours, that can enable you as an entrepreneur
to find the initial seed funding you are looking for.
==
As another side-note, I particularly like the pre-emptive, potential “it’s not you it’s us” line in the last paragraph.
Classic, I presume FB’s lawyers are Seinfeld fans.
Anyway #2: I think this is smart and overdue for fbFund, I would suggest they set this message up as an auto-reply to people who emailed them about a project.
In fact, it’s reminiscent of how Facebook did not, in Zuckerberg’s own words “communicate the news feed launch properly or clearly” last year.
Bottom line, Facebook is maturing, so is Zuckerberg, and this shows that the company is keen on doing good things for the web ecosystem but understands that business is business. But, it also suggests that the company’s open platform and fbFund will backfire at times because invariably, no matter how noble their intentions are, VCs want to make money for VCs…
And, with Facebook’s business being a multi-billion dollar one, and Zuckerberg still being mired in a legal matter, it was natural for the Facebook VCs and management to realize that their excitement to move forward on the fbFund shouldn’t make them put the cart ahead of the horse or expose them to more litigation.
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WatchMojo NewsletterI’ve been chronicling the dynamics of blogs and print magazines over the past year.
Trust me when I say the momentum is shifting from magazines to blogs specifically faster than it’s moving from print to online. Right now, the pioneers who dove into blog publishing, namely Rafat Ali, Nick Denton, Om Malik, Michael Arrington, Richard McManus et al. are easily heading towards becoming the men who are creating the Hearst, Conde Nast, Future Publishing, Time etc. of the 21st century.
To be fair, Jason Calacanis should on that list too, since they (along with his partners Brian Alvey and Peter Rojas) have the only blog empire (Weblogs Inc.) that both put up numbers on the board and cashed its chips. But he’s out of the blog game now, while the abovementioned men are doubling down.
And, don’t let the macho veneer fool you, beneath the external competitive jockeying, all of them understand that it’s their (as a group) game to win, and the magazines to lose. But more on this in a bit.
There’s still room for new players, after all, by 1980, FOX was not exactly spoken of in the same breath as were ABC, CBS and NBC. Today, FOX is on many days more potent that some of the initial 3 combined.
Connecting the dots from print to TV, in 1 or 2 years, blogs will be far more influential and important than they are today, but the pace and velocity of that shift will settle down a bit. By then, you will see an acceleration of TV to online video… something that has started today but will accelerate in a couple of years.
But today, it’s about print, and blogs: one of the first business writers I recall reading, Erick Schonfeld, made the announcement that he was not heading to Fortune, Business Week, the WSJ, but rather, Tech Crunch. Read his comments here. When Business 2.0 announced its last edition, you knew a writer with Schonfeld’s caliber and connections would not remain a free agent for too long, but you also expected him to be lured to one of the venerable print establishments.
And speaking of the print establishments, I’ll hold off judgment, but history will recall that Time Warner decided against keeping Business 2.0 afloat because it meant letting go in the hands of a competitor, Mansueto Ventures.
That says a lot, and maybe that’s why Schonfeld turned his back on print to embrace the web.
That says a lot about the state of the industry; it also speaks volumes about Michael Arrington - who announces the move here - following in the footsteps of Rafat Ali and Om Malik, moving from a one-man show to an actual trade publishing company.
Denton went big from Day 1, and that explains why his Gawker Publishing is ranked as the most valuable blog empire to this day and he the top ranked blogger.
Folks, we’re seeing the lines being redrawn in the sand…
Related:
- More Writers Jump Ship
- From writer/executive to publisher/founder
- Will Blogs displace books?
- Is blogosphere maturing or normalizing?
- Is blogging vested journalism?
- Blogs, blog networks and blogpimping
- USA Today on “Bloguls” Om Malik and Michael Arrington
- Wired and Newsweek Join Michael Arrington/Tech Crunch Roast
- How Bloggers Can Avoid Bloglag
- Does Tech Crunch Need an M&A CEO?
- Nick Denton Leaving Valleywag, to Focus Full Time on Gawker
- Richard McManus’ Empire, Down Under
- Blogs Account for 2-3% of Online Advertising?
- Om Malik’s GigaOm Hires COO
- Read Write Web Hires former Tech Crunch Writer Marshall Kirkpatrick
Settling back after my sojourn to SF. Checking in on some stats, I’ve already mentioned how the number of streams off WatchMojo.com was up 75% after the first couple of weeks since our relaunch on August 18th. Then, last week, in one day, we did 2.05 times the number of streams that we did on relaunch day.
Today I checked our syndication network streams and that is up 65% since September 1. Hell yeah!
I always tell people that to be successful at their respective professions, marketers need to succeed outside of Manhattan, programmers need to look beyond Silicon Valley and creators need to please audiences outside of Hollywood.
