Tag: business

Maybe Microsoft should buy Amazon instead

The Microsoft-Yahoo deal continues to be the hot topic in the blogosphere right now, with Techmeme still dominated by related discussion. The latest news is that Google has posted an official response to the proposed takeover. In general, discussion has moved from “can you believe what just happened” to “this deal with fail/succeed because…” If you read only two posts on the topic, read this one from Fake Steve Jobs and this one from Henry Blodget.

I really have no idea how this is going to play out. Based on what I’ve read, it seems pretty likely that Microsoft will successfully acquire Yahoo. Many think the deal is as good as done. Far less certain, however, is whether they can make the acquisition a success. It could go either way.

I think what’s clear is that this is a strategy change for Microsoft. A bold recognition that they need to succeed on the web. They trail Google in both search and advertising, and it makes a certain amount of sense that combining with Yahoo will create a stronger competitor.

Microsoft is a platform company. Their cash cow is Windows, the most widely used technology platform in history. They are good at platforms. If the strategy shift is to the web, shouldn’t it be slanted towards a great platform?

amazonawsSuch as Amazon’s Web Services platform. On Wednesday Amazon announced their fourth quarter earnings, and shared this tidbit about Amazon Web Services (AWS):

Adoption of Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) continues to grow. As an indicator of adoption, bandwidth utilized by these services in fourth quarter 2007 was even greater than bandwidth utilized in the same period by all of Amazon.com’s global websites combined.

ReadWriteWeb has a good discussion of what this means.

Obviously Microsoft isn’t a retailer, and owning Amazon.com itself probably isn’t in the company’s best interests. It could acquire the company for AWS and spin off the rest, however. I suppose Microsoft could just try to duplicate what Amazon has already accomplished with AWS, but why bother? Grab the early market leader and take it to the next level.

I think AWS is an indication of what the platform of the future will look like. Microsoft would be wise to pay attention.

Microsoft bids $44.6 billion for Yahoo!

Post Image This is no longer just a rumor, this is the real deal. I’ve never seen so many articles on the same topic so fast on Techmeme, but I guess I shouldn’t be surprised. This is big, big news! Here’s what they had to say in the press release:

The combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile. Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity.

Microsoft has developed a plan and process that will include the employees of both companies to focus on the integration of the combined business. Microsoft intends to offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.

The offer is a combination of cash and stock. Microsoft thinks they can have regulatory approval and a completed deal in the second half of 2008.

Look out Google!

Read: Techmeme

Zagat Survey up for sale

Post Image During my trip to New York in December, I became quite familiar with Zagat. As a foodie, Sharon assured me that Zagat was the final word on restaurants in NYC. And walking around certainly convinced me – tons of restaurants proudly display their Zagat rating or review in the window. If I had to guess, I’d say Zagat makes quite a bit of money, so I was surprised to see this in today’s Times:

Zagat Survey, the guide empire that started as a hobby for Tim and Nina Zagat in 1979 as a two-page typed list of New York restaurants compiled from reviews from friends, has been put up for sale, according to people briefed on the decision.

It is unclear how large a price Zagat will attract. While the company is a worldwide brand, its actual business is much smaller. People briefed on the company’s finances suggest the company could be valued at more than $200 million, which would still be a drop in the bucket for an Internet company or a wealthy executive.

The article hints that the reason for the sale is getting to the next level. Despite tons of success over the last three decades, more capital is necessary to move beyond organic growth. Potential suitors (as mentioned in the article) include just about every company with some cash, including IAC/InterActiveCorp, News Corporation, American Express, AT&T, and others. Heck, why not Facebook? The two companies have a partnership apparently.

I had no idea that Zagat had so many tech investors. The extremely well known Kleiner, Perkins, Caufield & Byers is one, as are former Microsoft CTO Nathan Myhrvold and Nicholas Negroponte, director of the media laboratory at MIT.

It depends who the buyer is, but I suspect the Zagat brand will lose some clout after a sale goes through.

Read: NYTimes.com

MCD vs. SBUX

Post Image I love McDonald’s. Have ever since I was a kid. If I have to choose between McDonald’s and another fast food joint, I’ll choose McDonald’s almost every time. I don’t go there because the food is healthy, and I don’t go there because the environment is relaxing and enjoyable. I go there because the food is inexpensive, convenient, and consistent. I love the double cheeseburger, and it never lets me down. Oh and the fries, you simply can’t go wrong with McDonald’s fries!

