Charts: One Strong Evidence That We’re Headed Towards An Early 2000s Tech Stock Bust

Facebook is now worth more than Walmart!

Source: Quartz
Source: Quartz

Three years since Facebook went public, the social media giant’s stock has surged rapidly, while Walmart’s has remained somewhat stagnant.

As Quartz pointed out, Facebook’s stock has jumped over 30% in the last year as the broader S&P 500 struggled to grow. The surge in Facebook’s stock added more than $65 billion to Facebook’s market value, bringing it just slightly above Walmart’s $235 billion.


Source: Quartz
Source: Quartz

Facebook’s annual revenue is nowhere close to Walmart’s!

Back in the early 2000s, one of the biggest reasons why the dot-com bubble burst was because technology companies that weren’t generating enough revenue to justify their valuations. Arguably, we’re seeing the same thing happening now.

But! The charts above does not represent the broader trend.

It is, in fact, very unlikely that we’re headed towards a crash as violent as the one in the early 2000s….

Source: B.I.
Source: B.I.

As you can see from the chart above, we’re currently nowhere close to where we were in the early 2000s, when the bubble and subsequent crashed occurred. The only reasonable explanation, then, is that we’re at the height of the boom cycle. Every 10 years or so, the tech economy accelerates (boom) before decelerating (bust). We’re now at the height of the boom — and should expect to see the economy decelerate in the next two years or so.

During the bust period, some startups and companies in Silicon Valley will be hurt (especially those that are based on extremely lofty valuations). People will start screaming that it’s a bubble. But I suspect that the major companies, like Facebook, will emerge from the bust period just fine.

The REAL problem is if we don’t enter a bust period in the next few years and the economy continues to accelerate…

So, Apple Caved To Taylor Swift. That’s Smart.

screenshot 2014-11-13 08.09.27

Taylor Swift wanted Apple to pay artists during its three-month Apple Music customer trial period. In an open letter to Apple on Tumblr late yesterday, Swift called Apple’s decision to not pay artists during the three-month trial period “shocking, disappointing, and completely unlike this historically progressive and generous company”.

She even closed the letter with a gut punch: “We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation.”

After less than a day of the letter’s publication, Apple’s media boss Eddy Cue started calling reporters up to tell them the good news: Apple, after a meeting, has changed its position — it will now pay the artists’ label royalties during the three-months trial period.

The news broke on Sunday night. And everyone went into a frenzy.

Just how did a 25-year-old girl get the upper-hand against the world’s richest company?

But here’s the truth: sure, Apple did cave to Swift — but they did so to benefit themselves. As they would, and should.

Look, Apple is no charity. They’re not obligated to pay artists any more than Spotify or Tidal or any of the other music streaming services are paying artists. If they’re going to do so, they would need a very good reason to.

And they seem to have found it: marketing for Apple Music.

Apple launched Music in WWDC this year — a conference that normal people don’t usually watch. Sure, the press covered it, but in all honesty, how many normal people would take the time to read about Apple’s latest offering that isn’t a new iPhone or iPad?

To reach the normals, Apple is already planning a massive marketing campaign for Music. Swift, one could very reasonably argue, is just part of that marketing campaign.

Swift has got a massive social media following: 59.2M Twitter followers, 71+M Facebook followers and more than 5 billion views on YouTube. She posted the open letter on both Twitter and Facebook. It’s very likely, therefore, that at least (a lowball, back-of-the-envelop estimate) that 20 million people saw the letter.

For those 20 million people, here’s the first thing they’re going to think of when they start reading the letter: so Apple came out with this music service thing and my idol, Taylor, doesn’t like it because it doesn’t pay musicians. WTF Apple?

It’s the type of negative association that could potentially kill a product as fragile as the Apple Music. Apple can’t have that. And so an easy (and given how quickly Apple reversed its decision — cheap!) way to earn goodwill among Swift’s fans would be to, obviously, start paying the artists!