Outside of the 650 or 415 area code, everyone looks up to Yahoo! but that does not mean that Yahoo! does not have problems. What’s Yahoo!’s problem?
How Yahoo’s marketing execs could have let this double opportunity slip by is a mystery. That they did speaks volumes, and the implication is clear: Yahoo’s new leadership has not yet taken control of the company, and in the power vacuum, dozens of middle managers are busy pushing their own agendas.
Oddly enough, Wired is talking about Yahoo!’s presentation and gameplan for Tech Crunch 40. Incidentally, on the second day of the event, I was outside briefly doing a phone interview with The Deal’s David Shabelman, as I’ve done before, for his latest piece on Yahoo!
Dave and I touched on many things, and the biggest one was in fact exactly what Wired talks about (what I italicized). Somewhat surprisingly, David omitted that part, so I”ll mention them.
Yahoo!’s problem is 99% based on human resources and management issues.
- Product-wise, it has fantastic assets.
- Sales-wise, it is magnificently positioned to win in video and display/banner ads. Even its laggard search unit is a very respectable #2… and in the event it were to pull the plug on Panama and go with Google’s program, then it would materially boost revenue and dramatically cut costs, meaning its profits would skyrocket.
A Demoralized Workforce?
But, therein is Yahoo!’s problem. Suppose analysts ran the numbers and decided to do just that, can Panama and partner in search technology and/or search ads with Google, Wall Street would be jubilant but internally, morale would plummet. Yes, employees’ stock might benefit, but sarcasm and skepticism towards future projects would be a major issue. As such, while Yahoo! might be better off doing that in the short-run, in the mid and long run that is disastrous.
Adopt a Long Term View
Coincidentally, co-founder David Filo mentioned that all startups need to consider the long term impact of their actions. I certainly don’t think I was alone in the room to think of Yahoo!’s big mistake before the turn of the century when it decided to use Google’s search on its portal. It got warrants in Google, sure, but that is largely why today Google is worth 5 times more than Yahoo!
Wired is referring specifically to the fact that Yahoo! chose to showcase Yahoo! for Teachers and not Yahoo!’s Mesh, a new social network. Mind you, to me, it’s would have been a tossup, because
a) with Y! For Teachers, clearly they’re trying to compensate for missing out on Facebook, even though today Facebook is about much more than students.
b) there are way too many social networks out there, one more? Puh-lease.
Turf Battles and Fiefdoms
But what Wired adds, is spot on: “dozens of middle managers are busy pushing their own agendas.”
Ding-ding-ding… let’s backtrack: last year, when Brad Garlinghouse [indirectly] leaked the now-infamous memo to the press, it was 1/3 about a senior executive trying to fire up the troops but 2/3 about a senior executive trying to jockey for power.
Yahoo! attracts really smart people. To be fair, I also got to hear Mr. Garlinghouse at TC40 and seemed smart and a no-nonsense guy. But all of those smart people at the top spawn cynicism from the people on the front lines that actually get work done. Yahoo!’s headcount has swollen quite a bit, and I’d guesstimate that ’tis at the top that it’s fattest.
Because promotions and openings at the top are naturally rarer than at the middle or bottom, VPs, Senior VPs and Executive VPs will always spend large portions of their time and energy plotting for career moves instead of market share and revenue opportunities. Why? We know - from projects like Panama or acquisitions like Zimbra - that it takes years to convert tactical and operations move into tangible gains. As such, Yahoo!’s culture has probably created one of politics instead of meritocracy. That’s a major problem.
I’m not sure Jerry Yang or David Filo have what it takes to address that. Filo need not, though he runs technical things to a large extent. Yang, it should be noted, never had anyone report to him until this year. Re-read, and ask yourself if it makes sense for him to be seen as a likely CEO in the mid-run. It does not. As a Yahoo! shareholder I love seeing him run things, but I am concerned (were I a board member) about the likelihood that he will quit suddenly.
Yahoo! has to address this problem: good low-level employees and mid-level managers probably don’t want to work at Yahoo! because of this bottleneck at the top and because the stock has not moved.
Stock’s Caught in Rut
Ah yes, the stock
Yahoo! has been caught in a range of about $22 to $34 for some time now. Worst off, Yahoo! swings to the high end of that range have a lot to do with rumor whilst the dips to the bottom have to do with news and negativity surrounding all-things-Yahoo!
In my opening line, I mentioned that “I always tell people, marketers need to succeed outside of Manhattan, programmers need to look beyond Silicon Valley and creators need to please anyone but Hollywood,” but notice, I don’t share that sentiment about Wall Street, because in the blessed capitalism system, Wall Street counts, quite a bit. Companies are revered because of what they offer Wall Street, not what people on Main Street think about them. That is why Yahoo! will in fact be seen as a takeover target as often as it is thought of as a buyer of an asset.
