Thank you for helping this blog to get noticed by WordPress
As of today, this blog made it to WordPress’s page for the top 100 fastest growing blogs. I often forget this blog and went months without posting, but am happy to be back posting and I hope that all of you will continue to read and, hopefully, even post comments. I am new at this, but having a fun time. Thank you all.
5 Dangerous things you should let your kids do
Must see video for parents (from Ted): http://www.ted.com/talks/view/id/202
Bullish On the Economy? Er…Uh…Ebay?
Seth Rascoff (of Zillow) makes the great point that eBay share trends inform us on the future outlook of the economy. While I often see predicting the economy as being much like predicting the weather (or housing prices!), he makes some great points!:
I don’t own any shares of ebay, but I casually follow the stock out of interest. After all, it’s an internet bellwether, so it indirectly affects my company Zillow. As has been widely covered, ebay reported mixed earnings yesterday. They are shifting their marketing focus from auctions to fixed price transactions, and they’re also revamping their pricing structure on auctions to emphasize final sale price rather than listing fees. And finally, longtime CEO Meg Whitman will retire on March 31 and be replaced by her hand-picked successor and former Bain Consulting colleague, John Donahoe.
But here’s what I find interesting – look at the reaction by the equity research community, the research analysts who cover ebay for various investment banks. These are all highly qualified people, experts in their field, masters of financial analysis, all looking at the same numbers. But they have highly divergent opinions about the future of ebay.
Ebay is at $27 today.
The Bulls:
- Jennifer Watson (who replaced Anthony Noto), Goldman Sachs: Buy, $38 price target (down from $42). “We maintain our Buy rating on eBay shares given ~30% upside to our new $38 price target (down from $42), which reflects a more conservative stance on 2008 and 2009 due to impending pricing changes and the economy.”
- Robert Peck, Bear Stearns: Outperform, $36 price target. “We continue to believe that eBay is a Franchise with: a strong balance sheet, solid FCF generation, comparatively more recession insulation, faster growing diversifying revenue streams and an attractive valuation (10.5x 08 EBITDA and 18x PE with 6% FCF yield). We think the changes will therefore provide opportunity if the new management team can execute.”
- Imran Khan, JP Morgan: Overweight. “On EV/EBITDA, eBay trades at 10.6x our F’08 est., vs. peers at 15.6x F’08 est. We think such a discount is unwarranted.”
- Youssef Squali, Jeffries: Buy, $40 price target (down from $46): “Sluggish growth in the core auctions business continues to be a drag on overall revenue growth. While we remain cautiously optimistic about the company’s ability to re-accelerate GMV growth by tweaking supply and demand, we are trimming our LT growth estimates to reflect lack of visibility into the turnaround.”
- Christa Quarles, Thomas Weisel Partners: Overweight, $38 price target: “eBay’s valuation remains contingent on its ability to maintain its current growth trajectory while holding on to its leadership position as an online marketplace and e-commerce destination. Equally critical elements to the eBay story are the expansion of PayPal off the eBay platform and the leveraging of Skype’s audience and technology to deliver value-added VoIP services.”
- Scott Devitt, Stifel Nicolaus: Buy, $39 price target: “eBay is an inexpensive business as measured by any statistical yardstick. Based on after hours pricing of $27.50, eBay shares trade for 14.2x our estimate of 2008 unlevered FCF ($2.174 billion, $2.35 billion less $176 million of interest income). If eBay were an inventory-free retailer, and it claims its not, it would qualify as one of the world’s fastest growing, lowest FCF multiple general merchandise retailers. As such, it is an internet marketplace, which makes 14x FCF seem more palatable in the mind of the market.”
The Bears:
- Doug Anmuth, Lehman Brothers: Hold, $30 price target (down from $33). “We would remain on the sidelines [nearterm] until we have a better sense of the details around eBay’s platform changes and their potential impact on buyers and sellers going forward.”
