Cameron Johnson's Blog

iPhone Madness!

This week I'm in New York and I must say, this is the place to be for the iPhone madness. I'm anxious to write much more over the weekend and I'll post it here on Sunday but there's really something to be said for Apple's 6pm timing. Unbelievable the amount of free exposure they manufactured.

PS - Let me remind everyone, this is a cell phone and cell phones already existed prior to today. I'm very pleased with my Blackberry Pearl as it answers calls the same way -

Viacom Sues Google

In my opinion, this is grossly overdue: http://www.breitbart.com/article.php?id=D8NRFPTO3&show_article=1

Now, what's next?

1) Is this a ploy to negotiate?

2) Will more media join?

3) If they had done this sooner, prior to Google striking deals with NBC and others, would this have hurt YouTube even more?

4) If Viacom had sued before they had any money (aka before Google bought them), would they have just closed up? Or would have Google bought them for a much, much, much lower fee.

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Some very interesting questions however one thing is for sure...if this goes to trial, a very important precedent will be set and it could kill YouTube or force them into striking some very attractive (for big media) deals. When Joost launches, there will be an even bigger shakeup. And Joost has already struck a deal with Viacom...

YouTube Failing to Make Deals...

Google spent a hefty $1.6 billion to acquire YouTube. In an earlier post, I explained why I felt Google was forced to buy YouTube. It's been reported that Google set aside $300-$400 million of the purchase price to handle potential legal liabilities. Google's plan was to sign deals with the major distributors and networks (Viacom, NBC Universal, News Corp, etc.). They're hitting some walls and to say the least, they thought it would be much easier.

The NY Times published a story today about Viacom's request to remove more than 100,000 clips from such favorite shows as The Daily Show, and many from MTV. I support Viacom's decision. This is really a fork in the road for YouTube and the media conglomerates. If they stick together (which I think they will), and all prevent their copyrighted material from hitting YouTube, then Google essentially failed at their entire reasoning for their $1.65 billion purchase price.

I expect that Google will cave and bow down to the media conglomerates as traditional programming will be a necessity for YouTube's long term success. Otherwise, they have no advantage over other video sharing sites (since they would just be an outlet for clips made by individuals).

Online banks launch checking accounts...

Just as I made a post a month or so ago about online checking being the future; USA Today has a great article on this today.

Cool? Or too late?

DirecTV announced their new portable satellite television. A cool concept right? Yes, for 2002. I think this really is cool for the few examples I can think of: tailgating, camping, etc. but when else would anyone need a portable satellite television and be willing to spend $1,000+ to buy it? It is cool, and I think it would have been great in 2002. But we're way past this now - we've got television coming to internet connections faster than ever and this looks like a poor shot by DirecTV to come up with something innovative.

Read the NY Times article here.

Microsoft/Ford Sync - OnStar Killer?

In early 2000, Ford's then-CEO Jacques Nasser said, "Go back 100 years, Henry Ford put the world on wheels. Today, Ford Motor Company will put the Internet on wheels." Ford's stock price was $64 a share and the company was one of the most profitable corporations in the world. He was announcing plans for a new telecommunications system called Wingcast which was being built in partnership with Qualcomm and was set to debut 18 months later. Ford ultimately invested more than $100 million into the project before scrapping it and selling the remains for a mere $10 million. Pretty terrible. A lot has changed since then, especially Ford's stock price and profitability.

GM continued their plans and launched OnStar which is still not profitable, but at least it made it somewhere. Well Ford's back, and they've got a new partner: Microsoft. The new Sync will debut later this Fall in 2008 models and looks quite impressive:

http://www.syncmyride.com/

Microsoft Should Buy the iPod Market

There are some advantages to being Microsoft - yes we know. What's interesting though is Mark Cuban's take on Microsoft's positioning in the "iPod" market. From reading this post on his blog, he has some very good ideas for Microsoft, or Google, or Yahoo, regarding the portable music business. I own a Zune. I own an iPod. I like both. I'll comment more on this later once I'm more familiar with the Zune. It has its flaws, lots of them. But so does everything else Microsoft makes. It also has cool features the ipod does not, but more on this later. Back to the business: Ok, so according to Mark Cuban's estimates on his blog, Apple paid a total of just under $600m to the music industry for the sale of 1 billion song downloads. In other words, $600m buys you 1 billion songs - I can find better ways to spend $600m but that's pretty interesting. Ok so Microsoft has made it clear they are serious about the Zune and they should be. The ipod has turned Apple's business around. Surely there have been some Windows users who have made the switch to Apple. Steve Ballmer doesn't like this.

