Should Groupon Purchase MySpace?

by nikiscevak on February 3, 2011

Groupon and other Daily Deal sites will likely spend $1 billion in online ad spend this year. And most of that will be on Facebook and Google.

Given that Facebook will likely be the number one source, is it so preposterous that Groupon would buy MySpace at the right price? Now that News Corp has hung the for sale sign out and CEO Chase Carey seems particularly repulsed by the subsidiary, the timing seems right for a low price.

As well as the upfront cost, Groupon would have a large headache in getting the property to break-even but if they left 25% for current management as an incentive and kept the firm autonomous perhaps the incentives could take care of that headache for the Groupon mothership.

Also attractive about MySpace is that since it was the early leader in social network it does have a very large US userbase. Even the ghost town accounts have some value.

Given the capital markets willingness to value Groupon stock at such a high multiple, buying MySpace for $200m upfront and then perhaps another $100m a year for 2 years to get it to breakeven doesn’t seem that farfetched at all.

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Vanity Metrics

by nikiscevak on February 2, 2011

Eric Ries, one of the leading lights of management theory in startups, made a very good point around the wrong kind of metrics. Metrics that don’t correlate with revenue or the chief value event and says nothing about the why are vanity metrics.

I couldn’t but help think of vanity metrics when I was reading about Path’s funding by Kleiner Perkins and Index. Path is an iphone app that let’s users share private moments with friends and put a constraint on the number of friends that could happen with.

The company is founded by Dave Morin, who ran Facebook’s platform, and a series of other very talented executives. Now let’s be honest: The funding and the competitive seed round before it is entirely based upon the team and their product instincts.

But at $8.5m the company probably felt like they needed to come up with some meaningless but suitably large number and they came up with this: “The company says they have hundreds of thousands of users who’ve experienced “over 2 million moments shared.”

Now let’s unpack that 2 million into what actually could be happening. If 2,000 users with 50 friends each shared a photo 2 times each week for the 10 weeks that Path has been operational then 2 million moments would have been shared.

They should have just said nothing at all.

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A Fine Line

January 30, 2011

Craziness, it seems, is a fine line: “[Kevin] Rose announced that he and [Tim] Ferris recently invested in Facebook “before the craziness.” [...] “We confirmed with Rose that he and Ferriss actually bought shares on secondary market SecondMarket at a $45 billion valuation. We’re told the deal was in the seven figures. [..] The ‘craziness’ [...]

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Google and Real Estate

January 26, 2011

Google today announced that they would no longer allow searching of real estate on Google Maps. I’ll admit part of writing this post is to point back to my post about six months ago when I said that Google had failed in real estate to date because of their wedded view that people want to [...]

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What Price is Fair for Facebook?

January 3, 2011

My first reaction to Facebook raising $500m from Goldman Sachs and ‘a Russian investor’ at a $50bn valuation and perhaps up to $1.5bn more from private clients of Goldman Sachs was twofold: Bravo Facebook management for locking in such a rich valuation and secondly, if I thought the investors were so stupid as to pay [...]

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The Dividend Recap

December 30, 2010

In judging the likelihood of the year ahead it’s always important to see how the last year set it up. And there is no better group of people to follow than private equity firms. I’m not referring to what they have said but rather what they have done. This year the dividend recap returned in [...]

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Finance Stuff They Teach You That’s Wrong

November 2, 2010

Over the past few years I have become a complete student of value investing and have been quite successful. So naturally when some dumb schmuck gets lucky, the desire to impart the ‘fool proof’ system rises. But seriously, there are two huge principles of finance that they teach you at University that I think are [...]

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Apple Misunderstanding

November 2, 2010

For years, I used to retort Apple fanboys with the measly market share numbers the firm held in desktops and laptops. But businesses are about profits and not units shipped or even revenue earned and Apple’s strategy is designed to maximize profit. In recent times Android has ‘raced’ past iPhone shipments but Google has to [...]

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Sandy Kory/Horizon Partners

October 21, 2010

A quick shout out to Sandy Kory who recently founded Horizon Partners, a boutique investment banking firm that helps small Internet companies raise money or execute an M&A process. Somewhat uniquely, they are also beginning to blog with the aim to bring more transparency to the M&A process for entrepreneurs. Also, Sandy was on Mixergy [...]

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Quote of the Day

October 21, 2010

From Whitney Tilson of T2 Partners, a value investment hedge fund: “We choose to share some of our ideas and analyses publicly not for marketing or ego reasons, but because it helps us make money for our investors, in three primary ways: a) when it is widely known that we have a position in a [...]

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