WSJ’s Kara Swisher asks the inevitable question: Who Will be Mark Zuckerberg’s Eric Schmidt?
Some time ago, we asked whether Zuckerberg’s hubris would lead to Facebook’s downfall, listing Zuck’s inexperience as one of the reasons why Facebook might become a thing of the past. Bear in mind, while the VCs and Board members that surround Zuckerberg are smarter and richer than God, who says they have a clue about the future of social networking or advertising. Chances are, they too are flying by the seat of their pants.
Conventional wisdom is for Facebook to bring in someone who can:
a) coexist with Mark Z.
b) knows a thing or two about social networks
c) has advertising experience
d) has worked with platforms - since Facebook has bet the farm on this.
She runs through a myriad of candidates but settles on Mark Andreessen, Netscape’s founder and current Chairman on Ning. I doubt Mark is the best man for the job. Incidentally, she includes many females, and I think ultimately it very well might be a female but the point is, Andreesseen isn’t the man for the job.
For one, he himself had to have a manager/executive in Jim Barksdale to manage Netscape. He hasn’t managed anything per se, he’s always been the ideas guy who has brought in others to manage. He himself admitted to not being interested in the CEO job (at least he did so at Tech Crunch 40).
Anyway, one thing that he had in common with Eric Schmidt - the executive that Google brought in - is that both men have lost battles to MSFT. Google wanted to beat both Yahoo! and MSFT, but Yahoo! lost the battle itself by being so inept, frankly.
So Google knew that it wanted to displace MSFT. Schmidt’s career was littered with losses against MSFT so that made hungry to beat MSFT.
In that sense, Andreessen too has lost battles to MSFT, running Netscape when MSFT launched Internet Explorer, which today garners 75% of the market share in browsers relative to Netscape’s 1%.
Problem is, winning at Facebook has nothing to do with beating MSFT, MSFT is Facebook’s ally in the battle against Google, I think Facebook needs someone who has actually taken on Google and won. I cannot think of too many people who have done that. YouTube comes to mind in online video, for sure, though that was not really a business in the revenue, profits and stand-alone capability basis. Who else? Not too many come to mind.
Anyway, the biggest reason why I think few will accept the CEO job have little to do with Zuckerberg’s quirkiness. I think very few people feel that they will be able to appreciate the company’s value from a base of $15B. This is arguably the biggest obstacle.
When Schmidt came on board at Google, the paper value of the company was small enough that it gave Schmidt a “margin of safety”. Any executive coming in to Facebook today would be expected to deliver a miracle, why? Because as I wrote this week, most VCs do not get how online advertising works, and they blindly assume that generating meaningful ad sales is easy. It’s not, and it’s even harder for Facebook by virtue of their resistance to accepting that media, publishing and advertising has not really changed fundamentally.
In fact, I do not mean to pick a fight with anyone, lest not Jim Breyer or Peter Thiel, but judging by Mr. Breyer’s background, I don’t see anything that spells out “ad sales” while Thiel made his name - and fortune - at Paypal, the site that sold for $1.5B without selling $1.50 in ad sales.
This is the problem: Google created a $200B ad-supported technology company that became the envy of Silicon Valley and Madison Avenue, but the Valley does not want to admit it doesn’t really understand advertising and Madison Avenue can’t admit it doesn’t get technology.
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WatchMojo NewsletterIt’s a good thing Alley Insider rummages through 10-K’s - so we don’t have to (then again, our full time job isn’t to, well, rummage through 10-K’s): turns out Time Warner’s $5B revenue unit Time Magazines will be laying off about 100 people or so. Time is one of the most successful and profitable B2C print companies with 150 publications in the US and the UK.
Can the news get any worst for print?
Reed Elsevier, a leader in B2B publications, is getting out of the magazine trade altogether. According to the NYT (ironic, I know):
Variety, Publishers Weekly and dozens of other trade publications are going up for sale as the publishing company Reed Elsevier looks to get out of the uncertain advertising market.
The company, based in London and Amsterdam, announced Thursday that it intended to sell one unit, Reed Business Information, and acquire ChoicePoint, a provider of consumer information, for $4.1 billion.
The business information unit includes some relatively well-known titles (Broadcasting & Cable, Multichannel News, New Scientist) along with sector-specific publications (Custom Builder, Microprocessor Report, Home Textiles Today). Of the 400 publications, the most prominent is Variety, the Hollywood trade magazine.