So Apple has 65% market share, what can Microsoft do? Everything. The barrier of entry to this market is one of the highest of any - but Microsoft sees this as an opportunity. I think Microsoft has screwed up the launch of the Zune and has positioned it entirely wrong. Their store, or "marketplace", is terrible but I'm more concerned with their marketing/branding strategy. They've said they are going to spend $100+ million advertising the Zune. What is their viral strategy? Unfortuantely, the Zune cannot and will not survive on the early tech adopters who buy everything, or the Microsoft fans (yes, they do exist), that would just rather own a MSFT device versus AAPL. So what do they need? A viral strategy. They need every Zune user to bring them 3 new Zune users. With the wireless technology, it's an easy sell to tell your friends about the Zune. What's most interesting, and back to the point of this blog though, is how much mileage could Microsoft get by giving away music?

Google paid $900m to MySpace to control the search business on their site. This was expensive. $575 million for 1 billion songs isn't expensive. $100 million to advertise/brand the Zune is expensive. What Microsoft should consider for Round 2 > and by Round 2, I mean a better marketplace, better software, and an upgraded better device...why wait until Round 2? Because they need a better product that people would be willing to sell for them virally (friends, family, co-workers, etc.). They need to position themselves so it's "cool" to tell your friends, and each user needs to be proud of the product they're recommending. This isn't rocket science. Taking it a step further, they should reward their customers for doing so, for instance free downloads. Microsoft would technically buy 100 million song downloads for $60 million or less. And using Microsoft's "rented" music strategy, they could potentially buy a lot more songs or downloadable rights for much less, probably $30 million. If they rewarded Zune users with free music, then it'll become very viral and very quickly.

I have no doubt Microsoft is serious about the Zune and serious about making it work, and that's why Apple needs to take notice.

Can Microsoft's Zune Carry a Tune?

Ok, Microsoft begged for this cheesy title when they named their new mp3 device the Zune. Once again, Microsoft is late to the party. Everything about this device just screams that it was rushed to the market. If you haven't yet heard the Zune is Microsoft's new "iPod Killer" - or lack thereof. Before I join the bandwagon of Microsoft bashing, I must remind everyone that the Xbox was last to market as well and right now it is the leader. PS3 is going to rock the market, their only problem (and big problem) is lack of supply.

Ok now back to the Zune. To Microsoft's credit, it has the potential to become a major player, although "iPod Killer" is definitely an overstatement. We must accept and realize this is how Microsoft operates. They are not expecting to take a 30% initial market share on the Zune or huge demand. The only thing I can justify is they decided to launch this "version 1.0" and rush it to market because they had no choice. They realized that they could wait another 6-12 months and come to the market fully prepared but they felt they'd be even further behind and have less of a chance. This way, they will have some Microsoft fans (yes, they do exist) and they will have plenty of early adopters make the switch regardless of what the news articles tell us.

Microsoft's business model and massive reach (hello, they have a new operating system just months away) allows them to bring virtually anything to market - and to make virtually anything a success. Now, for my competitive comparison: I'm a loyal iPod user and also an early adopter. The new Zune is larger and bulkier than the most recent iPod release, their Zune Store doesn't sell movies or television shows, it's extremely difficult to migrate your purchased music from iTunes into their new store, and their wireless feature only lets you send/receive files with other Zunes and not even with your own computer's wireless connection. Ooops! Not so fast, we must accept Microsoft rushed this to market and even the name. They don't even own Zune.com - obviously that would be one of my first recommendations, in terms of branding.

With all its faults aside - it is perfectly on time with Microsoft's overall strategy. I predicted this years ago before even Microsoft acknowledged this (by creating Windows Media Center and other announcements) but here's Microsoft's long-term strategy: They want to be your entire house's platform. What do I mean? Your computer runs Windows, your DVD player is your Xbox, your personal music player is your Zune, your cell phone runs Windows Mobile, you get the idea. They're well on their way to accomplishing this. Microsoft's biggest problem however is making it all work. I love the idea of not owning a DVD player and an Xbox and my Xbox being able to wirelessly connect to my computer to play all of my computer's songs wirelessly through my television's surround sound system. The Zune is early, it was rushed. They had to do this; and nevertheless, they've still committed $100 million to spend advertising it. It has flaws - lots of them in my opinion - but it's at the right time and they're on the right track.

Many would say it's Microsoft that's behind however let's step back a moment and I'll challenge you that it's Apple that's behind. Maybe not in the personal media player business, but in every other business.


Disclaimer: I'm a Microsoft shareholder.

Facebook Worth $1 Billion? SAYS WHO?

