Venture Level

How Zynga will be a $54 Billion+ company

Tue, 17 Apr 2012 14:28:00 -0400

Yadda, yadda, yadda, Zynga this Zynga that. You’ve probably heard every guy on Wall Street nag on the company. These so called “analysts” are not qualified to judge Zynga in my mind. First of all, they take a traditional approach to judging a company like Zynga, as if it were in the semiconductor space or financial sector. Zynga is in a totally different space. Then on the other hand, they’ll put all internet companies in the same boat. Zynga and Groupon are not the same kind of company. I don’t even consider Groupon to be a ‘tech’ company, it feels more like a sales company to me. So analysts need to stop putting every internet related company under the same umbrella.

Now that I’ve said my spiel on Wall St, let me get to the goods of this post. I feel Zynga will be worth $54 Billion or more in the future (a significant gain on their current $7.2B market cap). And for a very good reason: Online gambling, specifically online poker and mobile poker. Just think of how addicted the world is to online poker— even if you know nothing about playing poker, you know poker players love it. Now take those same people and give them an iPhone app, or Android app and let them play poker on their way to work on the subway. That gets even crazier, right?

Poker fans are no doubt die hard gamblers. And Zynga does well with fake poker. The rumors are that Zynga is scouting out a partnership with Wynn, one of the most well known gaming brands in Vegas. And no doubt, there is a lot of red tape and legality issues Zynga and their partner will have to work with. But honestly, what is the difference between someone gambling at a casino and at their house with their laptop? In my mind nothing. And in the minds of poker players —also nothing, except for the convenience. Now I’ve never played online poker, in fact I don’t even know how to play poker, but I know that the revenue stream this could create from taxes is HUGEE (that deserves two e’s).

We all know our economy is in the trenches, and in order to come out of it, we will have to allow innovation like this to create new revenue streams. Good things don’t last forever, so sometimes changes are a great thing. I mean you hear about immigration laws all day from Silicon Valley moguls, telling you the laws are driving innovation outside our country. Why are we letting these opportunities slip away? Because we won’t change. And even if Zynga can’t get things done fast in the US, then there is always the UK, where online gambling is legal. Zynga already has a huge audience they can leverage and an established brand name, so it could be highly disruptive. After all, Zynga is a global brand with offices in more than just Silicon Valley.

Now to the even better part, how do I think Zynga will be a $54B+ company? Simple. Casino brands like Las Vegas Sands ($42B), Wynn ($12B), and others are valued in the billions. These brands operate on business, for the most part, from guests being physically at the locations owned by the casino brands. There is no virtual gambling or anything like that. Now, given that not all of their revenue comes from gambling, but from dining, shows, rooms, etc- I do admit that their value is not solely based upon gambling. But in return Zynga reaches a larger audience when they implement gambling on the internet- everyone, everywhere it is legal (and I believe laws will tip in Zynga’s favor soon) because it will be a huge revenue stream for the government. So to conclude, I take into account the value of these resort enterprises, and feel Zynga will be valued at the combined value of two of the most valuable casino brands, if not more. We also have to take into account the value of their current business; casual gaming. It’s big and no doubt successful.

I don’t think the average stock market investor knows how to analyze Zynga (I’m talking about the guy who lives in Iowa that owns a small business, etc), so they have to make their investing decisions off of what the street analysts say. From that, they are only left to believe what they hear about Zynga, but frankly, the analysts can’t even see the vision—after all what the heck have they ever built? They are not builders, thinkers or entrepreneurs, for the most part they just comment on things they have no domain expertise to comment on.

Disclosure: This article is based upon my opinion. You should make your own decisions and opinions. In no way is this investment advice and I am NOT an investment professional.

Twitter Upset about Facebook-Instagram Acquisition

Mon, 09 Apr 2012 15:00:00 -0400

So Facebook just announced they acquired Instagram for $1 billion…who knew? Well, Twitter knew - and they are pretty upset about it. I’ll get to that in a minute. But first let me congratulate the Instagram team on creating a product everyone loves and much success. Also, to be honest, the majority of Instagrams popularity and success should be credited to Twitter. Sure there was Facebook where people sometimes shared filtered photos, but Twitter was where people constantly shared Instagram photos- versus say um…Twitpic?

According to someone close to Twitter, Twitter was interested in acquiring Instagram. But why did it not happen? Here’s why: Twitter didn’t have the means. And now they are highly upset about the whole situation.

Obviously they wanted to get their hands on the Instagram property because of the strong user engagement that Instagram users have, in essence creating more value for Twitter shareholders.

The main difference between Facebook and Twitter is that Facebook is going to have an IPO very shortly. This means that their stock is very attractive (and straightforward), Unlike Twitter who’s stock is harder to figure out the real value on. Also the cash reserves for Twitter are nowhere near the reserves of Facebook. Twitter doesn’t really have a healthy stream of revenue like Facebook so the billion they raised in total is about what they are running on.

But lets get to the Instagram acquisition. It all comes down to money (and with money- CASH is king). I’m sure if AOL decided to write a check for $1.1 billion or more in cash (digging in to the proceeds of their patent sale to Microsoft today), Instagram might have exercised that opportunity. Twitter just didn’t have the money it needed to persuade the Instagram team to sell to them. Nobody wants Twitter stock when they can get Facebook stock which perhaps will pop on IPO day and is super hot. Obviously Twitter couldn’t write a $1 billion check and call it a day. It’s well understood that the majority of this Instagram acquisition was Facebook stock and not cold hard cash (although some), because Facebook stock is almost as worthy as cash (if not more because of the perceived notion of a IPO pop).

But what’s more interesting out of all this, is that this will force Twitter to ramp up revenue so they don’t let opportunities like this slip away in the future to a cut throat competitor like Facebook.

Oh and you can bet Twitter is going to start aggressive in-house filtering of photos.

I should also note, Jack Dorsey (the creator of Twitter) was an investor in Instagram. Clearly, that had no outcome on the acquirer though.

