A Meaningful Life

Facebook may not have worked it out yet but they are getting played with. 1-2% is nothing, it’s not a takeover, it’s a cheap option to play the game, with a lot more power as an investor.

The oldest trick in the M&A world is to “get a chunk”. Taking a bite gives you so many benefits that the first and smallest investment is often the best. It can be the buyers most profitable in the event they lose and sell to the winning bidder in defeat. Else, it can be the cheapest equity the buyer will have bought in the company.

I was pretty surprised by the amount of blogging out there talking like it’s a done deal. Sure it might happen one day but this isn’t the normal way you would see it play out so far in a pure, fast takeover. The deal in M&A is never the deal the public see’s. It’s more complex, it’s modelled payoffs. Such as the free press component valuation for the aggressor or better still the brand wash value which is very high on this deal.

What does this deal do?

• Buys probably the equivalent of 10’s or possibly close to 100 million dollars worth of PR. Online, paper and TV. Screen real estate for 3 months as people speculate. So their Facebook spend isn’t 260mio already it’s a lot less.
• Wash Facebook brand onto Microsoft’s brand.
• Makes it easier for Microsoft to buy a blocking stake later. They already have a start now.
• Buys Microsoft time and holds other players out. Other suitors will have their shoulder devil telling them this might be too hard. It’s Microsoft after all, a no debt cash rich company.
• It keeps Facebooks management thinking Microsoft loves them. Microsoft might not love them they just want their new date to think that so they don’t sleep with anyone else.
• Opens compulsory dialogue between the companies. Microsoft is now an investor.
• Equity blood brothers never slag each other and will tend to cross promote better. What would you pay Facebook to be a channel partner for your software company if you have one?
• Microsoft undoubtedly starts to get some influence in Facebook product direction or at least learns what the next steps are.
• Facebook will look to impress it’s big daddy by considering everything Microsoft asks for. Microsoft have a big fat chequebook, wouldn’t you get on your knees? Plus you would never bite that big Microsoft mitt of a hand, it might just feed you a lot of green.

And the best M&A trick of all is…

Microsoft pays up for the first chunk, then the seller/victim re-benchmarks price in their mind and any suitors that come along look cheap and nasty. As a result new suitors say no to Facebooks attempts to get some price tension. The new suitors don’t even try. Then all of a sudden Facebook is left with their initial investor who has only bought a small percentage. Time passes, more time passes and Facebooks business model of low cash and high cost is starting to show particularly as the US economic slowdown hits. What do you know Microsoft does not want to pay the same price any more.

Microsoft still could be aggressive

My guess is they won’t. 15Bio is a big number and if they do get aggressive it’s out of desperation. Let’s not forget it Microsoft can take just about any player out of the market a lot earlier than this, but they didn’t. What does that mean for this deal? Are they that late and stupid? I doubt it.

There is an amazing Lyre Bird BBC YouTube clip that is a must see! It’s mimicking sirens and chainsaws. Emma, the kids and I went for bushwalk and we weren’t sure but we thought we heard a Lyre Bird mimicking a siren. We couldn’t see the bird though so no confirmed sighting. It reminded me that Nat of Simple and Loveable posted this video a while ago so I tracked it down on YouTube.

Youtube is getting more views than most reality TV shows these days. Tonight I saw strong anecdotal evidence that we are past the reality TV product cycles apex. Advertised tonight was a new show called the “Oldest Drivers in Britain”. Now they really are running out of ideas.

There are still many years left and it will probably never leave us, however original concepts in reality TV are harder to come up with.

What’s the next wave?

If I were in the TV business I’d be analysing Youtube hit rates like a domain squatter watches his Adwords account. I’m sure many in that game are cluing up but we haven’t seen much evidence of it flowing into content. Dance and singing contest shows have given them a grace period for a few more years.

After seeing that over 1,000,000 people had watched a very lame Ferrari, Porsche, Lambo snippet on Youtube last week it got me thinking. Either the title tricked one million rev heads, “Lambo vs Ferrari”, or it’s not about the quality but more about the niche content.

More niche content is next.

So you will see channel’s with just car shows or just gardening shows. Internet TV providers like Joost will speed this trend up.

People like me love TV but don’t have the time so niche works. Niche allows precise content choice. Reality TV on these niche channels will become more of an “authentic reality”.