There’s also a bonus in store for Apple: since everyone thinks that Apple only changed course to appease Swift’s demands, she’s also implicitly pressured to put her latest album, 1989, on the service. This is important because Swift is special in the music business: she’s probably the only really huge star who isn’t represented by a label. She can do anything she want. So far, Swift has declined to put her latest album on any music streaming services. But now, after all that Apple has done for her, she’s going to be pressured to put her album up on Apple Music, or risk looking somewhat foolish.

After Apple changed its course, Swift doesn’t have a reason/excuse to not put her album up on Apple Music.

1989 was not only the best selling (8.6 million worldwide!) album, but also the first to earn the Platinum label in 2014. It definitely won’t hurt Apple to have the exclusive rights to streaming it on their new service.

As Swift would say, “Everything Has Changed!”

EXPOSED: This Is Hillary Clinton’s “Talking Points” For “Friends And Allies”

On Friday afternoon, Hillary Clinton’s campaign spokeswoman Adrienne Elrod sent out a memo to supporters containing “talking points” for “friends and allies”.

The memo, which includes a preview of Clinton’s speech on Saturday, articulates how the campaign plans to ramp up its efforts in the primary states by focusing on building a grassroots organization.

Among other things, the memo also addresses how the campaign plans to deal with the presence of Hillary’s husband, Bill Clinton’s presence at his wife’s events (“the speaking program will feature Hillary Clinton exclusively”) as well as how Hillary will go into greater detail with regards to her specific policies in the “coming weeks and months.”

Throughout the entire memo, the Clinton team makes one thing clear: they’re not taking anything for granted.

Read the full memo after the break.

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EXCLUSIVE: Uncertainty Clouds Over Twitter After CEO Abruptly Resigned; Many Skeptical Of iCEO Dorsey

It’s been just a little under a day since Twitter CEO Dick Costolo unexpectedly announced his resignation, putting in place co-founder Jack Dorsey as the “interim CEO”. Dorsey will serve as the interim CEO while the company’s board searches for a permanent CEO. The official narrative, provided by Twitter and prominent investors such as Fred Wilson, is that Costolo has served his role in Twitter: he took a company from $0 in revenues to millions, and took it public. He has accomplished everything he wanted to in the company. His time there is done.

But that sounded a little too perfect for us. Twitter is, after all, a company known for aggressively hiding the truth from the press — or even its own employees. As New York Times columnist Nick Bilton wrote in his book Hatching Twitter, Twitter aggressively stage-manages every executive exit, painting every departure as mutually-agreed upon and for the best of the company. With that in mind, we asked around. And we found a few people who were willing to talk to us, as long as we do not attribute the information to them.

Our two word summary of everything we heard is going on at Twitter: it’s messy.

Costolo’s unexpected departure

Short of Twitter’s most prominent investors and the company’s C-suite, almost no one in the company knew — or got any hint — that Costolo was going to resign. Some felt betrayed that the everyone else, including the media, learned the news at the same time they did. But more importantly, they were sad. Costolo, who used to be a comedian, was universally loved within Twitter. He was incredibly funny, warm and personable.

When Costolo announced that he was resigning, those in the room gave him a standing ovation, while others began tweeting with the hashtag #ThankYouDickC.

“We all knew how much he tried for the company,” said one senior executive we talked to. But at the end of the day, Costolo did not satisfy Wall Street’s expectations, after numerous misses on revenue and user growth. As Twitter’s investors became more and more vocal about the dismal state of the company, many began calling for Costolo’s head to roll.

“The Dick I know will only resign when he knows that there’s really nothing more he can do for this place he loved so much,” the senior executive continued.

Dorsey, isn’t as well-liked within Twitter… perhaps for a good reason.

The fake CEO search

In 1997, when Steve Jobs returned to Apple, he was given the “interim CEO” title by the board. Years later, he dropped the “i” in front of the “iCEO” title. Several employees believe that this is going to be the case with Dorsey. Sure, he may be the “interim” CEO now — but not for long, they told us.

So why pretend to have a CEO search when the board is eventually going to make Dorsey the permanent CEO?

“It’s all part of an illusion, at least that’s what I think, to make sure that no one suspects a coup occurred,” one employee who has worked at Twitter for a number of years told us. “They already made up their mind… and they know that no one wants the job more than Jack.”

