From the Porch

I’m saying this for the third time. Facebook will do search. And [more importantly] they’ll do it well. Yes, they announced Graph Search in mid January, but since then the naysayers beat up the product with myopic criticism of the beta release. Some months have passed, but I figured now that everyone is focused on beating up Facebook Home instead, it’d be as good a time as any to answer back….

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The value of a YouTube view will increase by orders of magnitude. Here’s why….

Advertisers will pay ~$100K to get their message in front of 1M basic cable TV viewers in an evening, but only ~$2K to get their message in front of the same number of YouTube viewers. This 50x delta is unsustainable and the most likely result is an increase in total revenue per YouTube view.

The math. (I made it up again - shhhh….)

If an “ok” basic cable reality show costs around $200K per episode to produce and needs around a million viewers per night to stay on the air, then it needs to generate $100K in advertising revenue to break even (assuming around half of total revenue comes from carriage). An unfair analysis to be sure as it is way oversimplified and excludes tons of other variables, but it also probably costs more than $200K per episode to make - so we’ll stick with it. Bottom line: $100K for 1 million viewers.

By contrast, YouTube will pay content creators a $2 CPM. 1 million views x $2 per thousand views = $2K. Also not a fair analysis because YouTube CPM’s vary, not all content is monetized, not all views are monetized, etc., but the order of magnitude should be close. Bottom line: $2K for 1 million views.

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What do Snapchat, Vine, and foursquare have in common? It’s that damn “Press and Hold” - it’s so hot right now.

I first noticed the mobile gesture in Snapchat and I can’t help but believe that it’s part of what led to the app’s success (ephemeral weiner shots aside). I fell in like with Vine for a similar reason - not having realized how painfully inconvenient it was to tap my iPhone screen to start recording and tap it again to stop (obligatory Vine of my son here). When foursquare added it as a way to check-in quickly I finally realized how powerful the seemingly simple little twist to the UI made using these apps more seamless (I’ll refer to my foursquare check-in count as proof).

Tapping, flicking, and swiping is to clicking as press and hold is to….

I suspect the next place we’ll see press and hold is in mobile commerce apps. Amazon apparently thought 1-click ordering was so powerful for converting on the desktop that it patented it. I wonder if pressing and holding to buy something on a mobile commerce app would yield comparable results. What say you Amazon, eBay, Fab, Wanelo, Groupon, Gilt, et al?

“Don’t ask questions. Just give in to the power of the press and hold.”

One thing that’s missing from this cycle that we had in the last cycle (i.e., the dotcom bubble) is a massive broadband overbuild. Last time it was for our wired infrastructure. This time we need it for our mobile infrastructure. Last time the carriers financed it. This time it will be Apple, Google, and others. Are there many issues more stubborn and pressing than mobile capacity and speed?

The Telecom Act of 1996 deregulated telecom markets and attempted to introduce competition to monopolistic sectors. It also ushered in a massive infrastructure overbuild from the likes of Level 3, Global Crossing, WilTel, Worldcom, and other (dubious/infamous) companies financed by other (dubious/infamous) investors and banks. (I confess I was part of the problem, but, hey, the ducks were quacking.) After the dotcom bubble burst there were unprecedented bankruptcies, but the silver lining was the (wired) broadband infrastructure we all enjoy and take for granted today. In fact, toward the beginning of the bubble in 1997, Internet penetration (not broadband penetration but Internet penetration overall) was about 30% in the US and broadband penetration was next to nothing. Today, both Internet and broadband penetration are 90%+ - i.e., effectively ubiquitous.

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For all of the Facebook haters out there crying about their lack of innovation, let’s not forget that Google:

• “borrowed” its business model from Goto.com/Overture (some lawyers might use the term “stole”);
• replicated (and, to be fair, improved upon) Firefox and others with Chrome,
• acquired its Android OS group;
• worked w hardware providers to launch smartphones with remarkable similarities to the iPhone;
• launched Offers, which looked a whole lot like Groupon, after it couldn’t buy Groupon;
• launched a number of foursquare-like products like FieldTrip and Latitude (which, to be fair, has some relationship to dodgeball, the predecessor to foursquare that Google acquired);
• launched its places product to compete w Yelp and others and arguably adjusted its search results to favor its own content versus competitors;
• and launched Google+ (after a number of failed attempts at Facebook and Twitter slaying), which bears a striking resemblance to Facebook - though Google is able to goose its usage by tying its search, mail, calendar, and other applications to it (some might call that unfair/monopolistic action).

Going back a few more years, we may remember that Apple got hopping mad when Microsoft ripped off its GUI with Windows, after Apple had rightfully stolen the idea from Xerox first. And so on.

I’m not saying that Facebook is the most innovative company in the world, but they’ve built some pretty neat things and aren’t much more guilty than others when it comes to replicating successful concepts.

Every holiday season, folks reach out to talk to me about the gifting market because of my first startup. It was called Tigerbow and it let people send real gifts to email addresses (and Facebook profiles, Twitter accounts, mobile phones, etc.) I poured my heart and soul into it for 2-3 years and it failed. Facebook’s (re)launch of Gifts and the holiday season got me thinking that I ought to finally do a post mortem. It’s been a few years and another startup so forgive my memory, but here goes….

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Since way before it was public, there has been much ado about Facebook’s business model (or supposed lack thereof). Most recently, Forbes put out this mess about Facebook’s lack of a mobile business model. They’ve got (at least) one. It’s called sponsored stories. And its working. The proof is in this report; here are the summary metrics:

• Sponsored stories have 53% more engagement than standard ads.
• Mobile ad CTR = 1.14% vs. 0.083% for desktop ads and 0.588% for desktop newsfeed ads.
• Mobile ads CTR is up 31% y/y.
• Facebook mobile ads have 4x the engagement of Twitter ads.
• Facebook CPM’s are up 58% y/y.
• Overall engagement is up 11% y/y.

Let’s also have a quick look back at very recent history….

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Startup valuations are going up. The ‘series-A crunch’ and imminent doomsday prognosticators can let it go. I can’t argue that valuations aren’t ‘high.’ They are. But all any investor should care about now is where they go from here. And my math says they’re going higher because of asset reallocation, uninvested funds, and market under-representation of new digital media companies. These things comprise such a big theme that (almost) nothing else matters.

Asset reallocation….

Corporations (be they people or not) and people (be they corporations or not) are hoarding cash. In my opinion, recent reports of ‘The Myth of Cash on the Sidelines’ are, well, myths. Nominally, toward the end of last year, nonfarm nonfinancial corporate businesses held $2.11 trillion in liquid assets. Moreover, at these businesses the ratio of liquid assets as a percentage of total assets has turned up significantly over the last year reaching the upper end of its 30-year range. Individuals have built cash hoards too. And asset reallocation is a way more influential determinant than anything so let’s look at where this money could go….

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Yeah, I know, it’s a car service. But it’s also an excellent example of what mobile payments is really about; that is, tap and go.

Sure booking your ride via iPhone with a few taps and seeing it show up on the map is pretty cool (except when it doesn’t show up and your downtown, cold, and drunk with unfortunately easy access to Twitter - sorry again fellas), but as I mentioned last month, my favorite part of the Uber (and GroundLink) experience is just getting out of the car when I’m done. No swipe. No cash. No processing. Just the inevitable, “So, we cool?” conversation with the driver. I’d already ‘opened my tab’ when I booked my car, so I could close it and pay on my phone. Automagically.

Everything we do should be this easy. And there is no reason why it won’t be.

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