This is a company that generated $6.4B in 2006 revenues, up 22% from the $5.2B 2005 figure, but its net income fell from $1.9B in 2005 to $750M. That’s not bad. There are many reasons for that, including R&D investment in Panama, and a bloated management rank on top.
$100B Market Cap If Executed Right
I’ve said this before, the choices for Yahoo! are bountiful, but the one that is probably best for shareholders is to sell to a private equity firm.
The deal would also prove lucrative for the PE firm, in our analysis, just by maintaining its grip with regards to market share in online advertising revenue, Yahoo! could be worth $100B by 2010.
According to our analysis:
Yahoo! could be generating revenues of $9 to $18 billion in 2010; its profit margin was 24% and 36% in 2004 and 2005 respectively.
Say it can maintain margins of 25% (hey, they won’t be hiring as aggressively as Google and there is only so much purple paint out there), this means that it can be generating profits of $2.5 to $5 billion per year, at a P/E of 25 (it’s now at 33 today), that’s a market cap of $62.5 billion to $125 billion in 2010, or an average of $93.75 billion.
With those kinds of revenues and margins, it will have more than $10 billion in cash, so a market cap of just over $100 billion.
Will any of this happen? Probably not, but if it doesn’t, it might have more to do with what Wired stated (”Yahoo’s new leadership has not yet taken control of the company, and in the power vacuum”), and not the opportunity at hand…
Disclaimer: I own shares in YHOO
I had a chance to be in attendance and hear the following panels:
- Sequoia’s Michael Moritz interviews Marc Andreesen (founder Netscape & Opsware, co-founder Ning), David Filo (co-founder Yahoo), and Chad Hurley (co-founder YouTube);
- Jason Calacanis moderates discussion with Jay Adelson (Digg), David Sacks (Geni), Roelof Botha (Sequoia), Sumant Mandal (Clearstone), George Zachery (CRV), Hank Barry (Howard Rice), and Jeff Clavier (SoftTechVC);
- Heather Harde moderates discussion with Michael Montgomery (Montgomery & Co.), Craig Walker (GrandCentral/Google), Raj Kapoor (Mayfield), Ted Wang (Fenwick), Michael Marquez (CBS) and Evan Williams (Obvious and Twitter).
Instead of simply transcribing the panels, I put my pen down, closed my laptop and just listened. I asked a few questions, naturally… The following are all heavily paraphrased, but important nuggets of wisdom from some of the most influential and successful figures of the first 10 years of the World Wide Web.
1. If you are going to start a company, start with a big, crazy and ambitious goal (Marc Andreessen).
2. Regardless of what you are doing, financing options exist. In fact, there are people whose sole job is to identify people and projects and invest in them (Marc Andreessen).
3. When you are building a company, don’t move necessarily to where the financiers are, go where you can find talent (David Sacks). In fact, don’t do anything you would not otherwise do (Sumant Mandel).
4. No matter what your strategy is, keep your costs down (Chad Hurley) and never hire ahead of needs (Marc Andreessen).
5. Throughout your business’ growth, don’t manage with an exit strategy in mind (Michael Montgomery), but don’t make decisions that will put you at a disadvantage, either, like giving up exclusive clauses for sectors or geographical locations. In other words, think of repercussions (Ted Wang).
6. It’s very easy to think of short-term gains and advantages for making a decision, always pause and think of the long-term impact of any one decision (David Filo).
7. No one can really advise you on the best decision to make in the sell vs. build dilemma, it’s your asset, do what you want to do, it’s your right (Ron Conway).
8. Oftentimes, a business development inquiry or relationships can grow into a corporate development deal (Mike Marquez).
9. The VC community is torn on the issue of founder’s liquidity, it’s a case by case decision, really… and as an entrepreneur, you are not alone in the need to take some chips off the table in exchange to continue building the company (Raj Kapoor).
10. Never underestimate the importance of reaching out to financiers via professional services firm, be it lawyers or accountants (Hank Berry).
11. All factors being equal, you will get a better deal from investors that have already worked with you (George Zachery, David Sacks).
12. An entrepreneur should not kid himself: once you sell the company, you probably won’t end up staying at the new company forever… after all, the kind of person that is happy at a large company is not the kind of person that starts one (Evan Williams).
13. In the case of small companies selling, valuation boils down to two things: what will it take for you to sell and can the buyer justify the deal (Evan Williams).
14. Major variable in M&A is the balance between demand and supply and competitive process (Michael Montgomery).
15. You always need a good lawyer who’s done deals, but you don’t always need an investment banker (Ted Wang, Michael Montgomery).
16. All factors being equal, avoid earn-out’s in sales (Michael Montgomery). They create too rigid of a framework afterwards (Mike Marquez). But, they can be amended or scrapped afterwards if both parties agree (Michael Montgomery).
Enjoy. In case you are wondering, the tip #7, from Ron Conway, was a question I asked him at the cocktail, as he was a judge and not part of the panels…
PLAY
