here. <\/strong><\/a><\/p>\nFrom the New York Times Dealbook today comes this:<\/p>\n
Twitter’s Value Rises to $3.7 Billion After New Investments Here’s a news flash fit for a tweet: Twitter, the social media darling, is now worth $3.7 billion after a new $200 million round of investments.<\/p>\n
And James Surowiecki of the New Yorker has this:<\/p>\n
The history of the Internet is, in part, a series of opportunities missed: the major record labels let Apple take over the digital-music business; Blockbuster refused to buy Netflix for a mere fifty million dollars; Excite turned down the chance to acquire Google for less than a million dollars. Time and again, businesses with seemingly dicey prospects have ended up becoming huge successes, and price tags that once seemed absurd have turned out to be bargains. But big companies have learned their lesson: these days, they\u2019re positively obsessed with not missing the next big thing, and are willing to shell out huge sums of money in order to insure that they don\u2019t. And when Google tried recently to acquire the two-year-old daily-deal site Groupon, for the seemingly outlandish sum of six billion dollars, it was hard not to wonder if the lessons of history had been learned too well.<\/p>\n
To be sure, Groupon\u2019s got a healthy business. Almost forty million people, in more than a hundred and fifty cities around the world, have signed up for its e-mails, and every weekday it sends subscribers a daily deal, typically from a local business\u2014fifty per cent off spa treatments, say, or twenty bucks off sushi. Groupon\u2019s gimmick, such as it is, is that you get the deal only if enough people sign up for it, but at this point the site is so popular that just about all the deals go through. In essence, what Groupon offers is an innovative twist on the tradition of loss-leader marketing: just as retailers have always used steep discounts on certain items in order to get people into their stores, Groupon\u2019s deals are an easy, low-risk way for small businesses to attract new customers. It\u2019s an appealing business model, particularly in recessionary times. But is it, as Groupon\u2019s C.E.O., Andrew Mason, suggested recently, a company that\u2019s going to transform the way local business works? Or is it just another overpriced flash in the pan?<\/p>\n
The answer, most probably, is neither. Groupon isn\u2019t going away. Unlike many Web companies, it\u2019s been profitable from the start. (It takes fifty per cent of the revenue in every deal.) This year, it had half a billion dollars in sales, and estimates are that, before long, it could have as much as two billion dollars in revenue. The market for local advertising, which is really the business Groupon is in, is huge (more than $130 billion a year) and still relatively untapped online. And, while Groupon has many competitors, it\u2019s by far the biggest and most respected player around.<\/p>\n
So Groupon is a real company. But it seems unlikely that it\u2019s going to become a revolutionary company, along the lines of YouTube, Facebook, Twitter, and Google. Most of the companies that have transformed the Web have certain things in common. They have distinctive technologies. They benefit from what are usually called network effects: the more people who use the service, the more valuable the service becomes. (You\u2019re more likely to use Facebook or Twitter when lots of your friends have signed up, and the more people there are who use Google the more accurate its searches become.) Most important, they scale easily, meaning that they can grow very big without much additional effort. To be sure, the more users Twitter and Facebook have, the more servers they have to buy, and so on. But the genius of these companies is that their users do most of the work and create most of the value; once the ball is rolling, it\u2019s the users who keep pushing it along.<\/p>\n
Groupon, by contrast, is a much more old-school business. It doesn\u2019t have any obvious technological advantage. Its users don\u2019t really do anything other than hit the \u201cbuy\u201d button. And its business requires lots of hands-on attention: thousands of salespeople to sell to and service local businesses, copywriters to come up with the right pitches for customers (Groupon\u2019s clever ad copy is one of its selling points). Groupon isn\u2019t just flinging piles of deals at users; the idea is that it\u2019s performing a \u201ccuratorial\u201d role, and is relying on humans, instead of on Google-style algorithms. All these things are real assets\u2014and a reason that Groupon is less vulnerable to competition than people think\u2014but they\u2019re also very labor-intensive. Facebook, with five hundred million users, has fewer than two thousand employees, while Groupon, with some forty million subscribers, already has three thousand employees. Groupon can obviously add subscribers easily (all it has to do is send out more e-mails), but serving them enough deals to keep them happy is another matter: the more business it does, the more people it has to hire. Recently, Groupon has experimented with a self-service system, which would let it outsource some of the work to local merchants, who could set up virtual storefronts. But, unless it wants to abandon the approach that made it successful, scaling up will require more work and more workers than the Twitters and YouTubes of the world need.<\/p>\n
This isn\u2019t an impossible task; Amazon succeeded in the face of similar obstacles. But, even if Groupon doesn\u2019t end up changing the way we shop, there\u2019s still a good chance that it will make a lot of money\u2014maybe even more than some of its revolutionary brethren. When we think about the Internet, we often think of businesses in black-and-white terms: either they\u2019re huge, world-changing hits or they\u2019re flops. But that\u2019s a false dichotomy. These days, the Web is full of good, solid businesses that may not be remaking the world but that are helping give people what they want. If that\u2019s what Groupon ends up being, well, there are worse fates. \u2666<\/p>\n
Opportunities at the post office.<\/strong><\/span>
\nA lady is at the post office buying stamps for her holiday\u00a0 cards.\u00a0 “May I have 50 Chanukah stamps and 50 Christmas stamps?”<\/p>\nThe clerk answers, “What denomination?”<\/p>\n
“Oh my G-d!” the woman exclaims rhetorically. “Has it REALLY come to this? Give me 16 Orthodox, 22 Conservative and 12 Reform Chanukah cards and 20 Catholic, 18 Greek Orthodox and 12 Lutheran Christmas cards.”<\/p>\n
![\"\"](\"..\/wp-content\/uploads\/2010\/08\/HarryNewtonNewShot2.jpg\" "\\"HarryNewtonNewShot\\"")
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\n<\/strong><\/div>\nHarry Newton who is learning to divorce emotion from this business of investing. It ain’t easy. Heck, it’s only money.<\/p>\n","protected":false},"excerpt":{"rendered":"
Suddenly, high yield is no longer in.\u00a0 Maybe. The world’s worst trade has suddenly become profitable (if you bought recently). Suddenly, the press (and all my friends) are full of bond horror stories. Of muni bonds cratering because their prospects are bleak. Of popular high yielders like Annaly, which drops its quarterly dividend from 68 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-5069","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/5069","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5069"}],"version-history":[{"count":0,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/5069\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5069"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5069"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5069"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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