Taxi Magic post-mortem

After getting a good presentation from the Taxi Magic folks last Tuesday I decided to try the service for the first time this wknd.  I signed up and ordered a cab no-problemo.  Though the option for the next cab was over 45 min = no biggie.  I scheduled it early enough it didn't matter.  (I found out later the driver could've been there quicker but then stopped for coffee and smokes) He showed up on time and accepted cash.

I peppered the cabbie with questions.  He actually picks me up at least once or twice a month anyway.  He's been driving for nearly 20 years and knows the local demand patterns well.  I asked him what % of his rides originate thru TM - amazingly he said more than 50%!! I also asked him if the computer could provide data about expected demand in under-served markets would that information be valuable to him?  He said "Absolutely YES!"

Coincidentally, the party I attended was in a part of town that may just be one of those under-served markets.  At least at 1 in the morning.  Many friends had trouble finding a cab and waited over an hour leaving the party.  This begs the question:  Could the under-served riders have been serviced more timely?  I'm certain geo-spatial data collected by companies like TM could help build some predictive modeling to answer that question.  Especially for events whose date/time/location are posted on the web - even "smaller" like my buddies birthday party.

U2's carbon footprint solved! Rap & Quacks

< Originally written in September 2009 >

Fellow music fans,

I am sure many of you are aware of U2's 360 Tour environmental impact and the embarrassing press it has generated: http://www.civilianism.com/futurism/?p=2097 As I go to my first "big show" in years tonight it got me thinking about their problem....and the looming disaster that Big-Bands pose to the future of music and the planet.

Seeing as Bono has been losing sleep at night wondering how to reduce the bands footprint. I've devised a simple scheme to reduce it while leveling the playing field for smaller bands and raising "revenue" for struggling small bands around the world to combat those evil, environmentally hazardous, profit-maximizing Big-Bands! (while simultaneously subsidizing really bad music that no one wants to hear or wouldn't otherwise be supported in a "free-market")

I call it: Rap & Quacks

First we start by issuing a carbon "credit" to all bands in the world. This credit would be distributed evenly. To qualify as a "band" one would need to have: a harmonious making instrument and at least one single member. Think of all the new "bands" this could produce!! Big-Bands that toured or used jets instead of buses could buy credits from smaller bands. This would allow Big-Bands to continue to pollute while giving more money to those smaller bands to produce better quality music at a lower carbon footprint. This might even spur innovative ideas that Big-Bands could use to further reduce their carbon output!! (like not touring maybe?)

Music is borderless. Therefore, an international quasi-governmental organization, such as the fair and incorruptible United Nations, would have to issue the credits and would be responsible for administering the program and distributing the booty <ahem> I mean revenue. This would give countries that produce little/no music, like Micronesia, an equal say in the matter (sorry Micronesians, but I haven't heard any great hits out of y'all lately) Oh and since these Big-Bands already make GOBS and GOBS of cash (I paid $130 for my ticket tonight and that's one of the "cheaper" ones) I am certain they wouldn't pass off the tax to their fans in the form of higher ticket prices. That would be unconscionable.

MAGNIFICENT!

Spotify, REM and the music market Collapsing into Now

First, in reference to our presentation earlier this semester on Spotify:  Europe gets the "listening" party as a real "social" event on the web. The US gets...NPR. (Which is NOT being zapped by cost cutting GOP since it only gets 1.5% of it's funding from taxpayers)  Either way it's not a stirring endorsement of public / government support for the arts or the lack of success in a shrinking market.  Perhaps REM's title to the new album is more appropriate than we now know.

