Robi Ganguly’s Big Ideas

As per the Twitter note I had up, I got a Macbook the other day. I’ve been planning to get a Mac at some point and decided recently that I really needed to have a personal laptop. Not wanting to get caught buying the new fancy gadget right before it becomes obsolete, I opted for a Macbook instead of the Macbook Pro. I found a decent deal on Craigslist on a new Macbook (gotta love the Internet.. it was still in its box, untouched) and picked it up yesterday.

So, today I embarked upon installing Vista on it.

Surprise, it was freaking easy! Yes, I’m a Microsoft fan and I own a bunch of Apple stock, but I was shocked at how easy it was. Most of the time was spent downloading/letting files load. Basically, the process went like this:

• Download Bootcamp
• Run Bootcamp
• Burn a cd with Windows drivers
• Install Vista
• Install the Windows drivers
• Set up your network connection and watch Vista automatically identify problems and update drivers etc

Now, for those of you who don’t even like to install software and are overwhelmed by the personal computing experience – ok, fine, it’s not that easy. But really, as far as installing and running two highly complicated Operating Systems on the same laptop goes, this was about as smooth as I can imagine. As I’m typing this, I’m working in Vista, listening to Yahoo! Music Jukebox while blogging in Windows Live Writer, on a Mac. Only a few hours removed from undertaking the installation process. That’s pretty damned cool.

I’m sure I’ll discover some funky stuff as I play with this and maybe I’ll put up a follow-up post, but the only annoying thing that I ran into was that I set up my partition for Windows to be too small (the dialogue boxes when making these choices could certainly be better). It looks like the only way to fix that is to clear the Windows partition and start over. But given how easy this install process was, I know that’s basically 20 minutes of my time so I’m fine with it. If I discovered this much further down the line (after I’d really installed a bunch of apps, stored a lot of data) I’d probably be pretty damn peeved.

Here’s a suggestion, if anyone from Apple is listening: you folks should fix those dialogue boxes and perhaps, see if you can make the partitions adjustable. The former is pretty easy to do folks.

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Well, the good news is that I’m making more decisions these days and pushing forward several important things. The bad news is, I’m not having as much time to sit, think and write as I would like. But, between 16 hours of travel time this upcoming weekend (heading to a conference in Miami), and some newfound mobility in my computing life, that should change soon.

In the meantime, check this out. It’s freaking cool, of course, but, the fact that my friend Sarah could send this on to me in email and then I can go find it on YouTube to share with all of you is the really cool part.

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Question: What happens when a startup receives funding from an executive who is on the payroll of its chief competitor?

Read on to find out.

Continuing on my last post, “Digging into the details: understanding companies from the outside”, I’d like to explore a bit of a discussion on a startup that seems to be a no-brainer. Not only does it have serious exit options available, but it’s being built to capitalize on a large and proven opportunity over the long run.

Interestingly, there’s quite a bit of public information about the company and yet it’s not getting a large amount of discussion, nor are key details being brought to light. This is why blogs are terrific; I can attempt to address the shortcomings in the marketplace for information. Today, I’ll be bringing you Chapter 1 in my occasional “Digging into the details” series:

“The Viagogo story”

Last week, Viagogo got a significant amount of press because it announced a U.S.-based deal with the Cleveland Browns (Techcrunch coverage, Venture Beat coverage and Paid Content coverage) along with a $30mm funding round. Now, I’d been aware of the company for a little while but I found that the coverage smacked of “PR regurgitation” and decided to do some more digging for myself. After having done so, it’s become pretty clear to me that those involved in the company right now have a very real chance of making a killing.

Let’s start with the basics:

What’s the company do?

If you’ve ever heard of StubHub, you know what Viagogo does. Basically, the markets around tickets for events are pretty inefficient and both Stubhub and Viagogo attempt to make them more liquid, better matching up sellers and buyers of tickets for concerts, sporting events etc. If you recall, Stubhub sold to eBay in January for $310 million. Viagogo’s focused on the European market and has secured numerous exclusive relationships there, which is why their entry into the U.S. made some headlines.

How do they make money?  

They match up buyers and sellers of event tickets and charge them both. Their info page appears to be deliberately vague but my understanding is that they charge sellers as much as 15% and buyers as much as 10%. So, that’d add up to 25% on each transaction. Compare that to the typical fees on eBay and I think you’ll quickly come to the conclusion that they’re either crazy or in an insanely good market.

Is this sustainable?

Given Stubhub’s success in the U.S. (conducting hundreds of millions of dollars worth of transactions) , their eventual sale to eBay, and claims that the secondary ticket market might be worth around $10 billion in the US alone, I think it’s safe to say that, at the very least, there’s clearly some money here.

But let’s dig a bit deeper, shall we?

While the Browns deal was the company’s first in the U.S., they’ve got substantial traction in Europe. In fact, they have exclusive relationships with the top football clubs in Europe (like Manchester United) and are, I’m sure, working to secure more. This is important because in the U.S., Ticketmaster has typically had exclusive relationships but has been under attack by the event constituents, as they’ve realized that Ticketmaster is under-monetizing the opportunity.