FACEBOOK ACQUIRES INSTAGRAM

Mon, 09 Apr 2012 13:08:00 -0400

Breaking! Nobody has covered this yet! Facebook is going to acquire instagram!

https://www.facebook.com/zuck/posts/10100318398827991

Update: Here are the goods. Facebook bought instagram for $1 Billion in cash and stock. And yes, that is for a service with not a penny in revenue. The message: Build great products and liquidation will come?

SayClip launches on Mac OS X

Thu, 15 Mar 2012 23:00:00 -0400

I’m pleased to say that SayClip has made its way onto Mac OS X. This felt like a natural extension of the platform that started on iOS and the web, moved to Android, and now is part of OS X. The app really has seamless integration to users’ desktop screens because it runs off the menu bar similar to other apps, such as Dropbox. While it is running in the background, the app icon will be dark until you receive a “SayClip” from one of your contacts, at which point it will light up, just like the image above. This is a subtle indicator of a new message which users can respond to on their own time.

The app is quite dead simple to use and there is absolutely no learning curve. In fact, I believe a 5 year old could use it if they tried.

Here is an example of how the app runs, when there are no new messages:

Here is how it looks when there is a new message:

I think the great thing about being able to use SayClip from your desktop or laptop is mainly the ease of use, but the whole experience is much faster than using it from a mobile device. Uploading a message doesn’t take long at all, viewing a message, etc- nothing takes more than a few seconds to do. Since SayClip allows people to group message each other, this is a perfect tool for families to share special moments or even just say “hi” more often, privately- knowing only their recipients will be able to view the content and not anyone on the internet!

The app has been in private beta for the past few weeks and was being used across various continents. Users across these continents have expressed this has changed the way they’ve stayed in touch with family recently. No more waiting for those once a month Skype sessions with 8-12 hour time differences. No more expensive phone calls overseas. Even within the nation, people have expressed the ease of sending a message has made them kind of addicted to the service since they can send a simple “hello” while they are checking emails at work.

So I’ve given you my spiel, now go download SayClip for Mac OS X and let me know what YOU think! Head over to SayClip.com and click the ‘now available on Mac’ badge to download. By the way, it’s free. And there are no ads.

P.S. A lot of companies have forgotten about the desktop! Every tech company that matters has an iOS app and probably an Android app, but many have forgot that people spend the most time behind the screen of their computer when it comes to gadgets. This is one of the main reasons we’ve created a native SayClip Mac OS X app :)

Facebook Post IPO Ammunition

Fri, 03 Feb 2012 21:24:34 -0500

In technology companies, you see a lot of hype pre IPO and even in the first few days of trading, however as time goes by a lot of companies lose the heat and buzz it had in the initial days of trading. We’ve seen Demand Media go as high as 27 and some change to as low as 5 and some change, currently trading around 6 something. Then we’ve seen juggernauts like Zynga who had a struggle out of the gate, but are now doing well- particularly due to Facebook’s S-1 filing stating ~12% of revenues come from Zynga.

This leaves a question, and a huge one at possibly $100B market capitalization; will Facebook be steamy enough for the public market post IPO? My thoughts are yes, it will be- here’s why:

Facebook might do search
Facebook might start their own ad network- “FaceSense and FaceWords” if you will.
Facebook might get into entertainment

These are some thoughts I have and I think Facebook will get aggressive with these after their IPO. Lets take search first.

Search is huge if it’s done right. That’s why Microsoft has invested billions into Bing and a lot of small startups try to do search. Search is also hard. Why? Because people naturally think Google when they think of search. Microsoft has the money to blow on Bing and so far, it hasn’t turned out all that bad, but you see a lot of startups come and go because search is also costly if you can’t attract and audience. It’s mainly hard for people to make the switch because in order for them to see a real benefit of leaving the big G, the search experience and results have to be more than 10-30% better. However, Facebook would not have this be a huge problem because people naturally spend time on their site for other reasons and there is a white bar just waiting for users to type something into. Currently, FB uses bing for their web results, but having a in house engine could be a huge cash cow, even if the results are not more than 10% better than Google. But those are the nitty gritty details of the outcome, shareholders will just be optimistic off the fact that they are taking a go at search in general because Google has built this huge empire off of it.

If Facebook did an ad network, that would also be a huge cash cow. This would go hand in hand with search. They already sell ads in house for their own inventory, so why not expand it to third party inventory? There’s no reason not to. Google has AdSense and AdWords, and Facebook could definitely take a jab at that business if they wanted to (which I’m pretty sure they will.) Given that Google makes a couple billion a quarter (don’t quote me on the exact number) from AdSense partners, this type of model would boost FB revenues significantly on an annual basis. And getting people to switch wouldn’t be that difficult if they made it lucrative and juicy for publishers, but even beyond- “cooler” with the “Facebook factor.” Instead of traditional ads, Facebook can essentially bring the whole Like system and more to third party ads. If you buy likes within Facebook right now, can you imagine buying likes on keyword specific sites? For example, say you are ShoeDazzle and you are targeting shoe maniacs; imagine the ability to buy new likes through Elle.com or some other fashion site. The problem with internet advertising is that you cannot always get people to convert to a sale, and if they click and come over to your site and leave without buying, they are gone- forever! Instead, the ability to buy a like and then gradually convert them into a lifelong customer seems more valuable, especially when done outside the Facebook ecosystem on a third party fashion (or whatever else) portal.

Lastly, I think there is some level of expectation for Facebook to get into some kind of content business. Entertainment is huge online, whether it is through Netflix, iTunes, Hulu, etc. But people hate having to maintain multiple accounts on various platforms- it’s just too much work. Since people already spend a boat load of time on FB, If Facebook can figure out how to tie all this together and deliver content through FB accounts they can quite possibly disrupt Hollywood in a positive way. Getting people to rent on the platform through credits would be an ideal play in my mind. Rewarding people with credits initially to rent movies and then letting them pay for credits once they are into the idea of renting movies via Facebook. How much more targeted can it get? I think a reason why Facebook might increase the rate of rentals over sites like YouTube or even iTunes is for the simple fact that users spend more time on site, potentially swaying them to spend more money.