Last year, the unit had revenue of $1.76 billion with an adjusted operating profit of $233 million. Most of the revenue came from advertising, and in a statement, Reed said it was seeking to reduce its exposure “to advertising markets and cyclicality.” The trade show business, Reed Exhibitions, will not be sold.
This isn’t anything new, it’s an acceleration of what we’ve been seeing, in two ways.
Reed Elsevier sold another publishing arm, Harcourt Education, last year. The company has sought to reorient itself as a provider of subscription-based online services, with products including science and health information and the LexisNexis databases of legal, news and business documents.
In that sense, we’ve seen companies like Thomson reposition themselves from print to resellers of subscription-based online services.
In a second way, however, we’re seeing trade and consumer publications head for the doors at an alarming rate: Guardian Media and Apax Partners bought Emap’s publications last year for $2B.
You can run, but you can’t hide from reality. And the longer you run, the quicker you realize that you are running off a cliff.
Today, more numbers reiterating the writing on the wall:
Hours spent with media per week, per IDC (via Alley Insider):
All media: 70.6 hours
Internet: 32.7 hours (46%)
Television: 16.4 hours (23%)
Magazines and Newspapers: 3.9 hours (0.05%)
I’ll be the first to admit that the IDC numbers might skew favorably to the Web, granted, but Magazines and Newspapers: 3.9 hours (0.05%) is terrifying to see if you are a print executive.
What’s more terrifying is that the Web isn’t even garnering 10% of total advertising spending yet (it gets 7-9%). Once it does, who will main to buy print assets?
Right now, private equity bankers are showing up (as they did for Maxim, who had I known was really on the market I would have made a run for myself - with the help of my banker friends) because the absolute revenue figures are big enough to merit paying the interest expense. But in a higher rate environment, no private banker will be able to stomach the underlying metrics… and over time, as the Internet garners more and more of the absolute dollars in advertising, who knows, maybe print will in fact die?
I don’t care to comment much on NBC’s acquisitions, namely iVillage and Healthology. In some ways, they were pretty prescient and good fits with NBC’s offline strategy. But, clearly there were execution woes, who are we kidding. Oh, look, looks like I did indeed comment on them.
Anyway, the point of this post is simple: man times have changed. Back in 2000, everyone was looking for a B2B component to their business model. Ariba, Commerce One were trading at nosebleed multiples because they were B2B plays.
Today, it’s the opposite. Via Paid Content:
An NBC Universal spokesperson said iVillage will focus more on consumer health like YourTotalHealth.com. Healthology, acquired for $17.2 million under iVillage’s previous regime, relies on physician-generated content; the company considers it to be more B2B.
By deciding to cut back at Healthology, NBC is basically echoing the sentiment that online is a consumer play and the main way to make money is not by offering services to businesses (doctors) but rather, to regular Joe’s (or Jane’s in NBC’s case).
Back in December 2005, when News Corp. bought my old company and the brass at IGN pushed me out of the company, I was offered a gig of sorts at Healthology but I passed… that was when I started to think about what I could do in the consumer video space, and presto: WatchMojo.com was born. It’s funny how fast and quickly things change. That was a mere 26 months ago!
Anyway, the dealmaker in me says this is foolish on behalf of NBC Universal for a couple of reasons:
- NBC Universal, which is owned 80% by GE, should take Healthology out of the NBC Universal unit and put it in the GE Healthcare unit. GE Healthcare sells equipment to doctors… Healthology fits fantastically with that unit. Maybe it’s just me, but Jack Welch’s blood would be boiling here because Healthology is probably #1 or #2 in information for doctors and GE Healthcare is too… yet NBC Universal shutters it for a consumer play (that’s the right thing to do within the unit, but company-wide? Nope.)
- If GE Healthcare does not see a fit, fine… but then don’t shutter it, sell it. GE is legendary for investing, managing, and selling businesses at a profit. It bought Healthology for a relatively paltry $18M… it could flip it for more to a company like Thomson that is in the digital information business for professionals. Of course, Thomson is skewed towards finance and legal, but why not medical?
Anyway, sometimes I wonder why these companies manage with the blinders on… I assume there’s more to it than meets the eye.
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