A lot of reality TV should actually be called “story board reality TV”. Filming someone just as they are in real life will start to grip more as Youtube retrains the content programmers that people like “real”. Youtube has shown that scripted reality isn’t as popular.

Fake reality is sniffed out very quickly and given plenty of “lame” tags. Unscripted content gets lots of hits because it’s real. People value real and they discount the contrived. It’s why people buy cotton instead of rayon and why fake plants never took off. Viral content is scripted and rates right up there but that’s another post.

I posted my thoughts on interruptions in business life today on our Saasu Blog. If you feel the barrage of interruptions like I often do then take refuge in my post called Business Interruptus. Better still get the RSS into your reader or homepage of choice and you won’t miss my posts there.

I was contemplating why we as humans design things in order to create the new and the better versions of what we have. It doesn’t seem to fit very well relative to nature which will tend to use chance and filter the good results. Evolution doesn’t do design.

So an inquiry into what this means for SaaS (Software as a Service) application design is interesting to me. You could argue designing improvement is a less effective mechanism than filtering a pile of chance results. This is a little scary for someone like me who really appreciates design. After all it is only a single or limited input mechanism. The realm of knowledge an individual has in their specific context is very limited. Even a group has limits. Relatively it is very small when you compare to the enormous test and release environment that the natural world has for it’s many species mutations.

You could say that every creature inputs their genetics into the natural process of evolution to be tested. A candidate for better or worse genetics. Accordingly there is has been spectacular results like the evolution of the nervous system, interdependence of creatures and my favourite the symbiotic relationship.

Evolution puts species through continual survival testing. Successfully featured creatures survive and the poorly featured creatures are killed off, never to be cloned again. The reward is simple and pure. The right to pass down your design and increase it’s spread. Mutations allow change, often radical. They are a very low cost chance of improvement. Near free options on evolutionary upside. Physical and behavioural mutations that are beneficial lead to higher probabilities of survival and a new creature is born.

If SaaS evolved and wasn’t designed what would happen?

So I’ll bring this back to the area I understand, SaaS (Software as a Service). If Mother Nature were a SaaS developer she would probably just add features like mutations over and over and keep killing them off if they didn’t work as improvements and leave them when they did.

If customers used a new feature mutation then mother nature would be rewarded with dollars. So does this imply customers could be left to control the development by their evolutionary wallet. Well the answer is yes if you are happy with a slow kind of evolution.

So why is this less than perfect when it seems so so right? The answer is in luck. Genetic mutations for the sake of this argument could be considered natural luck. Some mutations are very lucky advantages while others are a fatal blow.

Accordingly a SaaS developer can choose to enhance development with customer feedback and also with mutations. Those things the customer never dreamt of. Things that need survival testing. Injecting new ideas or concept into the SaaS application gets accepted or rejected by the customers wallet. The ultimate survivability test.

An amazing market advantage is only ever one left field mutation away. One feature that so alters the customer experience that it might never have been perceived through customer voting systems or looking at competitors.

Evolution has leaps like this. Mutations that lead to one species dramatically outcompeting another. Many individuals in the species will evolve from the single creature feature that was so advantageous. Quite efficiently the cost to get this big upside is only ever single individuals whose mutations didn’t work in their favour.

So it might take several mutations to find a very successful change but when it hits it takes off in a large way. It even leads to the extinction of related species. When you repeat this process with velocity you can quickly see why natures model for improvement should not be overlooked and that maybe designing a little too much might miss the evolutionary leaps.

I posted about our plans for Saasu.com’s sustainable business on the Saasu.com blog. So I won’t comment in length here. It’s many hours of Saasu.com research that might be helpful in your own business.

When the Net began to evolve it was interesting to see what unfolded first. Yep, you guessed it was the easy business models like lists, search, news and online versions of paper publishing.

When I decided to get into the Internet business I said to myself “everyone in this ASP (Application Service Provider) game is going to run off and do the easy ASP’s first”. So I decided to avoid the crowd, create my blue ocean and do the hard one everyone will leave to last.

Interestingly it’s been nearly eight years in this business and it’s only now we are seeing some new faces. I blogged about well being yesterday and mentioned that this market has upside. What business person in their right mind doesn’t think soul soothing has a market for many years to come.

I feel compelled to explain a little further. My hypothesis is that the number of high quality news websites divided by the number of news magazines is a very large ratio (I’m using the term websites to represent blogs and portals). It’s an anecdotal ratio as I don’t have time to do the math or research.