Anyways, these are just some thoughts I have on their future and I could be wrong.

What's next for Apple? Gaming. No, not casual games on the App Store, an actual console called iGame.

Fri, 27 Jan 2012 22:54:00 -0500

Besides the obvious, iTV, iPhone 5, iPad 3, what’s the next big market Apple will enter? Gaming. A bird might have hinted to me, Apple will build real consoles like Microsoft has for Xbox and Sony has done for Playstation.

A gaming console from Apple, iGame (if you will), makes perfect sense if you think about the model Apple uses, which is disrupting a large existing market with a way better product that anyone out there. They’ve done gaming for regular folks to enjoy on their iDevices, but now for the real gamers will come an actual gaming console where they can enjoy playing hours of Call of Duty, Madden or whatever else they please. And I wouldn’t be surprised if Apple integrated the iGame experience into their iTV. Imagine not having to buy a console, just popping games into your iTV, like you do DVD’s into your iMac, and kicking back for hours scoring three pointers.

An integrated gaming experience would surely give the iTV the “wow” factor no other tv has, but will definitely give the massive gamer market a damn good reason to actually take the dip and buy a new television set, despite all the other goodies of the iTV like a la carte subscription based programming.

But there’s more to it. I feel Apple will take gaming a step further, by possibly eliminating the need to buy physical discs. Just log into your iTunes, type a title, and click purchase- and download directly to your iTV. No scratched discs, no breaking them, no friends borrowing and never returning, no hassles. All you gamers out there, can you imagine getting the next title of your favorite game instantly, instead of having to wait in line and hope that you’ll be early enough in line to actually make the cut for limited quantity?

There’s no doubt the gaming market is a huge market and people don’t always give new gaming devices a chance, but gamers are usually geeks, and geeks usually use Apple products, and if Apple makes a gaming console- integrated into iTV or not- I feel they will be able to penetrate the market.

What the Apple TV or "iTV" will be like...

Thu, 26 Jan 2012 18:59:00 -0500

Apple just came off of a smoking hot quarter, but now everyone is thinking what the future holds for the technology juggernaut. There are talks about the obvious- iPhone 5 and iPad 3, then there are talks about new Macbooks, and lastly talks about Apple’s physical TV set or iTV as I like to think of it.

I’ve been meaning to comment on it for awhile now, but what better time to discuss the potential of iTV than now?

It’s obvious that Apple won’t just put out a tv set to say they have one and compete against the dominant players like Samsung and Sony in the space. Knowing the Apple we know, they’ll put out something truly unique and disruptive to say the least, to which all of our jaws will drop to the floor.

So what do I think the key features of iTV will be? Here’s what I think:

iTunes will be integrated
You will be able to download apps on it
You will have an a la carte style of programming selection (more below)
The tv itself will come with hard disk space (or flash memory) to record shows, which will eliminate the need for a separate DVR
Ability to use your iPhone/iTouch/iPad for the remote

I’m sure there will be more features than I mentioned and while some of the listed features are probably obvious, the one thing I’m really betting Apple will introduce is a la carte programming.

For years, television programming has never changed. Either you have cable, satellite, or something free over the air. Now we have options like Netflix, Hulu, Amazon prime, etc- but those don’t count.

I have a feeling that Apple will introduce a way to subscribe to individual channels for individual subscription costs. Meaning if you want to watch ESPN, CNBC, and CNN for example, you pay for only those channels through iTunes or something connected to the iWorld. Americans pay a lot for cable or satellite and yet we only watch a small handful of the hundreds of channels we pay for. What a waste- it’s like buying dinner for 4 when all you are feeding is yourself. Why pay $40, $60, $100 or more per month for things you don’t even care for? Instead why not pay for individual subscriptions say $1.99, $2.99 or even $4.99 per month, depending on the channel? Imagine the subscriptions for a middle aged businessman versus a young high schooler versus a grandmother. The options are limitless.

I think Apple would have introduced the iTV by now, if they could get these content deals in place, but the major thing holding up the announcement of the iTV is probably structuring these deals. I’ve heard of reports saying they’ve been working on the iTV for multiple years and unless they’re making a tv set that projects a virtual hologram, I don’t think the technology would take them “years” to refine.

Just think about it for a minute, “cutting the cord,” all the hype in the media these days, but actually doing it with the sense that you are saving money and only paying for what you want. A nice clean bill for your favorite network of channels.

Think about the cash flow from something like this. Suits everything they’ve done in the past. Reoccurring revenue from iTunes after you buy an iPod, reoccurring revenue from the App store once you buy an iPad, a cut from all cellular plans once you buy a subsidized iPhone.

I made an interesting comment among my group of friends recently, stating my opinion of Apple being the first company ever that will reach a trillion dollar market cap. I guess we can start by taking Comcast’s and Time Warner’s and give Apple another $94B to pad that $414B as of writing this article. Maybe add a little Sony dollars in the mix. :)

Sounds like an Apple kind of thing to me. Of course, this is all my opinion and it’s not like I spoke to Steve Wozniak about it.

Path Needs to make Web a Priority if it Wants to be Relevant

Fri, 23 Dec 2011 00:12:00 -0500

As many of you know, I’m a huge fan of privacy online and services that not only enable it, but make it an essential part of their business. Path is a service that allows people to create a mobile social network, with restrictions of having 150 friends maximum for each user.

Path’s raised some capital from some all star investors and is founded by Dave Morin, who is a Facebook and Apple alum, but the key work history is from Facebook since he was the 30th- or so employee there.

As far as some history for the company itself, their version 1.0 product was a non-catchy utter disaster even though the concept was awesome. Privatizing social interactions through any social networking service is a must if the company wants to expand the service and create a sustainable product, in my opinion. The largest problem with the first version was that people just didn’t catch on. Often times since the service is private, you don’t get the Twitter effect, where there are just random people that befriend you and the service just takes off like a rocket ship. Some examples would be YouTube, Instagram, Twitter, so on and so forth.