Second, Internet start ups face competition from the very low-barriers to entry that make starting a web-business very cheaply.  Specifically for companies like MusicJuice.net or Taxi Magic - the technology is not novel and in many cases can be easily replicated.  Though Taxi Magic does have competitive advantage of integrating to the 4 major taxi dispatch software systems - it had the backing of $100M founder to fund those operations for over a year.  Incentive alignment also seems amiss for MusicJuice.net - the value proposition they pose is more beneficial to the artist rather than the listener.  Artists won't share their revenue of disc sales or concert revenue sold "outside" MusicJuice's purview.  The case wasn't clear on how this would be tracked or enforced. It took Taxi Magic some time to realize they should charge cab drivers, not riders, to better align value / incentives.

I'd close MusicJuice.net right now and look to build an options/future trading site on what bands will be in the Top 10 Albums, etc on Billboard magazine sales.  That's something interactive and "fun" for music lovers to bet on the future of their favorite known bands.  With only $5k remaining and such low site traffic it's doubtful even a sale could generate much cash.  Another option would be to partner as an add-on service to companies like BigChampagne (a B2B data/information service for music industry)

Finally, I will chime in about "crowd-sourcing" music (or different structures of artists development) with a note I wrote a few years ago before attending a U2 show.  I'll save that for a diff post.

UnSiriusXM Radio Online

The Value proposition for SiriusXM Radio Online will let you listen to SiriusXM on your smart-phone and thru services like Sonos for an extra $3 / month (in addition to the 12.99 monthly fee).  Currently SiriusXM offers 214 channels to traditional subscribers.  A full 124 channels are NOT available to SiriusXM online subscribers. I've listed them below.  Seeing as I prob spend 95% of my listening time on 43,44,47 and the comedy channels I don't think this a good value prop for me.  Additionally, you can't get most sports, news, weather and traffic. Will it be a good value add for you?

34    enLighten
41    Hair Nation
42    Liquid Metal
43    Sirius XMU
44    1st Wave
46    Classic Vinyl
47    Alt Nation
48    Octane
49    Classic Rewind
52    Faction
54    Lithium
55    Radio Margaritaville
56    Jam_ON
57    The Grateful Dead Channel
58    E Street Radio
59    Underground Garage
70    Real Jazz
85    Caliente
86    The Joint
87    The Verge
88    Air Musique
89    Sur La Route
95    XM Scoreboard
96    Canada 360
97    Calendrier Sportif
98    OutQ Gay Radio
107    Sports Play-by-Play
113    Sports Play-by-Play
119    Doctor Radio
121    FOX News Channel
125    Quoi De Neuf
126    CNN En Espanol
127    CNBC
128    Sirius NASCAR Radio
131    BBC World Service
134    NPR Now
135    World Radio Network
136    PRX Public Radio
139    SiriusXM Stars Too
142    FOX Sports Radio
143    College Sports Nation
148    Blue Collar Radio
149    The Foxxhole
150    Raw Dog Comedy
151    Laugh USA
152    Extreme Talk
153    Laugh Attack
154    ESPN Deportes
155    SiriusXM Stars
156    Oprah Radio
157    Martha Stewart Living Radio
158    America's Talk
162    Cosmo Radio
163    SiriusXM Book Radio
164    RadioClassics
165    Talk Radio
166    SiriusXM Patriot
167    America Left
168    FOX News Talk
169    The Power
170    Family Talk
171    Road Dog Trucking
172    Radio Parallele
173    Bollywood and Beyond
174    MLB Play-by-Play En Espanol
175    MLB Network Radio
176    MLB Play-by-Play
177    MLB Play-by-Play
178    MLB Play-by-Play
179    MLB Play-by-Play
180    MLB Play-by-Play
181    MLB Play-by-Play
182    MLB Play-by-Play
183    MLB Play-by-Play
184    MLB Play-by-Play
185    MLB Play-by-Play
186    MLB Play-by-Play
187    MLB Play-by-Play
188    MLB Play-by-Play
189    MLB Play-by-Play
190    ACC
191    ACC
192    ACC
193    PAC-10
194    PAC-10
196    Big Ten 196
198    Big Ten 198
199    SEC
200    SEC
201    SEC
202    The VIRUS
203    Big East
204    NHL Home Ice
205    NHL Play-by-Play
206    NHL Play-by-Play
207    NHL Play-by-Play
212    Atlanta/Miami
213    Dallas/Houston
214    Washington DC/Baltimore
215    Pittsburgh / Minneapolis
216    Detroit/Las Vegas
217    Chicago/St. Louis
218    Tampa/Orlando
219    Phoenix/San Diego
221    San Francisco/Seattle
222    Los Angeles
231    BIG 12
232    NBA Play-by-Play
233    NBA Play-by-Play
234    NBA Play-by-Play
235    NBA Play-by-Play
236    NBA Play-by-Play
237    Sports Play-by-Play
238    Sports Play-by-Play
239    Sports Play-by-Play
241    Sports Play-by-Play
242    Sports Play-by-Play
243    Sports Play-by-Play
244    Sports Play-by-Play
245    Sports Play-by-Play
246    Sports Play-by-Play
248    Spice Radio