- Ben Schachter, UBS: Hold, $32 price target (down from $38): “…the growth rates in the core continue to deteriorate, and until we can confidently call a bottom in the core, it is difficult to get behind the stock. The uncertainty regarding the new CEO’s efforts to boost core marketplace growth rates, as well as soft guidance, keep us on the sidelines.
- Derek Brown, Cantor Fitzgerald: Sell, $25 price target (down from $30): “Our previous research warned that 1H:08 may prove to be a period of heightened uncertainty for eBay and its shareholders; yet, even we are suprised by the volume and magnitude of change that eBay has elected to pursue at this time, after having done so little for so long.”
There is a huge range of price targets here – from $25 at the low end to $40 at the high end. It’s surprising to me that these people have reached such different conclusions with the same information. Of course, that’s what makes a horse race (or a volatile stock price, in this case). After all, every single share of stock that trades hands is the result of divergent opinions about that company: the seller think the stock will go down, the buyer thinks it will go up. Still, you don’t see such divergence on another internet bellwether, Google, where 30 out of the 33 analysts who cover the company have a Buy or Strong Buy.
Time will tell…
How To Make The Perfect Cup of Coffee At Home
I saw this great podcast from Chris Pirillo on how to make the perfect cup of coffee. I took note because he makes it almost exactly the same way that I do (except I use an electric teapot to heat the water). If you love to drink coffee and like to be able to have amazing coffee at home, you must check this out! Also note that my favorite coffee (purveyor and blend) has a starring role:
Starbuck’s $1 Cup of Joe
The less remarkable a product is, the more that price becomes a factor. This is now evident as Starbuck’s coffee becomes ubiquitous. There was a time when Starbuck’s made me passionate about coffee when they first came to Los Angeles nearly 20 years ago. I often credit this passion for coffee as leading to my passion for food and wine. Anybody who knows me can attest to the importance of these three things in my life. But I have long since abandoned as my coffee purveyor of choice as the product has become less, well, remarkable.
John Moore, who honed his marketing skills while working at Starbuck’s, takes issue with the problem them as they choose to lower their prices:
Starbucks CEO Howard Schultz once said, “Our marketing will emphasize quality and service, not price.” He’s now doing something different.
In a bigger shift in marketing strategy than spending millions on national television advertising, Starbucks is now selling short-sized cups of brewed coffee for a $1.00 and offering free refills at Seattle-area locations. (Reuters link | WSJ link)
Oh My! That is a MAJOR shift in strategy for Starbucks. Here’s why…
“Starbucks fiercely protects its pricing power because it knows a low-price strategy is the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee. It also knows if it lowers prices, it will have a hard time ever raising them again. Most important of all, Starbucks knows higher prices bring them healthier profit margins, which fuel the cozy experience customers enjoy. By ever deciding to run itself as a priced-to-sell retailer, Starbucks would be admitting it no longer values a unique product or a unique customer experience. Seth Godin, author of Purple Cow, goes one step further, saying that a low-price strategy is “the last refuge of a…marketer who is out of great ideas.” The folks at Starbucks are too smart, too savvy, and too creative to fall for the low-price trap. And if they ever did, Starbucks as we know it—Starbucks as a forward-thinking company—would cease to exist.” SOURCE
Those words were written in TRIBAL KNOWLEDGE, my love story to a company that shaped how I approach marketing. In my eight-years there, we, Starbucks marketers, would have never considered promoting a $1 Cup o’Joe to increase sales. Instead, we would have used of a combination of these ideas to solve for Starbucks problems.
A “cheap coffee strategy” … Oh My! is right; because, a low-price strategy is indeed the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee.
Chris Anderson, Free, and Rupert Murdoch
Chris Anderson’s blog takes to task the idea that had the Wall Street Journal chosen to make its paid online service (which I pay for, in the interest of full disclosure) free, the site would have to gain massive traffic to make up for the subscription shortfall:
I love Bear Stearns analyst Spencer Wang, but he can do better than this. According to PaidContent, Wang calculates that if the Wall Street Journal online goes free, as its new owner Rupert Murdoch has said it will, it would have to increase its traffic 12x to make up for the lost subscription revenues.