There’s also another reason why it’s important to have a broad CEO search: in case Dorsey screws up.

The responsibility of appointing a competent CEO ultimately falls onto the board. If Dorsey screws up as the CEO, investors are going to wonder why didn’t the board hire someone more competent from another company, or at the very least, not from within Twitter. If and when that happens, the board then say: look, we did try to look for other candidates, but we believe Dorsey is the best guy to lead Twitter. It’s not on us that he screwed up.

Is a distracted Dorsey any better than a focused Costolo?

The more we talked to former and current Twitter employees to get their take on Costolo’s resignation and Dorsey’s iCEO status, the more we heard this: if Dorsey can’t make any money at Square, what makes you think he’s going to make any as Twitter’s CEO?

One of the most important reasons why major investors wanted Costolo canned was because Twitter’s revenues weren’t increasing at a pace that satisfied Wall Street. Twitter’s stocks took beatings regularly. It was getting ugly. But does it mean Dorsey can fix that problem?


As The Verge noted, “the value of [Square] compared to its revenue has been steadily declining. That’s likely because it has become clear that Square’s current business model can’t generate a profit, no matter how large it scales.”

Even worse still, insiders pointed out a critical flaw of Dorsey’s: he seems to be always distracted with other projects.

When Dorsey was Twitter’s CEO, a position he was fired from in late 2008, he often prioritized personal projects over the state of the company. As Bilton wrote in Hatching Twitter, Dorsey would often dash from the office at 6 p.m. sharp, to go to his favorite extracurriculars: sometimes a drawing class, sometimes yoga, other times a dress-making course.

Now, Dorsey is the CEO of Square, in addition to being Twitter’s interim CEO. Square is a company that has taken on close to $600 million in funding from investors who are eagerly waiting for their return on investment. “It makes you wonder… is Jack going to prioritize his baby [Square], where he found a second chance after being booted out [of Twitter] humiliatingly, or is he going to prioritize the company that, well, betrayed him?” said a former Twitter employee. “The way I see it, Twitter is doomed under Jack.”

The chorus is getting louder: take Twitter private!

A well-placed source within Twitter confided in us that, in his opinion, the best thing Dorsey can do is to take Twitter private while trying to fix the company’s business model. He believes that Twitter’s business model — wanting to be like Facebook, but being unable to — is in need of serious fixing.

If you look at the numbers, it’s a belief not entirely unfounded.

Twitter’s monthly average users (MAUs) is growing, relative to the social media world, very slowly. New users are not signing up. Normal people — those who aren’t celebrities or journalists — aren’t using it. If Twitter becomes private again, the reasoning goes, Twitter can figure out other measures of success and monetize on those new measures beyond just raw user numbers. “Twitter should stop playing a game they know they’re going to fail in,” our source said.

In terms of raw user numbers, Twitter is way behind Facebook. Shareholders want Twitter to be Facebook. It can’t. It is something different, but no one wants to embrace Twitter’s difference. So the next logical thing to do is to take Twitter private, so it can figure out its future strategically without taking constant beatings from investors over every single misstep. Twitter’s management needs room to breathe. It’s suffocating.

As we said before, it’s messy.

Chart: Why Snapchat Only Wants Content Formatted Vertically – And Nothing Else

If a company wants to advertise on Snapchat, or participate in the Discover media section, it’s going to have to format the story/ads vertically. It’s one of Snapchat’s non-negotiables. And it’s a smart one, because Snapchat’s researchers realized something very early on: most people can’t be bothered to turn their smartphones horizontally to view a picture or video. Rather than turning their smartphones around, they would just choose to not view the content at all… which means that Snapchat stands to lose a lot of potential eyeballs (views = revenue).

