The JP Morgan “Twitter Fund”

The announcement last week that JP Morgan is launching an investment fund for certain digital companies has proponents of the “greater fool” theory crawling out of the woodwork and pointing to the wreckage of the tech bubble from ten years ago.  This announcement closely follows the news that Goldman Sachs is offering clients an opportunity to buy into Facebook at a valuation of $50 billion.  While many have pointed to the copycat nature of the JP Morgan fund, I believe that the bigger theme is a nearing peak in valuations for social media companies.

First, the facts.  The fund is going to have no more than six companies in it, and Twitter alone will represent over half of the fund.  Not surprisingly, this opportunity has quickly been named “the Twitter fund.”  JP Morgan intends to raise $500-750 million from wealthy investors from its Private Banking division, each of whom must pony up a $1 million minimum.  The other companies have not been identified publicly and may not be known yet even within JP Morgan.  Fund manager Larry Unrein has confirmed that the terms of the investment give Twitter a notional value of $4.3 billion, up slightly from $3.7 billion in December, based on an earlier round of funding.

A quick dive into the numbers show some frothy sentiments from investors.  Twitter had actual revenues of $45 million in 2010, and the most aggressive predictions put the upper limit for 2011 at $150 million.  Using this assumption, JP Morgan investors value Twitter at nearly 29x revenues.  By way of comparison, Goldman Sachs investors value Facebook at 12x 2011 revenues of $4.1 billion.  Keep in mind that we are talking about revenue multiples, not earnings multiples.

Now, this lofty valuation could be justified if Twitter opens up its ad platform to the general public and starts bringing in billions of dollars of ad revenue over the next three years.  And it could be justified if one assumes that either Google or Facebook will buy Twitter very soon and integrate its functionality.  But neither scenario is likely to happen.  Twitter doesn’t have the eyeballs necessary for advertisers to pay top dollar, and most Tweets don’t occur on twitter.com anyway, so potential users won’t see the ads.  All user metrics point to far lower levels of engagement on Twitter than on other leading social media sites.  As for a buyout, Google and Facebook have both had on-and-off talks with Twitter for over two years now, but there has been no offer.  Why?  Both companies are wary of overpaying for a company that isn’t likely to ever hit a billion dollars of revenue.

So ten years after the collapse of the tech bubble, why are investors lining up to take more pain?  Isn’t it obvious that when retail investors buy companies at insane valuations, most experts call the top?  Is it different this time?

No, it isn’t different this time.  Twitter management insists that its consumer database alone is worth billions, but in the end, valuations always come down to multiples on earnings.  JP Morgan itself isn’t putting any money at all into the Twitter fund – that should represent a clear warning sign.  Unless there is someone else out there willing to value Twitter at $6-8 billion, the JP Morgan fund could take a beating if consumer sentiment changes directions quickly.

21st Century Graffiti

I am not the most tech-savvy person in the world, so it took me a while to catch on to these strange blocks popping up everywhere.  A friend of mine filled me in on the phenomenon that I was missing out on: QR codes.

QR (quick response) codes are little squares of code that can be scanned by smart phones and link users to all sorts of information.  In short: they are a marketer’s dream.  These codes can be found anywhere from the bottom of a perfume advertisement in a magazine to the bathroom stalls in a club, logging face time with smart phones all over the world.  Now that the iPhone and the Android system have exploded across the market people of all ages have the capability to scan these little codes wherever they go.  QR codes can be linked to web pages, display text, link to URLs – the options are nearly limitless.

Perhaps the greatest way to use QR codes as a marketing technique is to present them with little to no information at all.  Nearly anyone can create their own code using online generators, and what better way to log site visits by posting a code on a bathroom stall and leaving it at that?  The phrase “curiosity killed the cat” comes to mind when musing about the use of QR codes as marketing schemes.  Give consumers a code to something and tag it with a phrase like: “New club opening, check it out…” and you are guaranteed to get a solid number of hits if the QR is linked to a website.  (Granted, the number of scans is contingent upon where the codes are placed and how many are available.)

The rising popularity of QR codes is just one more way people are linking print media to electronic media.  Magazines, newspapers, fliers and billboards utilize QR codes to direct people to websites and media just as footnotes direct readers to additional information on a text.  QR codes are merely modern day footnotes linking the world of print media to the ever-changing world of multimedia.

Beyond their practicality as a marketing technique, QR codes have caught on in the art world.  If you look closely enough, you can see codes adapted by artists in every facet of life, from giant wallscapes to cow sculptures on the sides of streets.

Yes, QR codes are one of the greatest marketing techniques we have seen so far, but beyond that they are an artistic revolution.  Although there are plenty of kids preserving the fine medium of spray paint, what are QR codes but 21st Century graffiti?  Where gangs once marked their territory by tagging walls and subway stations, corporations are now marking theirs with neat little strategically placed squares.  The main difference?  Corporations probably spend millions of dollars on focus groups in order to determine the most profitable places to leave their mark.

A History of Web Standards

Hold on to your mouse because you are about to be deployed into a good ol’ fashioned browser war.

It’s safe to say that by 1994, America had discovered the World Wide Web. We were amazed at the lightning-fast speed of our 28.8K modems and we almost enjoyed hearing the bangs and whistles blasted by our speakers when connecting to this fascinating new world.

Most of us began our Web journey by subscribing to online service providers, such as Prodigy and Compuserve, but eventually settled with a service that USA Today declared the fourth largest influence on “How the Internet Took Over:” America Online (AOL).

