Posted on March 4, 2014. Filed under: Uncategorized | Tags: , , , , , , , , , , , , , , , , , , , , , , |

Today we live in a world where social media has taken a centre stage and a sizeable percentage of the overall world population is actively using various types of social networking platform. Social Media is about connectivity and interactive engagement where a single POST or an OPINION is shared, liked, and commented upon creating a feedback loop almost immediately.

So a company today is able to collect more or less an accurate feedback from consumers without a time lag. For example, a company or a marketing firm with access to thousands of emails can now follow the individuals linked to each emails on a social media platform for a week or months and better profile their behaviours as consumers as well as individuals. And these sort of informations are extremely important for a company. So companies that are able to keep an interactive and engaging presence on Social Networks will surely see the benefit. Take for example TESLA, by using social media networks the company was able to quickly spot the problem with Model S fires and managed to instantly respond to its customer base and got engaged in an interactive conversation winning back most of the customers or as TESLA would say ” able to correct the misperception ” around the product.

And besides commercial companies today you have authors, universities, celebrities of all sorts connected to their audience on various social networks and able to instantly promote a book or simply keep their readers informed and also every now and then get engaged in an interactive discussion enabling an author to better understand their readers and expectations etc. Universities are not only able to promote themselves but also get engaged in various types of conversation, debates etc. And Celebrities have 24×7 instant connection with their fan base enabling them to not only promote a movie or an album etc but also interact with their audience on day to day stuff. Researches and LABS are creating communities on social networks that allows them instant connectivity and visibility with a wide range of audience and the open nature of the social media platforms is helping them create better, open and efficient collaboration. So a research post or a headline is instantly picked up by thousands and the commentaries with all types of opinions  comes pouring in immediately.

In short with the advent of Social media networks, we have started to live in a 24×7 very interconnected world where OPINIONS on anything and everything are shaped and re shaped almost immediately.

And overtime the SOCIAL MEDIA space will most likely evolve and that’s already happening. For example look at INSTAGRAM, today it has it’s own interactive community with millions of user in social media. Then you have VINE ( the video sharing platform ) which has over 40 million active users. PININTEREST has also started making waves in the social media space with over 10 million active users on a monthly basis. So the social media space is clearly evolving and will continue to evolve going forward.

But as a word of caution I must add that the astronomical PRICE TAG that most of these platforms carry does create an inherent bubble because it is very likely that some of these ideas will or may fail down the road and also the core business model will need to evolve to make sure the underlying business is and remains sustainable. There is also a real risk of SOCIAL MEDIA FATIGUE as evident from the fall in overall usage of social networking sites like Facebook, Twitter by average folks and this is why leading companies like Facebook would need to be forward looking in order to stay relevant and most likely the recent acquisition of whatsApp by Facebook carrying a whooping $ 19 billion price tag is a part of that strategy.

And some would rightly argue that overpaying is quite a risky way to grow your business and many Silicon Valley based companies have already paid the price of getting overboard with an acquisition. And here are some examples of spectacular failed acquisition. After paying $ 15.3 billion to acquire  Network Solutions, VeriSign sold the company for just $ 100 million taking a write down of $ 15.2 billion. The other one that comes to mind is Terra Network’s $ 13.8 billion acquisition of LYCOS only to sell it later for  $ 95 million. Then there is HP’s $ 8.8 billion write down over AUTONOMY. And the list goes on. In short Silicon Valley does not have a solid track record in being able to monetise pricy and premium acquisitions.

So is quite plausible that Facebook may have to take a write down on the price it paid for WhatsApp going forward because the instant messaging space is quite crowded and even with a freemium model “FB” may struggle to generate the sort of return required to justify the $ 19 billion price tag but this blockbuster acquisition has clearly pushed up the overall valuation of the instant messaging companies and in most likelihood BlackBerry Messenger Service could be one of the biggest beneficiary.