In a recent profile on Bloomberg, Snapchat CEO Evan Spiegel emphasized as much when describing the kinds of ads Snapchat is running (emphasis ours):

The ads are about 10 seconds and resemble conventional TV spots, not some novel Internet format. Their most unusual aspect is that they fill the screen when a smartphone is held vertically, without the user having to turn the phone sideways, a distinction the company asserts is important. In its sales document to advertisers, Snapchat claims its users are nine times more likely to watch an entire ad because they don’t have to rotate their phone. In separate research, Google backs up the claim that larger video ads are more likely to be seen. According to a May report from its DoubleClick unit, the most commonly served video ad on the Web and smartphones, a small rectangle that typically appears on the side of a page, is viewed by a pathetic 19.8 percent of visitors to that page. Snapchat’s vertical orientation also means that advertisers can’t repurpose their existing ads, which are in a horizontal format for YouTube and Facebook. Advertisers say the hassle is expensive, but that doesn’t concern Spiegel much. “We are fortunate that we have an audience that is compelling and big enough that people will change their video to make it a better product,” he says.

And here’s the one chart from venture capitalist Mary Meeker’s 2015 Internet Trends slide deck that perfectly explains why Spiegel’s company is willing to accept only vertical ads/content…

Vertical viewing mary meeker

Simply put: as viewing content on mobile becomes an increasingly popular option for Millennials, vertical viewing will be too. And it’s smart for Spiegel to follow those trends early in the game.

After Buying AOL, Verizon Is Going To Have To Confront This Problem Soon…

Tim Armstrong, Chairman and CEO of AOL, talks at a media summit, Thursday, March 10, 2011 in New York. (AP Photo/Mark Lennihan)

Big news today: Verizon is acquiring AOL for $4.4 billion in cash, or $50 per share (on Monday, AOL was $42.59, which means Verizon paid a 17% premium). This deal came right after Goldman Sachs placed a “Sell” rating and $38 price target on AOL, which is basically a hint for its clients to sell the stock (although one could argue that getting AOL for $4.4 billion is a steal given that AOL generated $2.5 billion in revenues last year alone).

Now, the “business” side of the deal makes sense. AOL, under CEO Tim Armstrong, has been steadily building out its ad tech stack. Armstrong wants AOL to become one of the top three biggest players in the realm of online advertising, next to Facebook and Google. It is currently at number 11, and one of the easiest ways it can get to number three is if it uses Verizon’s scale to do that. In exchange, AOL offers Verizon a ready-made ad tech platform that shows a lot of promise. It’s a logical symbiotic relationship. 

But for $4.4 billion, Verizon will also get AOL’s media properties (the biggest being TechCrunch, Engadget and the Huffington Post). That’s a lot of baggage Verizon is not going to want, especially since Verizon most likely only wanted AOL for its ad tech stack and a shot at getting AOL’s 2.1 million dial-up subscribers.


Ad tech stack refers to the ability for marketers to buy and sell ads using an algorithm, rather than human-to-human interaction. Here’s Bloomberg describing why it’s important: “Automated ad buying is an essential tool for companies such as Verizon as they increasingly offer content over mobile phones and the Internet. Digital marketers are demanding a streamlined buying and selling process — leaving those without a programmatic platform at risk of losing those ad dollars.”


So, what’s going to happen to those media properties?

(AOL spent a lot of money acquiring these properties. In 2011, the company spent $315 to acquire the Huffington Post.)

The easiest thing to do for AOL would be to absorb these media properties and let them run independently. But that would be a bad idea for Verizon: AOL’s media properties aren’t only not profitable, they’re often operated at a loss too (AOL had more revenue from subscription products in 2014 ($606.5 million) than from display ads ($593.1 million).

Ideologically, owing these media properties would not advance Verizon’s agenda either: the company has tried to own the media narrative before with its own site SugarString, and failed spectacularly in doing so after banning its reporters from writing about certain subjects that made Verizon uncomfortable (NSA, privacy, etc.).

The only logical thing to do is for Verizon to spin out AOL’s media properties.

There are two ways this can happen.

One of the ways Verizon can do so if it spins out the media properties with a third partner (other than AOL and Verizon), such as German publisher Axel Springer, as Re/Code’s Peter Kafka reports.

But there is a more exciting (and possibly profitable!) alternative: Yahoo could buy up AOL’s media properties.

Yahoo, under CEO Marissa Mayer, has developed further and deeper into the content business than her predecessors in an effort to cover its falling search market share across the world.

