Social media in NY

We’re getting together (my friend Juan Lopez Valcarcel and myself) before the SF-based TC 50 that starts on Monday September 14th.

We’ll be all at the Hotel Vitale’s bar (Mission and Embarcadero) for informal drinks on Sunday night (starting 6:30 PM).
Join us!

All info there: http://tc50europeans.eventbrite.com

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I’ve been thinking about that for a while: how painful and multi-tasking it takes accomplish the day to day task that you’re accomplishing every day on the web.
Let me be concrete and consider these situations:

• You’re talking with a friend on Google Talk and you want to send him a couple of pictures from Flickr while talking about a new restaurant and he wants to paste a map in the conversation
• You’re tweeting about a great place you’ve been last night that you want to recommend and want to include in your post a shorten URL back to this place website as well as the location map
• You’re blogging on a specific subject and want to include videos, some related links and tags and some pictures that are currently hosted on an outside service.
• You’re reading an article and want to tweet about it while including a shorten URL back to it and include some other tweeter users in in.

These operations are all part of creating “enriched web streams” that mix and match photo, text, video, social networks signals etc. But to make that happen, most of the time, the average user will  have to open multiples browsers, cut and paste, login to some accounts, struggle with the limitations of each formats etc.

So obviously, when I got a demo from Google on Google Waves, I was very excited at the project underlying motto: to easily enrich the online conversations you might have, add or remove participants, facilitate sharing and communication (even in different languages). And the demo really works: you start to understand how this richer conversation can potentially change the way we communicate with each other on the web (and even keep track of these online enriched streams). Here’s the full video of the demo of the product. It’s a 1 hour and 20 minutes video but it’s really worth it:

The other very interesting project underway is The Mozilla Labs Ubiquity Project. It’s a slightly different scope and objective: the goal is to make your life easier when you’re using the Internet, just like having on your side a little robot facilitating a lot of your most usual tasks.The project is totally open to anyone to contribute, faithful in that to the spirit of the Mozilla Foundation.

The reason I’m linking the two projects is that they’re both, in their own ways, going to help us enrich the way we’re using the Internet. They also both contribute in blurring the classic frontiers between desktop apps, software and online apps. Here’s a quick video explaining the Ubiquity project (that is just starting…).

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From Fred Wilson’s blog today:

“My head is in the same place it was last October and November when “the world was coming to an end”. I think we are in for a bad 2009 and a weak 2010 and maybe a better 2011. I also think we are going to see many large industries changed fundamentally by this downturn.”A VC, Apr 2009

The most cynical analyst tends to say that we’re just going through a classic pendular effect and that it’ll all go back to how it used to be. I actually agree totally with Fred’s thoughts: for a lot of industry segments, we will not get back to what it used to be.

A couple of examples:

- Retail: high end luxury brands, outside of the very high end where prices never went down (Cartier will always prefer destroying old inventory than discount it), will have a though time getting back to the pre-crisis prices. People are getting used to get some of them cheaper or they just switch to more affordable products. The perpetual lookout for bargains should mean a lot of potential for all ecommerce startups that are surfing on that front (I’m thinking Stylefeeder, Shopittome etc.)

- Advertising: most of the advertisers (when they’re buying) are tasting with great pleasure the extra inches that publishers and media companies accept to do to land deals. The bonuses here are more transparency, more efficency, optimized performances, shared metrics… OVERALL: the need for any media platform to now prove to the advetiser its validity as an advertising platform. I don’t think that these guys will actually go back to the black box that was used before. That’s also good news for the internet (which is probably the biggest metric driven ad platform) and all of the startups behind such as BluKai, Simulmedia, Lookery etc. Behavioral targetting, because of its data driven efficiency, should also take off if it’s not blocked by privacy rights advocates.

April 3rd to 5th is startup weekend worldwide!
But nobody signed up from NY.
It’s going to be tough to make the date in NY but I’m excited at the idea of launching that at a latter date in NY.

See below the video from Andrew.

A Startup Weekend Challenge from Andrew on Vimeo.

This was presented at TED conferences.

Pretty fascinating.