WSJ.com revenue is currently pegged at $78 million annually, based on an estimated 989,000 subscribers paying $79/year. Including non-subscriber traffic, the company claims 122.4 million monthly page views. Based on an estimated CPM of $6 and a few other assumptions about sell-through rate and ad impressions per page, Wang arrives at the 12x conclusion.
The problem, Wang concludes, is that going free would only increase its traffic 6x. Thus a downgrade of 1 cent a share, which Bear Stearns made today.
Now putting aside the fact that a $6 CPM is absurdly low for a site like wsj.com (and the more important fact that I haven’t read the whole report, which may be more subtle than it appears in these reports), there is one thing clearly missing in this analysis: the indirect benefits of the Wall Street Journal reappearing in the online business conversation that it has largely ceded to others due to its subscription wall.
For instance:
- What about the new newspaper subscriptions that a 6x increase in web traffic will generate? (Print subscribers are typically worth five times what online viewers are worth, due to the higher effective CPMs of print media.)
- What about the increased buzz and respect that the ability for bloggers everywhere to link to wsj.com stories will engender, bringing the paper back to the front of mind of media buyers and thus bringing in more ads?
- What about the fact that, in a fierce competitive battles with its cross-town rival, the the New York Times, once nytimes.com went free, wsj.com had no choice but to do the same to maintain mindshare with an audience who are increasingly shifting online?
I don’t know how to quantify any of those factors, but I know they’re all non-zero, and in the case of second, at least, could be large.
And then there’s the small matter of simply migrating a powerful twentieth century brand into the twenty-first century, by understanding the forces at work in the new media landscape. It’s ironic that it took a septuagenarian oligarch to understand that free will be the only viable price for mass media online in a world of information abundance and attention scarcity. But as a fan of the WSJ who doesn’t read it often enough because it doesn’t show up in my RSS feeds, I’m glad he did.
A Place to Sample Wine… A Beautiful Thing.
Okay, I am inspired. Mike Carter has a post about an inventive addition wine world…
The newest addition to the East London bar scene, The East Room is a members-only ‘new world wine room’ with a 24hour license from the people behind the Milk and Honey establishments, offering over 50 wines from the Southern Hemisphere- most of which are available by the glass or tasting measure via a self-operated machine. Simply charge up a wine card with as much credit as you like and try DIY sampling of some rare, unusual, and expensive wines normally only available to buy by the bottle.These machines, known as Enomatic wine serving systems, seem to be popping up around London- first at trendy Islington wine shop The Sampler where the available wines are rotated fortnightly to allow regular tasting of their 600 bottles – ranging in price from 30p for the cheapest to £30 for 25ml samples of the 1999 Pétrus, which to their surprise, disappeared in just a few days – and more recently at Selfridges new Wonder Bar, an addition to the Wonder Room that they describe as a weekly changing ‘jukebox of wine’, apparently created as a ’suitable riposte to the culture of binge drinking’!
Unpackaged
The gang over at PSFK brings us this great post about a store specializing only in “loose” foods. No wasteful packaging here and a great concept!
Founded in 2006, Unpackaged in Clerkenwell in London only sells loose foods without packaging. Selling everything from ‘Loose Organic Wholefoods’ to ‘Loose Sweets’. Customers must bring their own containers to shop for items (or buy a one-off reusable one from them). The site explains the rationale behind their approach:The Problem with PackagingCost: Unnecessary packaging increases the price of the goods you buy. It means you are charged twice; first when you buy over packaged goods and then through your council tax to dispose of your rubbish.Waste: Unnecessary packaging is a waste of resources at every level: to produce, store and transport, remove and to dispose of.Pollution: The two main methods of disposing of this packaging – landfill and incineration – are major pollutants for humans and the environment and release greenhouse gases.
Check out: Unpackaged[from PSFK]