Today, Yahoo’s editorial team includes star reporters such as David Pogue and Katie Couric (word is on the street that Yahoo is actively pursuing Bill Simmons after his breakup with ESPN late last week).

It has created digital “magazines” for its politics, fashion and tech verticals, among others.

It’s clear: Yahoo is serious about its content business. And if it wants to go all out on the content business, the easiest way to do so would be to absorb AOL media properties’ talented writers and editors, along with the sites’ established brand names.

Doing so would also make it easier for Yahoo to penetrate the content industry of other matured markets, such as China, Korea, and the U.K., where sites like the Huffington Post have already established a strong presence (the Huffington Post generates 1.1 billion views across 9 different markets each year).

If Verizon decides to spin out AOL’s media properties, it could also provide a nice exit for Armstrong, who currently owns 1.9% (~$7.4 million) of AOL (not taking into account the hidden clauses/sweeteners usually thrown into contracts like this one).

Overall, the market seems pretty happy with the deal: AOL shares surged 18% (~$50.26) after the deal was announced.


UPDATE: Verizon is indeed looking to spin off its flagship Huffington Post content unit, reports Re/Code’s Kara Swisher

Quick summary of what Swisher reported:

  • AOL had been planning to spin off the Huffington Post while negotiating its deal to sell to Verizon.
  • “… talks have been most serious with Axel Springer, the German media conglomerate, but a number of private equity firms have also expressed interest…”
  • Price: $1 billion (this is more than three times what AOL paid for the Huffington Post a few years ago)
  • Will either be a complete sale, or more likely, structured as a joint venture.
  • “AOL’s other content properties are not part of these talks.”

The Countdown To Uber’s IPO Starts Now

Uber angry taxi vs

Don’t be surprised if mobile ride hailing startup Uber goes public in the next year and a half.

According to an exclusive report published on the Wall Street Journal earlier today, Uber is planning to raise a $1.5 – 2 billion round by the end of this month, citing people with knowledge of the deal. A later report by the New York Times confirmed the news, and added another interesting fact: instead of using the new funds for expansion purposes like the company usually do, Uber plans to use it for “strategic [purposes], with an eye on partnerships.” With the new funding round, Uber is aiming for a ~$50+ billion valuation, although that number can quickly balloon as Uber talks to more investors.

This new round is interesting for a few reasons.

First of all, it would make Uber the most highly capitalized private startup in the world, beating Chinese smartphone manufacturer Xiaomi (last valued at $45 billion).

Secondly, if Uber’s post-money valuation  reaches or exceeds $50 billion, the company will join Facebook as the only Silicon Valley startups to have attained a $50 billion valuation as private companies.

But the third point should be the most interesting for Uber observers: going public.

Late last year, as we were preparing our huge “State of Uber” post, we talked to a few of Uber’s investors.

They told us a bunch of stuff about the company, but the one notable thing that stuck out was this: most of Uber’s investors expect the company to IPO when it reaches a valuation in the ballpark of $50 – $100 billion. This belief was established based on several factors: Uber’s aggressive foreign expansion, the predicted maturity of current markets and trajectory that the company is headed towards under the guidance of CEO Travis Kalanick.

On average, Uber raises a new round every seven months. Which means that if Uber hits the predicted $50 billion valuation (which I don’t doubt at all that it will) sometime soon, then it would certainly not be too far-fetched to think that Uber might  go public in the next year and a half or so.

As the WSJ highlighted, it is important to note that all current/future investors are/will be investing on Uber’s potential, and not on its current performance (although it has, statistically, been nothing short of spectacular).

When Facebook raised their final round at a $50 billion post-money valuation in early 2011, the valuation was worth about 25 times its prior-year revenue of $2 billion. But given that Uber’s net revenue last year was $400 million, Uber may eventually be worth 120 times its trailing revenue – a legitimate cause of concern for investors who are worried that the company may have taken its eyes off the road of profitability.

Uber’s ubiquitous service currently exist in some 250 markets around the globe, and has secured more than $5 billion in debt and equity financing from investors just five years since inception.

DON’T MISS OUT: The Uber Playbook, Revealed

BONUS: Want to get a marketing job at Uber? Make sure you can answer these tough questions…