The Blood Test: M&A and "STD prevention"

Topic of the day is "Cash out Start-Ups" written up in WSJ last week.
http://online.wsj.com/article/SB10001424052748703312904576146372229938338.html#ixzz1E9U9sazV

They say 50% of marriages end in divorce. Well 9 out of 10 mergers fail to increase shareholder value!  While a M&A "Pre-Nup" might mitigate some of the complex causes of M&A failure it would not prevent fall-out costs of failure and ultimately break-up and / or re-organization costs of the merged entities.  In that sense having an escrow period is more like the pre-marriage blood screening test or like a pro-athlete having to pass a physical.  The original logic behind the marriage blood testing was to ensure neither party had syphilis.  In the case of the Redskins it's to ensure that no Albert Haynesworth's make the team.....but I digress! ha!

In the Internet age, with a backdrop of "spectacular" failures (a la Time Warner + AOL) and simply poor synergy (eBay+Skype) it makes sense for an acquiring company to protect it's assets / brand before agreeing to a "marriage" Specifically:

1. Earnouts as a pay for performance.  One of the major reasons these fail is that key personnel in the acquired company simply leave. This incentivizes them to stay (at least a while) with real "skin in the game."

2.  Looking for a "quick buck." Horror stories of vapor-ware aside, some budding businesses entire model is based on the assumption that they will be acquired by a larger entity to build out / complete their product services and/or features.  This doesn't necessarily prevent that strategy, but makes an entrepreneur think twice about its likelihood of success.  Businesses that are self-sustainable will be more stable and attractive for any potential purchaser.

3. Valuation.  As there is now a hurdle introduced in the M&A game this doesn't mean all the leverage in the bargaining position is in favor of the purchaser.  The acquired company may use this as a reason to demand higher valuation, ask for shorter escrow time, etc.  What this does do is force all parties involve to pause, think about the value-add for the merged entities and the likelihood of success.  Does anyone know the divorce rate for Vegas marriages???

----------------------------------------
Tonight we have TaxiMagic as our guest lecturer. It seems early adopters targeted are business travelers. Can't wait to hear the roll-out / expansion strategy!

NetFlix and the Future of Online VOD

I did the case write-up assignment this week.  So I will only put highlights online today.

In addition to using their movie predictor rating they could expand that skill set to other services. Books, music, TV shows, magazines.  Why not look to acquire a business in one of those spaces and test out their abilities to predict?  Any business where the problem of monetizing the long tail with "lean inventory" management would fit NetFlix's core competency well.