I'd like Yahoo to think long and hard about this acquisition before writing the check. $1 billion is a lot of money, even to Yahoo. Actually, especially to Yahoo with their Q3 profits being off 38%. Yahoo needs to ask itself, why were our profits off 38%? I hope they realize it's not because they have yet to buy Facebook - they have other, much larger problems. The core of Yahoo's business is its search related ads and banner ads. The rest of Yahoo is stickiness so that you'll use these other functions and see their ads. Yahoo Answers, Movies, Maps, etc. aren't there to generate huge profits - but rather to make Yahoo a one-stop shop. This isn't anything new, this is why they are the #1 website and also a "portal." Google is not a portal. At least not yet.

So if Yahoo has been the dominant player since its inception and has made smart acquisitions (for the most part) until this date, why do they think writing a $1 billion check to acquire Facebook is going to fix their problems? They're wrong if this is their thinking. Here's my rationale - and it's really simple: Facebook has 10 million members. If you exclude duplicate/fake accounts and one-time users, this number probably drops to somewhere around 9 million. If you also consider that its users are far less likely to use it once they graduate (ie. alumni spend 1/10 of the amount of time on the site as current college students), then the site has a peak at which it's quickly approaching. It's almost more of a service to college students than a money making machine. Are there ways they can monetize it better? Yes, plenty. Problem is, they have to be careful as these students are there because they don't want to be bombarded with ads - and if that happens, they'll leave.

Everyone would agree Facebook's value is with its members. The actual site, brand, etc. has very little real value. Its the user base that makes up Facebook's value. With this being said, if there was a better service/community then the users will leave. On that same note, if Facebook is valued at $1 billion - this is $100 per user. Do you know how nearly impossible it is to make $100 per user? While also supporting your overhead (employees: support staff, technical developers, server expenses, etc.) your actual cost is not only $100 to buy all of the users > but also to maintain them month after month. I remember when users were valued at $3-5/each. How they are worth 20x this today is beyond me.

If Yahoo wants to find out how loyal Facebook's users are...they should build their own social network similar to Facebook but exactly what students want...offer them $25 to signup and $25 for any friend they refer...and college students will get paid to signup and paid to cancel their Facebook account. Even if all 10 million members did this and everyone was referred by 1 other user (meaning Yahoo was spending $50 per new user), they'd still come out $500 million ahead. Come on Yahoo, let's think about this. Who cares if someone else buys it? Just sit back and laugh 3 years from now when you saved $1 billion and invested it elsewhere into something that can produce dividends.

Why Google Had to Buy YouTube

It's been weeks since the rumors began and already a few days since the deal went down but I'm here to tell you why Google had to buy YouTube. YouTube was Google's only way to penetrate the video market, and to do it quickly. Google Video was not gaining market share and was in fact, losing market share every month to its main rivals: Yahoo and MSN Video. What's worse? Both Yahoo and MSN could easily afford to buy YouTube and they would have easily done so, simply to hold Google back and force them out of the video market. Google couldn't afford to have this happen and it was a serious threat.

What better way to finally jump ahead of your competitors in the video space than by purchasing the #1 video site on the net which holds a 45% share of all online video? Exactly. So while we can argue the $1.65 Billion price tag and everything around it - Google didn't have a choice. So for the first time, Google had its back against the wall. But they passed the test.

Google continues to grow by leaps and bounds, this is their main threat. And their main problem is finding how to continue to grow. How do they make smart acquisitions? How do they justify them to shareholders? How can they continue to produce returns for their shareholders? Can they really get people to use Google Search 20% more than they already do? Probably not. This is why they have other offerings: Gmail and Google Calendar, etc. They need even more of their users' time. And they need to be a part of every website - whether it's through AdWords, or their analytics program for webmasters, or through Google Checkout to handle payment processing for online merchants. When you upload photos - they want it to be to Picasa, when you upload video - they've got YouTube, when you want to schedule a meeting - they've got Calendar, when you want to chat - they've got Google Talk, when you need directions - there's Google Maps. Let's also not forget Google News, Docs & Spreadsheets, Finance, Checkout (similar to PayPal), and who forgot they also own Blogger.com? They've got it together.

Let's not forget however that Microsoft's growth continues to outpace Google's. In fact, they have grown by an average of $3 Billion+ the past 3 years. So while Microsoft isn't "hot" like Google - they still have plenty of growth and momentum. More than anyone gives them credit.

So how will Google find a multi-billion dollar return on their YouTube investment? They'll monetize it just like they've done everything else - and it'll prove to be Google's best move yet. But, I wonder how much would they have saved had they written the check 6 months ago?