Path took another go at the product, released a new version and people seemed to catch on. This time they focused on expressing the service as a journal instead of a network. At the core, the product may be identical to the first version, however the product uplift gave users a reason to give it another go. This time people seem to be sticking to the product since Dave mentioned there’s at least a 30x more sharing rate than before, on this brutally honest and insightful interview with JCal from ThisWeekIn.

Now that I’ve layed out some of the backstory for you, I want to explain to you why Path needs to make web an equal focus to mobile.

With any social service, a product doesn’t work (private or public) if there is no social. Mobile is great, but people still spend time on computers all day long. Put these together and web is hole that Path should fix, very soon. If the service doesn’t pick up within families or friend circles beyond technologists, then it won’t be dethroning Facebook. If it does, it will dethrone Facebook. The only way I see Path being a stage 5 threat to Facebook is if Path does the web. Path has done mobile very beautifully, and there is no doubt they can execute the web just as great- and people will come if they do.

If you think about your Facebook stream today, don’t you hate seeing updates from people whom you barely know, or worse off, people you just added because you met them for five minutes once and they added you? Yes of course, which is why Facebook added the unsubscribe button. But the biggest problem is Facebook has botched its privacy functionality multiple times, even savvy technology minded geeks cannot figure it out half the time. I’m not taking a jab at Facebook, they’ve just grown very big and it’s too late to turn back and tell people the friend limit of 5000 is being reduced to 500 or even 150. You usually don’t try to make a 20 year old car compete with the latest models, instead just buy a new model and learn what it has to offer. If you think about it social networks are the same way, people will switch if there is a viable alternative that is better looking and offers more functionality. But the but here and it’s a huge but- is that Path needs to create the web because it will have to drive more than 1 or 2 people from everyones’ friend circles in order to create a movement around their service. Not everyone has a mobile device like an iPhone and many just don’t care to be using the device for other than work even if they do. Having a web destination for when people do want to be social addresses this.

The fact is people want privacy and limitations on who can see things they post online, and Path is great for it. Why did people give G+ a try? Ask your friends, if they still use it. I’ve heard many people complain that it was creepy because random people added them to circles, forcing them to delete their profiles. People want an alternative to Facebook and the way I see it, Path can really capitalize on this vulnerability right now.

I will end this post here, even though I could write a ton more on Path and the future with this: I believe Path can be worth billions of they build a web destination.

Elon Musk is the Next Steve Jobs

Sat, 12 Nov 2011 16:37:00 -0500

If you don’t know who Elon Musk is, you will. Not because I’m going to tell you right now, but because he will become the next greatest mind the world is swept by. DISCLAIMER: Elon Musk is one of my favorite entrepreneurs of all time.

Elon Musk has done a lot of things, started PayPal, started SpaceX, started Tesla Motors, and a few other not so well known companies. The thing that amazes me about Elon is not that he has started a half a dozen companies, but because he strives to tackle huge issues.

There are a lot of great entrepreneurs in the world, in all different industries, but you can’t say that many are addressing huge issues that impact all humans on the planet. Elon has a very brilliant mind and I think his legacy will be bigger than Steve Jobs.

Steve Jobs changed technology as we knew it, and Elon Musk is changing the automotive industry as we know it. There are many companies coming out with electric cars, but Elon approaches the technology with a design mindset. After all isn’t design what set Apple apart from every other hardware company?

Tesla makes the best electric cars from a design and technology aspect. SpaceX is striving to conquer space travel unlike ever before. And PayPal literally created a banking system for the internet.

Forgetting about Tesla for a minute and everything else he has done, Elon has bigger visions. He wants to create a more eco friendly aircraft, that takes off and lands vertically. More than a technology visionary, I would say he is a visionary for the future of all man kind. I guess the title of this post may be inaccurate, Elon Musk won’t be the next Steve Jobs, he is going to be the first Elon Musk.

I think everyone should take a few minutes to view the video clip below.

Steve Jobs, I'll miss you.

Thu, 06 Oct 2011 00:41:00 -0400

You have probably heard by now that Steve Jobs has passed. Firstly, I want to express my condolences to Steve’s family, friends and everyone at Apple and furthermore- everyone that loves technology.

As you can imagine, it was pretty sad hearing about it; news of his passing kind of felt surreal.

I want to take a minute and ask that you join me, to have a moment of silence in Steve’s memory.

He has shaped a lot of the technology many of us use today- whether they are Apple products or not- chances are a lot of the technology you use was influenced by Apple’s- mainly Steve’s innovations. One of the greatest minds in the world has left us.

What other tablet manufacturers can learn from the $99 Touchpad sale.

Thu, 25 Aug 2011 01:20:00 -0400

If you have got one or not, $99 for a tablet like the touchpad is a very cool deal. It obviously drove a lot of traffic to retailers online and off, to deplete all inventory in a matter of hours. There’s no question HP will lose money at the price point (as it costs them $300- and some change to manufacture the product), but there is a huge takeaway others in the tablet business can have from this situation.

Someone should create (preferably Google), a tablet priced at $99-$149, with the quality hardware a tablet should have, and an OS that people want (Android) other than iOS. So you are probably curious at this point how Google could achieve profitability at this price point. The goal wouldn’t be to make money off the hardware (it’s a sour and dying business anyways), it’s all in the software. Sell apps, sell more apps, and put ads on the device. Since Google is already in the ad business, the inventory and management of serving these ads wouldn’t be a problem. Put them in the browser and it will offset the loss of selling the tablets. They’ll create more impressions on these ads since tablet users are going to be using their tablets for longer duration of time than on their computer doing a search on Google. To make the deal even better for consumers, the ads should be disabled after an X number of impressions where Google recovers the amount of money they lose on the hardware.

Everyone knows Apple’s iPad is the number one selling tablet overall, but if another player wants to overtake them, they are going to have a very slim chance of dethroning Apple at the same price point of $499- no matter how killer the specs are- because they won’t have the app store. And since Google’s Android market is the most practical player, it’s only logical that they get in the tablet business first hand, like they’ve done with the Nexus line of phones.