A business needs to keep evolving to stay relevant and the same rule applies for businesses  operating in the social media space. The difference is Social Networking sites don’t sell a product to their user base but instead use all of their users as PRODUCTS to make money. So the users i.e. all of us ( as users ) will have a strong say in what happens to companies operating in the social media space. And with regards to social media platform as an investment, I personally believe the astronomical valuation could potentially be damaging to the overall progress of the sector because remember perception plays a key role so a couple of big failures could seriously put off investors and this is why businesses operating in the sector will not only have to evolve in terms of the uniqueness of their respective services but also on how they generate and create revenues going forward as for now almost all of them have a similar revenue model. And companies like Facebook can and should learn from Google on how to build a real and sustainable business.

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Making Sense of The Policy Debate Inside The Financial Market

Posted on June 18, 2013. Filed under: Uncategorized | Tags: , , , , , , , , , , , , , |

There is no shortage of opinion in the market today on the current state of affairs of the global economy and most of the commentary as well as analysis seem to be centred around Central banks policies and its overall current impact assessment and on how things may play out going forward. The discussions are generally focused on what the central banks especially the Federal Reserve System (aka the Federal Reserve ) did do and didn’t do during the financial crisis of 2008 and in the immediate aftermath and also what it should have been done instead among other things.

So during a conference call to discuss a deal, I managed to get myself into a what I would probably classify now as a silly debate on phone with two of my dear analyst friends in wall-street. It was quite evident from our conversation that  both of them had pretty strong opinion on one central banker in particular and I won’t say it’s shocking to learn how some folks create and form an immediate opinion on someone based on mostly what other market practitioners are saying or have said for that matter but what does surprise me is when people fail to realise that markets are run by human ideas and not all Ideas are good. It is good to have different ideas along with different perspective and we can always agree to disagree and but what we shouldn’t do is dismiss everything simply because it doesn’t fit with our own school of thoughts.

The reality is most of us do not have the essential or required foresight to accurately predict or map out the outcome of the implementation of an idea, strategy or decisions we are going to make but we do know that we can’t necessarily FIX today’s problems by applying tools of the past. And the financial crisis of 08 can’t be compared to other crises before it so fixing it will require a new approach and application of new tools. But the problem is we also live in a different era, a 24 x 7 world where any and every decision a policy maker takes will get scrutinised instantly and people pouring in with opinions expecting instant results without realising that a policy needs to go through a policy cycle in order to be fit for impact analysis. The market tends to carry out an instant autopsy right at the birth and sometimes even before an idea or a policy is fully conceived. And yes there are situations where initial debates are quintessential and do help in formulating good policies.

This crisis has been a breeding ground for learning and testing ideas. And unlike many of my friends I haven’t yet made an opinion on the decisions taken by Mr Ben Shalom Bernanke as I believe it is a bit early to carry out a full and comprehensive assessment and analysis of each and every policy decisions taken by the top central banks especially the Federal Reserve Bank of United States. Also it will be unwise to formulate a clear opinion on the type of legacy Mr Ben Shalom Bernanke as the chairman of the FED will leave behind. We will have to wait and see. And to those who are extremely eager to write their version of immediate history I would say this, where is the logic and common sense behind a person writing an auto biography at age 21 when you know you may end up looking like a complete idiot at the age of 65. As human beings we are never a finished item.

Whatever may become of Mr Ben Shalom Bernanke’s legacy, he has clearly been one of the most proactive central banker who made bold and conscious decisions to get ahead of the crisis and to add to that I would say that I have more faith in him than his house mate at Winthrop house in Harvard, Mr Lloyd Blankfein. Also his policy decisions will most likely keep many student of economics around the world busy for some time to come.

In order to make sense of a policy and policy decisions you do need to spend time on understanding the person or people behind the policies. It is important to look at the bigger picture and develop a better understanding of how that person or a group of people think and react in a given or different situations, how they make specific decisions and why, what is their thought process, what are their priorities, what is their understanding of a particular situation and what are they trying to achieve among other things. The ability to fully grasp a situation differs from people to people.

We live in a Facebook world where most of us tend to post and share our thoughts before it had a chance to fully develop or evolve and the same goes for policy making. A fully developed policy idea takes time to evolve but since most policy decisions during the crisis were made against a ticking clock they were generally half-baked ideas so there will obviously be some uncertainty around them which may cause or continue to create volatility in the market. And it is highly likely that most policy makers including of Mr Ben Bernanke are probably keeping their fingers crossed and hoping things will work out well eventually and history will be kind on them but we are not there yet.

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