I also love Starbucks. Not since I was a kid mind you, but I can still remember the first time my parents took me there. I had a Caramel Macchiato, and fell in love with both the drink and the place. These days I have a grande drip coffee every morning, though I still enjoy the Macchiato and other “signature” beverages from time to time (probably more often than I should). Like McDonald’s, Starbucks is convenient and consistent, but it also offers a wonderful experience.

McDonald’s is the largest restaurant chain in the world, with well over 30,000 locations scattered across the globe. In his book The Lexus and the Olive Tree, New York Times columnist Thomas L. Freidman noted that “no two countries that both had a McDonald’s had fought a war against each other, since each got its McDonald’s.” (there are two exceptions to this). To me this says two things. First, the rise of McDonald’s is fairly recent. Second, it’s everywhere, and it seems impossible for another chain to become as pervasive.

Starbucks likes to tackle problems that seem impossible, such as selling $4 lattes and running two successful stores across the street from one another. As Taylor Clark notes in his book Starbucked, the only company that has a realistic shot at surpassing the presence of McDonald’s is Starbucks. Currently there are over 15,000 locations worldwide, more than half of which are owned entirely by the company (McDonald’s outlets on the other hand are franchised). That’s not bad considering that McDonald’s had a 30-year head start!

Why am I writing about these two companies? Well each is fascinating on its own, but put them together in a global battle for food and beverage supremacy, and you’ve got something that’s especially interesting! And that is what appears to be happening:

McDonald’s Corp’s plan to expand the beverage lineup at its U.S. restaurants with cappuccinos, lattes and other drinks is expected to add $1 billion to annual sales…

McDonald’s has even added a “barista” position in its restaurants and dedicated a section of counter space to the automated espresso machines so customers can see the drinks being made, spokeswoman Danya Proud said.

It was last year that Starbucks decided they would start offering food in addition to coffee. None of the outlets I regularly visit offer breakfast, despite the company making a big push back in July (perhaps that was mostly in the US).

So are the two on a collision course? I don’t think so. I pretty much agree with this Time piece. Even though the clientele at Starbucks is diversifying, it’s hard to envision one company stealing customers from the other, at least not in great numbers. Besides, you’d think the two would cancel out – McDonald’s gains a few new coffee customers, Starbucks gains a few new food customers. Check out this Economist article for more.

For me at least, there is very little overlap between the two (as I tried to point out in the first two paragraphs above). I don’t visit McDonald’s at the expense of Starbucks, nor do I visit Starbucks at the expense of McDonald’s. And even if their respective menus started looking more alike, I can’t imagine that it would change anything for me.

That said, it’s an interesting battle that will be fun to watch over the next few years!

I'll say it until I'm blue in the face

Post ImageThere is no privacy on the web.

Early this morning, Robert Scoble’s Facebook account was disabled because he violated their terms of service by scraping data from the site. That caused a flood of a posts from people saying that either Scoble was wrong or that Facebook got what it deserved. Most people siding with Scoble said that as he owns his data, not Facebook, he was in the right. He should be able to do with it whatever he wishes. Except that he doesn’t own all the data. Would his friends be happy to find out that he was taking their data elsewhere without their knowledge?

Not that it matters. It should be a non-issue. If everyone realized the truth – there is no privacy on the web – no one would be up-in-arms about the whole situation.

Sure there is something to be said about Facebook only sharing data when it makes good business sense for them to do so. Some might say that’s evil, others might say that’s business. Either way, it all boils down to privacy. Facebook gives you the impression that your data is secure, but it really isn’t.

There is no privacy on the web.

Scott Karp rightly points out that data is power. He suggests a war will be fought over control of data. I wonder though, if such a war can ever have a victor? Does Scoble own the data in his account? Does Facebook? What about his friends, don’t they own some of it? What about advertisers, surely they own some of it? Other companies? I think it’s a pointless battle. There’s far too much entanglement.

Forget trying to control the data. Let it flow freely. Forget trying to keep things secret. If there’s something that must be kept private, don’t post it on the web.

There is no privacy on the web.

Don’t fool yourself into thinking you’re safe. With each passing day we give up a little bit more privacy than the last. The bottom line is that we almost always choose convenience over privacy, whether we know it or not. There’s a reason that concepts like identity theft didn’t really exist a hundred years ago. We share more information about ourselves now than individuals did back then, and we think nothing of it. Of course, accessing and distributing that information is easier than ever too, thanks in large part to the Internet.