Amazon did it with Kindle, placing ads on a cheaper version, but can you imagine how awesome it would be for a non-iPad tablet to achieve as much- or more market share than what the iPad has right now? Not to mention it would stimulate the ecosystem of apps for Android. Some of the best apps available on iOS are not available on Android, until months after the iOS launch, or ever. Why? Because the opportunity isn’t as huge. A product with a sweet price running the OS people can learn to love can disrupt how people buy tablets.

So what are your thoughts on tablets and the price point of non-iPad tablets?

Google Will Acquire Spotify

Sun, 17 Jul 2011 21:01:00 -0400

Another hit out of Europe (Skype was from there) for sure, but more so one of the most relevant and useful tech companies of the past decade, Spotify, has all the buzz lately. And they deserve it. They’ve managed to create a radio meets iTunes client for online radio that everyone loves, myself included. There has always been different media players for consumers, but there hasn’t been one that lets you stream and listen to whatever song you want, for free in an iTunes like style, until Spotify.

I won’t rant on about how awesome Spotify is, instead, I’m making a bold statement and predicting that Google will acquire Spotify. Why? Well, there are many reasons and I will get to them, but my main thought is that Google will go head and head with iTunes, Google’s efforts combined with the boost of users Spotify already has, who have downloaded the desktop client, that will make them a big threat to Apple.

Aside from going head to head with Apple, there are other things that can benefit Google from acquiring Spotify, like their Google Music endeavors, a killer music experience for Android products and most interesting of all, tying Spotify in with Google+, particularly, the +points system.

I want to talk a little bit more about how Spotify is a huge threat to iTunes. If you think about it for a minute, iPod sales are on the downturn, that is mainly because people just use their Android or iPhone, as an mp3 player, that can do more than just play music. There is also a situation with the fact that each track generally costs $1.29 to buy on iTunes now, instead of $.99. In addition, people who buy more than 8 songs a month, are probably better off streaming the same music and more for $10/month with Spotify’s Premium plan. And the last point being that syncing will be irrelevant and people won’t need to deal with it if they stream their music, since their playlists are all available through one login on Spotify.

Now that we’ve established that Spotify is a threat, and a bigger threat to iTunes when Google acquires it, even though Spotify is not selling music and just streaming it, let me discuss why it will be a great move for Android.

Android is no doubt becoming more and more of a juggernaut, with 550,000 activations per day. But the Spotify experience seamlessly integrated with all Android phones and tablets? Now that’ll be a bigger scare for Apple. It’s kind of like Netflix, but 100x better because all of the new music available on iTunes is on Spotify, unlike Netflix where there is just junk for streaming (for the most part).

The combination of social (Google+) with a music streaming service like Spotify, will probably give Facebook a tough time. If Google makes all the playlists users have available in Google+, that would drive more people to be social for a longer amount of time, since their music is playing and it helps them waste more time through the day being non-productive (only kidding, but you know it’s true— how many people are on Facebook at work instead of actually working). The possibilities are endless, from people discussing their music to sharing, maybe even having a Google+ date with elegant music playing in the background (why not? It’s the digital age).

In fact, the whole acquisition could be expressed as an integration play. Integrate the Spotify service into every Android device natively. Integrate it into Google+. Plus it being on the desktop, would give Google a desktop presence and in turn they could integrate Google+ into Spotify’s desktop client, allowing users to surf their Google+ service on the client itself.

Obviously acquiring Spotify wouldn’t be cheap for Google, given Spotify’s raised about $150M and about 33.2M Euros, but with Google revenues around $9B for quarter 2/2011, it doesn’t seem that difficult.

Now there is a reason I didn’t predict Microsoft or Facebook would acquire Spotify for two reasons.

First, Microsoft wouldn’t acquire them because they are still probably working on integration of Skype, but more so because they are focused on other things like trying to eat Google’s lunch, with Bing and trying to 1 up Apple OS X with Windows 8.

Facebook simply does not have the cash to acquire a service like Spotify since it is not public, and while I’m sure they would throw in a bid during an auction, they won’t be the highest bidder, that said, you never know if Microsoft will pull another Skype and outbid Facebook and Google and just pick up Spotify so their competitors can’t have it. But if we start thinking like that Apple has been sitting on a pile of cash for years and hasn’t made many acquisitions and Spotify would assure their stability in the ecosystem for a little while, but I’m sure in that case the anti-trust brigade would come knocking.

People might say they’d still rather download music because of data caps on their cellular carriers data plans, etc, but the fact is that WiFi is available in many places than not, so that doesn’t seem like a big issue, more so because if you download more than 50 songs a month, it is still cheaper to pay for Spotify Premium, additional bandwidth for data on some carriers and still come out ahead. And if you can use Google Rewards like +points for a service like Spotify, I don’t see it doing anything but destroying Apple’s iTunes business. All in all I believe Apple has done a great thing and made everything digital for the world, but Google will make it’s move and it will be staggering.

P.S. It is good to note that Google has had discussions with Spotify in the past, offering $1B to acquire the company, but the issue was that the contracts Spotify has with the major music labels, would be renegotiated if the service is acquired, which throws a curveball for whoever is acquiring the service. So why will Google circle back in the future? Because Spotify will be able to grow under its current conditions to desktops (and mobile devices) around the world, and once there is a surety of number of users, the risk will be less, even if the service ends up costing the acquirer more money.

The Google+ Game Plan

Tue, 12 Jul 2011 19:53:49 -0400

Before you read any of this, I have to say that if you think Google+ is “social”, it is a big understatement of the product.

Remember when Google said “social is a layer?” Well they weren’t kidding. People went as far as thinking Google was clueless about social, but the fact is the average Googler is smarter than the average human (source: myself).

I’m guessing if you are reading this you have heard of Google+, but if you haven’t it is a platform that Google is building that is going to be much bigger than social- (what many think it is). Don’t get me wrong, it is “social networking,” but there is a HUGE curve ball coming.