Besides the friendly greeting of “Welcome! You’ve got mail,” AOL connected us to most every website we could ever want, sparked our interest in instant messaging, and brainwashed us into believing that e-mail was an essential part of everyday life. With it’s inexpensive service and all-in-one package, AOL seemed to be the perfect way to view the Web.

But as we’ve now come to realize, what’s popular on the Web one day, isn’t so popular the next.

Flash forward two years. A Web navigation tool called the “browser” entered our lives and we began to access the Web in a less software-like fashion.

The first widely adopted browser was Netscape Navigator. Most of us welcomed the teal information-guide with open-source arms onto our desktops and into our lives. Netscape allowed us to view the Web without having to log-in through an online service provider. But a software-behemoth named Microsoft became extremely uneasy about Netscape’s attempt to make friends with the American public and literally saw an open “Window” into conquering the browser market. This began the first browser war.

The war spawned when Microsoft licensed Netscape Navigator and released its own version of the browser called Internet Explorer 1.0. Three months later, Microsoft unleashed an updated version of IE 1, logically titled Internet Explorer 2.0, which unlike Netscape, was available to all Windows users for free.

Over the next few years, it was pure bedlam between Microsoft and Netscape. Both companies regularly updated their browser, resulting in an unstable products, which were designed with little to no standards. Web designers often took sides and displayed messages along the lines of, “Webpage Best Viewed in Netscape.”

The war took an abrupt turn when Microsoft decided to take advantage of its status as the most widely used software company in the world. It bundled Internet Explorer in with the Windows Operating System. Although Microsoft secured victory, this abusive act of dominance was, and still is, hard to swallow for most techies.

Because of this pandemonium, along with future theories that the Web will connect to many devices, the technology community has come to appreciate the need for Web standards. Complying to Web standards promotes visibility, advocates accessibility, and secures the stability of a webpage.

I believe complying to Web standards is a necessity. While programmers often (and usually do) become frustrated adapting their interactive website to fit the needs of Internet Explorer 6 users, the fundamental intention of the World Wide Web is to broadcast information to everyone; a utopia of browsing. And though it may not look as sexy as it does in Safari, Firefox, or Chrome, information should be clearly visible and easily accessible to anyone surfing the Web.

We’ve Come A Long Way Baby

I ran across this video from 1994 where Bryant Gumble and Katie Couric were trying to define the Internet.  This wasn’t actually on the air – they were just taping during a commercial break.  Take a look. The video is kind of funny but it made me think too.  So much has changed since the mid-nineties – the way we work, the way we entertain ourselves, the way we learn, the way we stay informed.  Beyond the economic impact, it’s simply amazing to think about how our world has evolved.  What do you think?

The Internet of Things

“Meet George Jetson!” “Jane, his wife!”

As the familiar tune of Hanna-Barbara’s classic space-age cartoon joyfully bounces in your ears, it is likely that you will remember the futuristic themes scattered throughout the show. An alarm clock that communicates with your daily planner – waking you up early for your 5am flight. A washer and dryer that reads your tags and gives you advice about stain removal. Or even the ability to turn your home lights on and off while you are sipping Pina Coladas 1,000 miles away. But If you thought these one-time seemingly outrageous and unimaginable concepts were only possible in cartoon land, think again.

In 1999, a Jetsons-like idea known as a the Internet of Things was introduced to the world. The idea states that one day our physical surroundings will be able to communicate with our digital life – and is becoming a feasible reality.

The beginning of the ultramodern theory suggests that all things in our daily life will eventually come equipped with small identifying devices powered by radio frequencies – the same idea as tagging animals in the wild. These identifiers would enable us to easily keep track of general things like keys, shoes, the remote control, and ideally assist businesses by identifying inventory and wasted goods across the globe.

Over a decade later, with over 1.7 billion people connected to the Internet and 2015 predictions in the 2.6 billion range, the Internet of Things is beginning to show signs of realism with a major corporation seeing potential in the idea.

IBM has publicly made its presence known to take charge of the Internet of Things theory by saying “data is essential.” In a recently submitted video to YouTube, IBM explains that the driving force that makes the Internet of Things possible is the ability to access user data.

IBM then maps out what they call an idealistic morning: Your alarm clock waking you up early for a meeting by syncing with your digital calendar. The alarm clock also checking ferry times and calculating these to determine your wake time. While driving to catch your ferry, your vehicle interacting with the ferry system and advising you whether your ferry is on-time or delayed.

Jumping from the idealistic to the realistic, many products are beginning to emerge that would make George Jetson feel right at home.

Ambient, a highly regarded gadget and device company, has designed a clock that pulls data directly from Google Calendar, and displays colorful notifications which inform you about your upcoming events.

SmartLabs technology company has come up with a way to illuminate your home and control your entertainment system though a web-enabled phone.

Touch Revolution built a Google Android powered washer/dryer, fully equipped with a stain guide, touch screen controls, and a tag decoder for those hard to read labels.

But will the Internet of Things catch on?

As our world becomes more connected to the Internet, so will our things. It is only a matter of time before our gadgets have a data plan attached to them, with rebates being offered for light switches and two year agreements for door knobs.

Over the next few years while you are watching TV on your toaster and looking up recipes on your microwave, pay attention to how dependent you are becoming on these devices.

I believe we should strive to remember that as our things become more connected to us, we should not become overly connected to our things.