Everything you think you know about privacy in the physical world is meaningless in the virtual world. The rules of the game are completely different.

There is no privacy on the web.

Read: Techmeme

So long 712!

Brand New BroomAs you may know, for the last few weeks Dickson and I have been moving out of the office. It was early 2005 that we decided we needed a central place to setup shop and started looking around for one. We ended up at the Empire Building on 101st Street and Jasper Avenue, a building I had been in before. We moved into Suite 712 in late April. There were lots of reasons we chose this particular building – among other things, it is secure, renovated, and well-connected (can get any kind of Internet connection in there).

The biggest positive about the location is also the biggest negative – you can’t get more central than the Empire Building.

I loved being right smack dab in the middle of downtown Edmonton. The Jasper Avenue address looks good on marketing materials, for one thing. It feels like the place a business should be. More importantly, it is easy to get to from pretty much anywhere in the city. The office was more than a place for Dickson and I to code…it became a meeting place for us and our friends. Going to the hockey game? Let’s meet at the office and take the train. Out for dinner? Meet at the office and then we’ll go. It was quite handy!

But being so central has it’s drawbacks too. Parking is pretty much nonexistent…I don’t want to think about how much gas I wasted driving around looking for a meter. There’s also the issue of Edmonton’s street people – not a major problem, but sometimes an annoyance. And the biggest drawback of all – cost.

That’s the main reason we decided to bid farewell to the office. We’ve changed quite a bit in the last two and a half years, and we just couldn’t justify the cost any longer. Our servers are in a data center now, and we’ve been working remotely more and more frequently. As an Internet+software company, we don’t really have visitors in meatspace.

That said, I still think there is value in having an office, and we may find a new one before long. Being in the same room usually can’t be beat when you’re working to solve a problem. We certainly accomplished a lot in 712 over the years. A new office will certainly be somewhere else though, with a smaller monthly bill and lots of free parking 🙂

Moving is hard work. It feels like we have been moving out of the office for months! Tonight I finally handed over the keys and access cards, making it official. The broom in the picture above was one of the last things we moved out. It’s kind of funny, because neither of us remembers buying it, and it clearly hasn’t been used (the building had a cleaning staff). Moving is definitely a good opportunity to clean house.

Now it’s finally finished. Nothing left to move, and we’re officially a virtual company again. So long 712!

Microsoft and Yahoo…again

Post ImageAs the saying goes: where there’s smoke there’s fire. Perhaps that axiom should have a time limit though. I mean, there can only be so much smoke before you have to wonder…is there one fire? Multiple fires? Any fire at all? Is that even smoke?!

The reason I bring this up: Microsoft buying Yahoo was in the news again. Still a rumor. How many times are we going to hear this?

"It’s just speculation at this point. But there were rumors this past weekend that Microsoft offered $80 billion for Yahoo. Yahoo was said to have rejected the bid as too low."
– Microsoft Watch, 1/3/2006

"Microsoft has been in talks with Yahoo! about potentially acquiring a major portion of the company, according to a report published Wednesday."
– CNNMoney.com, 5/3/2006

"Microsoft should buy Yahoo! to give its struggling MSN Web unit a much-needed boost, according to a report issued by Merrill Lynch analyst Justin Post."
– TheStreet.com, 6/23/2006

"Microsoft can afford Yahoo! and a combined MSN/Yahoo! would certainly be a stronger competitive player against Google, something that is clearly on Ballmer’s mind right now. That seems the most likely deal to me."
– Fred Wilson, 10/15/2006

"Should Microsoft buy Yahoo? UBS analysts Heather Bellini and Benjamin Schachter raise the question in a report issued this afternoon about the troubles in Microsoft’s online business."
– Barron’s, 3/1/2007

"While Microsoft and Yahoo! have held informal deal talks over the years, sources say the latest approach signals an urgency on Microsoft’s part that has up until now been lacking."
– New York Post, 5/4/2007

"Microsoft Corp.’s plan to buy AQuantive Inc. for $6 billion increases the likelihood that the software maker will also buy Yahoo! Inc."
– Bloomberg, 5/18/2007

"In a TV interview, Microsoft’s Chairman and CEO Steve Ballmer wouldn’t answer whether the company continues to mull buying Yahoo."
– PC World, 8/20/2007

"A Microsoft acquisition of Yahoo would be disastrous for Yahoo…But what such an acquisition would do to Yahoo is irrelevant. If Microsoft comes in with a Murdoch-like offer, Yahoo won’t be able to refuse."
– Henry Blodget, 11/16/2007

There’s certainly been other times that I haven’t listed above (a quick search reveals millions of results). The point is that we’ve heard this rumor many times, and nothing has come of it. Will the next time be any different? I’m thinking no, but who knows.