Before you continue, I’m going to paint the picture here for you. Think social+entertainment+commerce=Google+. By the way, a little birdy told me this…

Lets touch on social first. Social is obviously what everyone thinks Google+ is today and what people think it will continue to be in the months to come, but are mistaken. It doesn’t matter whether you are for the service or think it is just trying to steal Facebook’s game, and refuse to join, because in the end, you will want to join so bad, you might even pay for it. In my personal opinion, I already think some of the features Google+ has are 10x better than Facebook, for example Google Hangouts v. Facebook/Skype. The primary example being, you don’t need Skype branding to have a video calling service and it should have been on Facebook a few years ago, and group video calls with up to 10 people will drive more people to use Google’s Hangout functionality than one on one calling, especially in a commercial environment.

Now lets touch on entertainment. Here is the obvious, Google+ and YouTube will be linked together and the whole YouTube experience will happen inside Google+, for those who want it. But there’s a further step that most people don’t consider today. It’s YouTube movies. Now this might not make sense yet, but keep reading. People will be able to also play games inside Google+ and be rewarded for it, with REAL rewards (called +points). This is no new concept to the world, as many companies are currently rewarding its users with real tangible rewards for playing games, but the way Google is approaching this, makes all that seem irrelevant. By real rewards I should be more clear, Google won’t be giving away product X for playing a game, instead they will have a rewards system - the oldest form of rewards known to man kind. Google’s rewards (+points) will be able to be used to rent movies on YouTube movies, but more so it will play a killer role for the commerce business Google will bring to the social experience.

Here is where you start thinking Amazon. Everyone loves Amazon, for one big reason: it saves the consumer money most of the time. Google Commerce will use the +points earned from playing games inside Google+, among other ways of earning, like getting a certain number of people to engage with your Google+ posts, to discount items purchased through Google Commerce. Google also recently launched a product called Music. Currently you can’t buy music through Google Music, but that will change (with the cooperation of labels). However, just like +points could be used for YouTube Movies, they’ll play a gig in Google Music, once Google can ink the deals with record labels. There is also Google Offers, which these +points could be used for. Imagine buying a daily deal and not spending money on it. Playing a virtual game, getting points, and getting an end tangible satisfaction out of the whole system…sounds good to me.

So the killer question for all of this is: WHY? Why would Google give rewards to people for playing games and doing other things on Google+? It’s simple. People love it. It keeps the user lifecycle going in one big circle. Think about it this way, people are being social; playing games; connecting with friends, which they do already, and Google is giving +points for that. With +points, Google’s other business endeavors live on because who doesn’t like discounts or free things that they’d pay money for? In addition, the +points given to users, won’t eat away at Google, because they will earn revenue from the sources the points are given away in anyways. And the loop keeps going on and on as people spend more time on the platform.

All of this will only leave one question flowing in your mind…IS GOOGLE+ WHAT GOOGLE’S NEXT MAJOR BUSINESS IS? Everyone knows Google has been trying to innovate outside search, because in all fairness they may not be able to sustain what market share they have today for the next 10 years.

There is also another question. If Google executes on all of this in a successful fashion, it could certainly put a handful of other competitors in a sticky situation. How can anyone compete with Google’s “social layer” with rewards, leading toward cheaper or even free products for consumers? Google being in multiple spaces with Android, Google Offers, movie rentals on YouTube, a future commerce platform, Google Music, this could be really, really disruptive in the whole tech ecosystem.

SayClip: The Future of Video Messaging

Thu, 02 Jun 2011 19:33:00 -0400

A lot of you may know, I recently started SayClip. SayClip allows users to privately message their contacts through video. If you want to know why I created SayClip, you can read that here. You can download SayClip on iTunes here.

In this post, I’m going to give some thoughts on the social world.

It seems just about every new product that is launched in today’s world that relates to “social networking,” deals with some form of public communication. Whether it is sharing photos, videos, or just text, most things are open for the world to eavesdrop on. Social as we know it today, is screwed up. Being social with the world isn’t normal, and non-tech people that are over 20 are usually hesitant to tweeting their life secrets away. In all honesty, if you think about it, there’s some things that you could care less if 100 people other than the person you want to share a certain something with sees certain content, but quite frankly, there’s a lot more that you would say in a private situation. Lets take Skype for example, if you had a Skype conversation with your friend, you would be more direct and might share a lot more interesting things going on in your life, than you would on a UStream.tv stream.

This is why I am taking a highly private approach to SayClip. Being social is one thing, but being genuinely social is another. You might have 1000 Facebook friends, but who are your real friends that you can call in the middle of the night if your car breaks down to come pick you up? It’s connecting with those people that I want to enable, on a global scale.

So far, the app has been downloaded all across the world in a lot of different countries. This is something I hope increases communication between families or friends that live on different continents, something that gives a little substance to a message, instead of black and white text. Even saying a quick “hello” through a video clip is worth more than a text message saying “hello, how are you?” There is a web platform coming to SayClip in the next few days, which will allow people to communicate with app users, if they don’t have an iOS device. Of course the Android app will be made available shortly as well.

I’m making the world more social, in a private way.

LinkedIn Just Laid Out The Future of Social IPOs, Now What?

Fri, 20 May 2011 10:30:00 -0400

Alright so, LinkedIn had its debut as a publicly traded company on Thursday. If you followed it- it exploded. My thoughts? It is absurd- now this is just my opinion, but I am going to say the stock will be worth way less than 1/2 what it is worth today, in 5 years worth of time. But that said, I think LinkedIn just played out the future for Facebook’s IPO and Twitter, if it plans to go public in the future also.

If you look at the earnings multiple and compare that to other companies, the other companies would be worth trillions. Hmmm….smells familiar. But back to Facebook and the future of social IPOs. In fact, I wouldn’t say just social IPOs, but everything related to social. Imagine Zynga having its IPO, etc. What LinkedIn did, Facebook will probably do with more noise, and quite possibly Twitter, too. The problem is that LinkedIn creates very little long term value (I feel). And the general population just doesn’t know that yet. However, a new startup BranchOut, will eat LinkedIn’s lunch, and dinner, and its fourthmeal.

Now that we’ve established that Facebook will have an even more jaw dropping debut on the public market, lets discuss how LinkedIn has a big problem.