There must be millions of websites dedicated to news but only hundreds of magazines. My second guess is that the number of high quality Lifestyle Websites versus their paper magazine counterparts is much lower.

Anecdotal evidence you can collect online by doing a quick Del.icio.us check of bookmarks reveals that this might be true. There are only 45,000 bookmarks for “Lifestyle” but a massive 1,250,000 for “News”. Even adding in terms like “Health” and “Well being” to bump up the “Lifestyle” numbers still has you at well bellow 500,000 relative to “News” bookmarks (yes I know it’s bookmarks, but to me that represents a vote on a page that is content of type “x”. You can’t ignore it).

Google returns an even more interesting result. 1.4 Billion versus 100 Million. A very large difference. Do you think humans allocate their time at a 14:1 ratio of News:Lifestyle. I don’t think so! Accordingly I smell upside in the air.

So you’ll see more high quality sea change, zen generation and soul soothing content like The Calm Space as overstressed and overworked humans try and fix themselves.

Why the difference? News is easy as long as you don’t expect to be first with the story (expensive). Lifestyle is harder as it requires skill and knowledge to write successfully. It takes new ideas to add value to readers. It requires managing the crossover between spirit and body.

All these things would have hit people as tricky or difficult when considering starting a website. It was easier to build a website and scrape ideas from others and call it a news portal. Looking at readership online is going to be the winner long term. One day you’ll be subscribing to the paper version of the online publication, not the other way around.

Devices are what will change this and they are coming thick and fast to your morning coffee reading as Leah pointed out to me.

This is without a doubt one of the next big areas for business to consumer on the net. Wellbeing is a hot topic. Yes it always has been, however I think we’ve only seen the tip of the recreational iceberg.

Happiness is every humans number one driver. It’s the original driver that causes all other drivers and behaviours. Even survival is second to happiness. After all, you try and survive in order to maintain happiness.

Check out The Calm Space as an example of what will probably be a new breed of well being websites and blogs. There’s lots of education in this area. Yes education, we educate ourselves in just about everything except looking after ourselves and being good parents. I think that’s a bit weird really. Why do we operate that way?

I recently completed a Landmark Education course called Fitness, Vitality and Wellbeing that hits this spot superbly.

Who doesn’t relate to a quiet time having a coffee, tea or power juice while you read your favourite magazine, blog or book. It can only be good for you.

Try these mind games as a way to get yourself prioritised for the day:

1. A reality TV crew rocks up to your offices and says we are doing a show called “Bills Not The Boss”. They ask if Bill Gates can work for you for a day. What would you get him to do?
2. “Google Prioritize” launches and you start getting paid by shareholders and customers to do the highest prioty stuff first so the shareholders capital investment goes up and the customers get a better product. The better you prioritise the more bucks they pay you.
3. A VC is coming to your office in a week and you’ve heard the first question this VC asks in order to get a flavour of your activity is “What have you done this week?”

I don’t claim to be a Web2.0 expert, no-one can, it’s bigger than all of us. However, I read a lot of really good posts on topic and some really, really bad ones so I thought I’d just give you an utterance of my strange sense of humour. Let’s leave aside artificial intelligence (my favourite), social, geo spacial, semantic, global database etc as the common Web3.0 themes. These will be fodder for another post. Web 3.0 will probably be real and alive when Web2.o companies:

1. have a bookmark or feed icon that get’s real and has authenticity. I’m coining it the “bagg it” icon.
2. realise AJAX isn’t just used for nice drag and drop features. They will actually start using it to move data quickly to give the user the experience of “software like” speed.
3. connect their Web 2.0 application to other Web 2.0 applications and maybe even build an API for their zoodowhatifokofumofu.com application.
4. have more paying customers than tech awards.
5. design their UI’s to allow for old fashioned anti-mouse keyboard users! (me!)
6. start caring about the handicapped user again when they design their UI’s.
7. stop using every available soft shade of “pastel” in photoshop for their UI design (Doh! Sorry pastel is not a colour). Disclaimer: I’m colour blind as a bat like millions of males out there and dislike web2.0 colours.
8. have business models not dependent on Google Adwords.
9. will have been recession proofed by the one we are about to have that you don’t know about yet!!!
10. won’t take money from hedge funds for fear they might not be around to help them IPO their Web3.0 app.