Acquisitions of this size take time. Maybe the strategy is to have it mentioned multiple times for a few years so that it is less shocking (and thus easier for everyone to swallow and for the Feds to approve) when it actually happens?

Or maybe it’s just such a fascinating combination that it’s hard not to speculate.

Read: Techmeme

Fortune fires up the photocopier for PayPal story

Fortune published an article today about "the hyperintelligent, superconnected pack of serial entrepreneurs" who left PayPal for bigger and better things; a group of individuals they have dubbed "the PayPal mafia". Founded in 1998, PayPal itself is fairly interesting, but the people behind it are downright fascinating!

As I was reading the article, I had the strangest sense of déjà vu. It was like I had read the article already! A quick search revealed that I had, over a year ago, at the New York Times. I just gave it a quick re-read, and it’s really amazing how similar the Fortune article is to the one that appeared in the Times last October.

Here are a couple examples. From the New York Times article:

Since 2002, when dozens of employees left PayPal after it was bought by eBay for $1.5 billion, those workers have gone on to start or join a new generation of Internet companies and other ventures. They have remained a tight-knit group, attending each other’s parties, helping to shape each other’s business plans, backing each other’s companies and recruiting each other for new projects.

Silicon Valley was largely built by networks of people and companies whose interlocking relationships help to spawn new start-ups. But the PayPal alumni have been unusually prolific…

And from the Fortune article:

Most of PayPal’s key employees left eBay, but they stayed in touch. They even have a name for themselves: the PayPal mafia. And the mafiosi have been busy.

During the past five years they’ve been furiously building things – investment firms, philanthropies, solar-power companies, an electric-car maker, a firm that aims to colonize Mars, and of course a slew of Internet companies. It’s amazing how many hot web properties can trace their ancestries to PayPal.

Again, from the New York Times article:

The company was losing millions each month. It was besieged by hackers who used technological trickery to siphon off huge sums from the company’s coffers.

And the Fortune article:

Meanwhile, PayPal losses were multiplying. It battled Russian fraudsters who were filching millions by cribbing credit card numbers.

See what I mean? Both stories follow the exact same formula, and touch on the exact same points. Of course this happens all the time in the media, but over a year apart? Seems kind of strange to me. Granted, the Fortune article does go into a bit more detail, but still.

It’s an interesting story, even if it has been written twice now. I was going to pull out the list of companies that former PayPalers have been involved with, but it has already been done at Wikipedia, of course. Facebook and YouTube are the heavy-hitters.

Both articles do a good job of detailing the tightly-knit group of individuals behind PayPal and many other startups. The topic I wish they’d follow-up on? How to break into that group.

Read: Fortune

Facebook Day – $15 billion!

Post ImageTo my knowledge there is no "Facebook Day" but that seems like a fitting label for today. Until the company eventually goes public, today is probably the most important day in Facebook’s (incredibly short) history. Today Microsoft announced that it would pay $240 million for a 1.6 percent stake in Facebook, which means:

The investment values the three-year-old Facebook, which will bring in about $150 million in revenue this year, at $15 billion.

“We are now stepping outside what is typically a business decision,” said Rob Enderle, the founder of the strategy concern Enderle Group. “This was almost personal. I wouldn’t want to be the executive that’s on the losing side at either firm.”

Yes, Facebook is officially worth $15 billion. I wrote in February that Facebook missed the boat by not selling to Yahoo, but also pointed out they’d get another shot. Turns out I was wrong on the first part, and right on the second. All of a sudden Mark Zuckerberg looks like a genius for saying "no thanks" to Yahoo’s paltry offer of $1 billion.

Microsoft and Google were said to be fighting over the deal to the very end, with Microsoft having the slight advantage thanks to a previous ad deal with Facebook. This deal is all about positioning – Microsoft couldn’t afford to let Google cozy up to Facebook’s growing network of eyeballs.

There’s a ton of commentary on this story in the blogosphere, so I won’t rehash that here, but there is one thing that seems odd to me: the amount. No doubt $240 million is a lot of money, but I was expecting an announcement in the billions today. Something more in line with Google’s purchase of YouTube or Microsoft’s purchase of aQuantive.

On the other hand, a smaller piece of a big pie is better than no pie at all.

Read: NYTimes.com