BranchOut is basically LinkedIn ON Facebook. I should end my post here and just hit publish, but I’ll explain. People don’t want to be on 10 different services, that require remembering 10 different passwords, and connecting (finding) their contacts on those 10 networks over and over. Another problem is that some contacts are not on all 10 networks. BranchOut brings the LinkedIn features to Facebook (where the world *or at least 600 million people* lives). This makes it way too easy for people to career network on Facebook to even think about being on LinkedIn.

A lot of people might argue its good to keep social fun and social business apart from each other, but lets be honest, the world is becoming a more centralized place. We party with co-workers, and we work with friends. Others might think it will be questionable for BranchOut to build a layer on Facebook where it offers LinkedIn type functionality and the question that if BranchOut will be successful. But we can all learn a lesson from Zynga, whose supposedly valued in the billions, that building a layer on top of Facebook is possible, in a juggernaut way.

I could keep writing and express more opinions about this whole situation, but feel we should just keep it at that and watch what happens.

P.S. Congratulations to Reid and the team for such a successful exit!

Blippy should return money to investors, if they haven’t spent it all on nail clippers.

Fri, 20 May 2011 10:02:00 -0400

Note: This post has been sitting in my queue for over a month or so now. TechCrunch recently posted this article talking about “the end of Blippy as we know it.” So I feel this post is relevant enough to share my thoughts through. Below is part of the original post, and everything in bold is written today.

Blippy was cool, for 5 minutes. A tool for sharing your credit card purchases seems 10 years too early for chances of success. Apprently, Blippy agrees, since it changed its model from just sharing to reviewing your purchases.

Blippy got a lot of press in its early days, but it seems to have failed to catch on and really take the internet by storm. I mean- do your friends really want to see what your bought? More so- do you really want to share what you’re buying at Walgreens? Perhaps, but I don’t.

I don’t even think an A-list celebrity user can have the masses flocking to use the service. The main problem arises with the age group. More young people would be inclined to use this type of product, but most young people don’t have credit cards. By the time they do- they probably have the sense of not posting everything they buy, online. I mean isn’t Facebook a problem for youngsters if they play sports or are looking for a job? Those pictures from that party can really damage their opportunities. Now think about spending money at a questionable establishment. That would really hurt their careers.

Aside from the concept, Blippy started giving away swag like nail clippers to users, which might have been okay, if the concept was worthy. This is a pure waste of capital in a startup. But I guess when a company has raised ample cash in a very short time, it makes them do silly things, without thinking them through.

But forget all that, assuming it’s all cool. Blippy exposed credit card numbers of some of its users. Now that is bad! Users can forgive and forget a company (especially a startup) for many things, but exposing sensitive information? Not so much. And you can’t blame them. When you tell people their credit card information is “secure” well- it better be. There is no reason why people would want to deal with secure information exposed and cleaning up that mess, especially when consumers are being “social” and sharing information willingly for such a controversial concept like Blippy.

More recently, the co-founder, Philip Kaplan has left Blippy and moved on to tinker around with iPhone apps. Cool, I guess. However, I think he should be sticking around and really re-focus the vision, if they plan to stay out of the deadpool.

The TechCrunch article mentions that Blippy is re-focusing the company, by creation of some social ecommerce tools, but frankly I just think they are avoiding the inevitable- the dealpool.

Microsoft Paid $8.5 Billion for Skype, Now What?

Wed, 11 May 2011 00:31:00 -0400

You’ve probably heard by now that Microsoft bought Skype for $8.5 billion. Most people think that Microsoft overpaid for Skype, and quite frankly it is irrelevant. Microsoft wanted to “guarantee” their acquisition of Skype (didn’t want to risk Google ousting them on the deal), and a couple bucks more doesn’t really matter if they have a solid plan on how they can take advantage of the acquisition and make billions more.

The first thing that comes to my mind in terms of Skype playing a strategical role in the future success of Microsoft is a FaceTime type competitor for Windows 7 Phones. If Microsoft can market the Skype technology (with some new features/innovation) being native on Windows phones, they can possibly recapture some of the lost market share in their benefit. Since Skype is already used by many millions, when marketing it, it wouldn’t be difficult for people to understand whatever they try to throw at consumers.

Of course there is Skype available as apps on Android and iPhone’s, but like I said, Microsoft will need to add on “special” functionality for Windows 7 Phones to one up the other two. And since they own Skype now, nobody is stopping them from doing so.

I also think Microsoft will tie in Skype with Xbox. This would be another somewhat obvious play on their part, but they could possibly make the gaming experience a lot better if it included live video streams of sorts, or maybe even virtual reality. Xbox already has Xbox live, so it could be a natural fit for that, however, there are also many problems with putting live video streams of people playing video games on another strangers tv. Seen the movie Gamer? Imagine if something like that was implemented in Xbox in the future. (Ok, maybe not that extreme, but perhaps along those lines).

More realistically, they could come out with some Xbox implementation to make the counsel more appealing as a set top box. The market of set top boxes is a thing a lot of companies are trying to get into and succeed at (Google, Boxee, etc.), but nobody has really nailed it yet. Throw in some Xbox kinect, with a little Skype, and some games, and it might be worth buying for trendy households.

It could turn out that Microsoft does something extremely out of the blue, like partner with major television manufactures and implement some kind of webcam in all new televisions. In fact, with the whole smart tv phenomenon, this wouldn’t seem far fetched. Skype would turn into a living room thing, with families, instead of just computer to computer or mobile. Microsoft has the abilities to land these deals and this would be a major stepping stone for Skype’s future. Grandparents wanting to see the whole family across the country before the nine o’ clock news? Done.

In the end Skype has millions of users, and if you add millions of users with the right creativity, the outcome might be something very profitable. If all the cards fall in the right place, the $8.5 billion Microsoft paid for Skype will seem like a drop in the bucket.

Why Tesla Will Be A $200+ Billion Company

Sat, 30 Apr 2011 14:39:00 -0400

Tesla Motors, you know- the electric car company. Yes, I believe they will become a $200B+ company. Obviously I could be wrong, but I’m probably not. In other words, worth more than Ford and GM put together as of today’s market cap. Or about 77x what it is worth today.