I am surprised that the case did not mention the NetFlix competition that ran during 2006-2009. Essentially the company crowd sourced the next version of their secret sauce.  This competition effectively created many “recommendation” engines. The many "sub-optimal" engines that didn’t win could be used by new or existing competitors quite easily.  Also, partnerships with IMDB or RottenTomatoes could capitalize on competitive advantages by leveraging the collaborative knowledge on those services as well.  Combined the data-sets of these online movie complements with the ratings / queue of NetFlix might give it a critical mass in discovering their “beachhead” in the online VOD market (though I find it extremely unlikely they could not find early adopters given their core competencies of pattern analysis and data driven recommendations)  The NetFlix brand would not be diluted by partnering with smart devices such as network-enabled DVD players or set-top boxes as long as the logo appeared on the screen (or box).  The company has worked too hard to build the brand equity to simply give it away as a bundled service on someone else’s platform.

Help Yelp!

What do you think is the best way for Yelp to monetize the reviews and content they’ve generated, going forward? How scared should Yelp be of Google Hotpot and what should they do to maintain/grow their position?
 
Yelp! has a tough decision to make.  In order to monetize the options were to charge readers or hire a salesforce to enroll businesses to increase ad sales.  The former goes against the free "culture" of the service, the latter is expensive and increased revenue generation is highly uncertain.  I don't believe the case made a very compelling argument for either option.  In addition, the print business is supposedly still the dominant medium for "local" searches as of 2005 - with a 1300% ROI.  I have doubts about the size of the print market in 2010 and could not find any credible footnotes referencing research or surveys that point to it's demise by 2010 (notes 74 and 78)  The article for Business Week had no citations either - and 5 years is an eternity in the online world.  In that same time frame, physical CD sales lost over 50% of it's market value:

I assume the print business, even if still profitable, can be leap-frogged by a better subscription-based model.  Companies that can cite increased sales as a result of the online marketing channel would be excellent references.  These companies would tend to be small, the ones that don't have "$1Billion marketing budgets" A subscription model would not interfere with the Yelp! culture or brand, which seems to be it's most significant source of value.

I have not heard of Google Hotpot before, but absolutely Yelp! should be concerned.  Google's trove of data they can access about a customer (through other Google services) can provide extremely relevant, location-based, local searches.  It can proactively seek the best "reviewers" using analytics and intelligence.  As you can read here the few can have massive influence on the many (think PageRanking your Twitter "score").  Finding these people has gotten easier and can often be counter-intuitive. Recently Verizon used linear regression to discover that the 1% of their main "influencers" were people who received many short messages / calls around 5pm on Fridays and Saturdays - the idea being that people contacted them to see what was going on for weekend entertainment. They were part of the "in" crowd that had massive influence on purchases.


Yelp! Might offer a partnership with Google to combine their brand and Google data mining techniques to stave off what could be crushing competition from the search giant.

Webvan

Webvan was the first of many "spectacular" failures in the go-go Dot.Com days.

There were some core reasons Webvan failed.

1. "We believe we had a brilliant concept. We were just ahead of our time." -  Webvan spokesman Bud Grebey.  In fact, Webvan was not a novel idea at all.  Home delivery was common in the 50s and 60s (bread, milk) but both lifestyles and economics changed the fundamentals here.

2. Webvan delivery costs were $30-35 per order.  This was a cost that consumers were already absorbing in their visits to grocery stores. Why subsidize that which consumers are already willing to pay?  In fact, the number of consumers who would actually pay for the delivery function of the business was a very small fraction of the market.

3. Technology in and of itself is not a solution.  In Webvan's case they had a technological "solution" looking for a problem.  There was no sizable market demand for home delivery with or without Webvan's technology. The existence of Webvan services did not change this fact.

4. Webvan entered a mature market that was highly efficient and had razor thin margins (Kroger's, Giant and Safeway have about a 1% net margin). With such fierce competition, Webvan was a guppy learning to swim in a pool of sharks.  The likelihood of success in this competitive environment is very low.

Had Webvan had the institutional knowledge of the home delivery market and the reasons for it's failure they may have chosen to alter their strategy or avoid the home-delivery market entirely.  This was another company that was caught up in the glitz of the Dot.Com era believing that their simple existence would guarantee a booming stock price and .... eventually profits.