Very good attempt from Douglas A. McIntyre at 24/7 Wall St to try to put a valuation number on the most used and famous blogs even if I get to a very different result. 

Here’s the list and their corresponding valuations:

1. Gawker Properties – $170m

2. Huffington Post – $90m

3. The Drudge Report  - $48m

4. Perez Hilton – $32m

5. Sugar Inc. – $27m

6. TechCrunch – $25m

7. MacRumors – $21m

8. SeekingAlpha – $11m

9. GigaOm – $9.5m

10. Politico – $8.7m

… the other 15 blogs are there.

The calculation is getting to strange results on some cases: Sugar at 27m seems like a bargain, especially when it’s based on the fact that the company has 70 employees. For me, part of these employees are actually working on the Coutorture blog network and, more than that, on Shopstyle which brings its own share of CPA / CPC revenues. Also, Gawker at 170m is probably much too high and that’s based on the fact that Doug takes 100% of the traffic (worldwide 23m UV) whereas only the US portion is monetizable (i.e. 14.4m UVs).

Let’s redo the exercise!

I’ve tried to redo the calculations on the Top 10 based on 24/7 info on employees and cost structures but using the US numbers on traffic (average of Quantcast / Compete / ComScore) with revised rates on remnants vs. premium advertising (closer to what we can see on the industry right now). The basic assumptions are:

• Traffic: Only US traffic is monetizable. Most of the cases, Doug takes the World traffic. Even if in certain cases, you can monetize it through international remnant networks, it’s going to be the bottom of the barrel.
• Premium rates can go from $4-5 to $15. I don’t believe in anything above right now, looking at the advertisers coyness. On top of that, you need to take into account that most blog templates includes up to 6 to 7 ads per pages, with maybe only  one or two of them above the fold (commanding higher CPMs). The ads below the fold, because of their very low CTR, are usually heavily discounted.
• Remnant rates are lucky to be around $1 (that’s when fully optimized with a dozen+ of partners).
• When blogs are using remnants partners, I’ll assume a premium sell-through and then most of the rest through remnants.
• For the blogs that are growing quickly, I’ve also assumed a premium of 20% on the revenue since I’ve done all my calculations based on January figures. That’s limitative but that’s a sufficient for the exercise.
• For the costs, I’ve kept Doug estimates since I don’t have any insights there. From time to time, I’ve just adjusted them based on revenues.

Variances

• Traffic: I used an average between ComScore, Compete and Quantcast. Data are diverging from time to time pretty strongly between the sites but it’s better than nothing. As I was saying, I also only used the US portion of the traffic (24/7 used the worlwide traffic data). Pretty big variances here. Over the Top 10 sites, I came up -49.7% on the UV and -38.6% on the PV (the real driver for when we get to the calculation of the revenue). See below the detailled list and you can find here the Excel spreadsheet. 

• Revenues: Obviously, because of the above, revenues vary dramatically, especially for the small sites. Combined revenues for the Top 10 sites get to $60m for me vs. $100m for 24/7 WallSt. That’s a big fallout. The key reason is that I’m very pessimistic on the ability of these sites to get high premium ad sell-through. On top of that, some of them are part of networks (Federated Media etc.), furthermore undermining the net revenue to them.
• Margin: Well, as expected, this is where it gets ugly. 4 sites out of 10 are losing money (and I do think 24/7 was soft on their cost estimates for most sites), 2 of them are barely breakeven. 
• Valuations: I’ve took a 2x multiple on revenues on all sites except when it was either a leader in its segment (HuffPo) or particularly influencial (TechCrunch) etc. On operating margins, most of the times I kept a 6 to 8x multiple.  When companies were losing money, I only kept the revenue multiple (which is nice…). 

So, total valuations for the Top 10 properties is at $159m from my end vs $442m for 24/7.  That doesn’t mean it will sell this low since between the intrinsic value of a company and its purchase price comes an infinity of variables (how much money was sunk by VC, how much these guys are expecting, what are the synergies to be expected, how badly does the purchaser wants the company etc.). 

You can find the full spreadsheet detailing the calculations here.