Why? It’s simple. Tesla has been hacking away at an alternative for oil or battery powered vehicles for a long time (since 2003), and they are definitely showing progress.

But more importantly, Elon Musk is running things.

Some people in the world think Tesla has no future, analysts project future growth, but I’m saying it will be a major player in the auto market.

All the skeptics need to understand the bigger problem (or industry) an entrepreneur is taking up, the longer it takes to succeed. Also, before Tesla went IPO, Elon poured everything he was worth into Tesla. This shows dedication, but in addition it shows that he won’t give up until he is satisfied.

He also co-founded PayPal. This shows two things. He’s “done” it and that things he’s worked on will live on for a significant amount of time to come. Referring back to my post on expecting a company to die when it is sold, PayPal would be one exception to that theory. This makes me think Tesla won’t disappear in the future.

Today is also the time for innovation. Tesla’s most expensive toy is north of $100k. When they introduce their next model it will be around $58k give or take a few, they say. And when they keep bringing out other models for normal price ranges, people will buy them. I’m willing to say they will also improve range on charges. Currently the roadster goes about 245 or so miles on a charge. Well, I’m going to make a bold statement and say in 5 years Tesla’s will start going 1000 miles on a single charge. I mean, just look at auto manufacturers from the past, fuel economy has increased as time passed.

Oh and who really wants to pay $5.00 for a gallon of gas? It’s too much work.

Google is a Threat to Everyone in Daily Deals

Tue, 26 Apr 2011 22:59:00 -0400

Whether you hate or love Google, you still probably use one of their products on a daily basis. If it is Google search, Gmail, YouTube, whatever it is, they have a large user base.

Google launched Google Offers last week. This is going to mess up everyones business in the deals space. Why? I’ll tell you why.

1. Google has an endless barrel of cash. They can put billions into this project, and not feel it.

2. Google owns Adwords. Take a minute and search for daily deals, daily coupons, or any other query in Google. See some ads? Yeah. Google can just use their endless pit of money to fund Adwords campaigns to convert people to subscribers for Google Offers. If you go across the web, you will see a lot of ads from the other big two in the daily deals space.

3. Google can just link Google offers from Google.com. Remember when they launched the Nexus One? They put up a link under the search box, and people bought the phones. It really is that easy for Google.

4. Feature YouTube videos of people’s experiences as consumers using deals at restaurants or anything else for that matter. I mean really feature ‘em. Take a camera crew and make videos of people skydiving or whatever. I feel a lot of people (outside the tech space) don’t “get” the concept of daily deals. Google can bring in YouTube into this and just put videos of people enjoying their Google Offers experiences on the YouTube homepage, and people will view that and be inclined to subscribe and/or purchase from Google Offers. That 1 big ad on YouTube costs advertisers something like $500k a day (give or take a few), so Google can obviously afford it. This would be the best filter to set Google Offers apart from anything else available. People are more inclined to convert (buy/subscribe) with their eye’s, not ads (marketing the service). Showing “Google Offers is awesome” to future customers is way better than just saying it “it’s better.”

5. Hire a brilliant team. With money comes power. With power comes talent. And Peter Parker didn’t say that. When you have talented people running things, prosperity comes about. Everything from the sales people to management, Google HAS to have the best of. This will be a major factor in the success. They will also have to deliver the BEST of the BEST deals available.

6. Google can also afford to “offer” the best of the best deals by cozying up to merchants. Since Google has the funds, they can afford not to make money for a long time. Remember when they bought YouTube and they kept spending endless amounts of cash on running it and never turned a profit? This enables them to give merchants 100% revenue proceeds from the deals that are run through Google offers. So mix in a whole lot of subscribers, add 100% revenue proceeds to merchants, and then add in Google’s team to that, WHY would a merchant go with anyone else? In fact, I’d go further:

To be really specific, if I ran Google Offers, to kickstart the product I would do something like: put in $2 billion into marketing the service (online and in the real world, tv, etc.), and put another $4 billion into getting the best deals the world has ever seen. In fact, I would pay elite merchants 100% of the difference between the deal and the retail cost of the deal, to feature them, so that would be like telling a merchant: “we’ll give you free leads, and it literally won’t cost you a penny.”

Essentially if I ran Google Offers, I’d rank merchants by three types. Regular, Elite, and Really Elite.

Regular merchants would get 100% of the net deal value. If it was a 50% off deal for $50 in value, being sold for $25, the merchant would get $25 and Google would take no cut.

Elite merchants would get $50 from Google Offers for each sold. So Google loses (or pays) $25 per sold. This type of deal would come around every so often.

And the Really Elite (something like a restaurant Gordon Ramsay owns, or a Trump hotel), would get $X on top of $50. So it’s an incentive to run a deal for these merchants. This wouldn’t come around too often, but when they do- people would make sure they are on top of the service daily to get them before they are sold out. In a way it encourages users to always check that Google Offers email, so they know they aren’t missing out, ever.

P.S. - Google: don’t mess this up.

Groupon Reached Out

Tue, 26 Apr 2011 07:00:00 -0400

A lot of you (if not all) have read the post on Groupon vs LivingSocial and my experience with both companies.

Clearly, the experience with Groupon was a bad one. However, since writing the post, numerous people from Groupon have reached out, including my account rep and have expressed their deepest apologies for my experience.

Andrew Mason, the founder of Groupon, and I talked about it and he has assured me Groupon is in the business of keeping merchants and consumers both happy. To do this better, they have implemented a new merchant group, which will look after any questions or issues future merchants may have with their Groupon run. He also thanked me for my post and said it was a eye-opener as well as a learning experience for Groupon.

I believe this is the right thing to do. When you have people working specifically to better merchant experiences and focused only on that, just like you have customer service reps for consumers, the odds of the “win-win” Groupon wants to make happen, increase.

At the end of the day, bad things can happen in any business, and it is what businesses take from those situations and reflect upon, which they can use to better themselves. It looks like Groupon has taken a step in a positive direction.