Finance Geek

Google’s daily brainteaser helps hone your search skills.

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Whether you have a habit of arriving awkwardly early or annoyingly late for meetings, an app called Twist is here to help. The new location-based app launched on Wednesday is like a more useful Find My Friends that notifies your family, friends or colleagues when you’re going to arrive at a specific location.

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Microsoft announced a firm ship date for its upcoming operating system on Wednesday.

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I love the core idea behind Maker Faire: Project based learning. Learning by doing. Putting the “construct” in constructivism. Maker Faire NY has been an annual family highlight for us each of its last two years–and we’re already looking forward to our next craft and explosion-filled weekend this September at the New York Hall of Science.

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Steve Jobs may have dissed 7-inch tablets, but now isn’t just a good time for Apple to launch an iPad mini — it’s the perfect time. Here’s why.

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The surprise announcement this week that Yahoo had tapped Google geekstar Marissa Mayer as its new CEO got a lot of people talking about the troubled web portal.

But would any of them actually want to work there?

That will be the big challenge from Mayer if she wants to turn around one of the internet’s oldest …

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Follow The Daily Ticker on Facebook! JPMorgan. UBS. Societe Generale. These banks have been rocked by gargantuan trading losses in recent years because of excessive risk taking (and trades gone bad) by one or two “rogue” traders. How can erroneous decisions made by one individual total billions of dollars in damages for his or her [...]

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Follow The Daily Ticker on Facebook! In the new HBO documentary, “Hard Times: Lost on Long Island,” award-winning producer and director Marc Levin takes a deeper look at how many average middle class Americans are still struggling from the fallout of the Great Recession. The film puts a human face on the ongoing U.S. unemployment [...]

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Follow The Daily Ticker on Facebook! The federal budget continues to attract the attention of policy wonks and investors. And well it should. The upcoming ‘fiscal cliff’ — the combination of tax increases and spending cuts poised to phase in starting January 1, 2013 — may cause the economy to lurch back into recession. But [...]

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Follow The Daily Ticker on Facebook! Many Americans accept the age-old axiom that hard work and determination will lead to a life of luxury, prosperity and professional success. The stories of those who were able to climb the social ladder and earn incredible wealth — Jay-Z, J.K. Rowling, Shania Twain, Mariah Carey, David Geffen, Demi [...]

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I love a good iPhone case, but as my junk drawer fills up with more and more options it becomes that much harder for a simple phone cover to make a proper impression. Still, there are those at work crafting innovative new shells for the ubiquitous iPhone 4/4S, even if what sets them apart also limits their overall utility.

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Consider this piece of logic from Derek Powazek:

The flow, as I see it, works like this.

1. We want to be a social network. The more people in it, the more “value” it has, so we need everyone to join. Because we want everyone to join, we cannot put up a pay barrier, so we have to make money another way. Let’s say advertising. (Note: Most never make it this far.)
2. Our advertisers want as much data about, and contact with, our users as possible. We want to only allow limited engagement. Either advertiser interest wanes (Flickr), or we coast on our investment (Twitter, Tumblr), or we give in and let the advertisers run the show (pretty much everyone else).
3. Members become angry at us because we’re selling them out. The exodus begins. There’s always somewhere else to go (see Friendster, MySpace). Go back to step 1.

See it? The bigger you go, the harder the road.

And a similar idea put differently by Maciej:

Were you a big Gowalla fan? Did you like Dodgeball? Did you think Trunk.ly (gasp!) was better than Pinboard? Did you make a lot of contributions to Nextstop? Do you miss Aardvark andEtherPad? Did "I Want Sandy" change your life?

These projects are all very different, but the dynamic is the same. Someone builds a cool, free product, it gets popular, and that popularity attracts a buyer. The new owner shuts the product down and the founders issue a glowing press release about how excited they are about synergies going forward. They are never heard from again.

Whether or not this is done in good faith, in practice this kind of ‘exit event’ is a pump-and-dump scheme. The very popularity that attracts a buyer also makes the project financially unsustainable.

I think there is something in this. Facebook and LinkedIn are highly profitable free social networks, but I can’t think of any others. I can however think of many that are very popular, but not making money – Twitter, Tumblr, and Pinterest spring to mind. Four or five years ago the list of free social networks that were popular but not making money was equally long, but totally different. Back then I might have listed Bebo, Myspace, and Friendster. Of these three, two sold out for what seemed like big headline prices at the time before going into terminal decline and the third (Friendster) slowly faded into insignificance. The most common explanation for this is that they were fads, but maybe the tension between user experience and profitability had more to do with it.

From Flickr to Instagram, over the last ten years building large but unprofitable social networks and selling them to large corporates has been a lucrative business for entrepreneurs and their VCs, but it hasn’t usually worked out well for the acquirers, or more accurately their shareholders. This imbalance won’t continue forever. I think the two ingredients for change are acquirers getting smarter about assessing whether their target has the magic to be one of the very few that monetises like Facebook or LinkedIn, and reduced valuations on the public markets for acquirers (high dollar value acquisitions look cheap to CEOs of companies with highly valued stock). The first of these ingredients isn’t far away, and may even be in place already. The second is harder to predict.

The implications of this analysis, which I’m not yet wholly sold on, is that the odds of winning the ‘get big really fast’ lottery are in decline. This is a bit counter-intuitive given recent successes at Instagram and Pinterest, but it is important to remember the large numbers of Pinterest wannabees and avoid being deceived by selective reporting and success bias.

Bonus extra: When he’s not writing about social networks Derek Powazek edits a quarterly book of true stories and original art called Fray. It’s rather good.

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