Let me stop for a second and explain: a core principle of economics is the concept of supply and demand. Basically, the price at which supply meets demand is where the optimal price lies. This is a simplification, but good enough for our purposes. For many years, Ticketmaster and traditional ticket sellers have insisted on selling tickets at tiered rates, without taking into account the ability to upgrade the purchasing dynamics, using the Internet, to determine the accurate prices for tickets. For the most part, this is why scalpers exist. Yes, there are some last minute sales that occur, but really, scalpers are people who have figured out that the ticket price for an event is below the price that rabid, devoted fans will pay. Slowly, sports teams, bands and others have realized this is the case and determined that ideally, they’d prefer to charge the correct prices for their product.

So, back to the narrative. Stubhub and some other competitors have come in and not displaced Ticketmaster, but rather, have layered themselves on top of Ticketmaster, by addressing the secondary market – the reselling of event tickets. In making that marketplace more efficient, they’ve realized significant economic benefits while pleasing many a happy consumer. Viagogo, however, has managed to successfully replicate that market in Europe and then, taken it one step further by negotiating exclusive relationships with some of these organizations, blocking out competition in a way that hasn’t been seen in the U.S.

This is, in a word, genius.

Now, mind you, I suspect that they’re being dumb about the long term pricing of the business. I don’t think that making 25% on each of these transactions is any more defensible than my $10 service charge with Ticketmaster is (in an efficient market), but then again, business is war and some businesses wage war with consumers…

So, those are the core pieces to understand I think.

But there are a few unique twists here that make this more of a big deal:

1. As is discussed in these articles, Eric Baker, started Viagogo. He co-founded Stubhub and left in 2004, due to some disagreements. So, he already knows how to do this.

2. If you don’t think that he’s motivated to beat Stubhub, you’re kidding yourself. Surprisingly, none of the articles I saw on this topic touched on a very real point: personal motivation. Baker clearly had strategic disagreements at Stubhub and continues to believe that he could have built a better business. He even cashed out during the eBay transaction (for ~$31 million, if the ownership stakes in this post were right), so he’s not doing this just because he made no money. No, he’s convinced that the real opportunity has been missed and he’s going after it. That is a compelling story and speaks to a fanatical desire, the likes of which often makes for extraordinary success.

3. Techcrunch makes this point: “The company claims to be generating more revenue in June, its tenth month in operation, than StubHub did in its first 15 months combined.” Ok, so the data says that they’re killing it on the execution and revenue front. I’m willing to bet that not only was Baker right about some of his strategic disagreements but that there’s a secret embedded there: the exclusive relationships with the sports teams are paying off.

4. If some of the clubs aren’t starting to allocate a certain portion of their tickets to the Viagogo ticket exchange, they’re missing out. Here’s why… The football club makes all of the revenue associated with primary ticket sales. Then, there’s a secondary market, totally endorsed by the club and powered by Viagogo. Now, typically, when a good is sold the first time, the manufacturer makes money but when it’s sold a second time, the manufacturer doesn’t see a penny. In this situation, however, the club in question is making money on the first transaction and probably again on the second transaction, via a rev share from Viagogo. If this is what’s happening, the revenue from Viagogo is purely incremental, which is music to a CFO’s ears. Why wouldn’t a team offer this, both for their fans and for their own bottom line?

5. eBay is an acquisitive company that has bought many similar companies over the years to expand its global footprint. At the very least, if Viagogo successfully rounds up the European market, eBay would want to own it in order to add to its existing capabilities and presence in markets (like the secondary market for events). Additionally, it would appear that eBay sees the opportunity to connect these marketplaces with their Skype acquisition (touched on in the above mashable post) and my guess is that the company thinks that secondary markets can be enhanced using voice/video interactions.

6. Which brings me to my most important point, which I’ve saved for last…
   Niklas Zennstrom is an investor.
   Now, you might not recognize that name offhand, but he’s one of the co-founders of Kazaa and then Skype. In addition to running Skype (according to eBay at least), he also maintains a venture capital fund, Atomico Investments. If you look at their portfolio, you can see rather easily that they’ve put money into Viagogo. This is important because: a) Niklas continues to run Skype b) eBay owns Skype, after acquiring it a few years ago c) eBay owns Stubhub, a clear competitor of Viagogo.

   Let me put this another way: Zennstrom is putting his own money into one of his employer’s competitors. I wonder if eBay knows about this.

So, looking at that overall picture, it looks to me like the WORST case scenario for Viagogo at this point is that it sells to eBay. Not bad for a company that’s only been around since last summer. Seems like a no-brainer to me, how about you?

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Over the past several years, I’d like to think, I’ve become an increasingly savvy investor. As a result of the focus that I put on better understanding what really drives corporate results and how that gets valued in the markets over the long run, I’ve begun to achieve a pretty satisfying success rate. (Of course, recognizing that the market’s done pretty well the past few years, I continue to evaluate this..)

One of the ways that I hone these skills is that as I’m reading about various companies I try to dig into the ones that play to areas I’m interested in and know something about. I find that over time, as I do this, I see a larger picture, an evolving story that tells me more about the company than what I could find from the conventional public reports and press coverage. This has led me to uncover companies from WebEx to Google. From Starbucks to In ‘N Out. 

Every once in a while, this process uncovers a private company that I think is doing something pretty well and definitely has a no-brainer opportunity in front of them. When a company is private, you don’t get very much detail and I like testing my ability to piece together the story on private companies with minimal data. Call it a mental exercise, but I find that it’s really helpful to push my brain to think through the various scenarios that could be playing out behind the scenes. When the companies actually grow and go public (as I watched with Google) you get the satisfying, “nice, I was right” feeling, to boot.  As I learn to do this more successfully, I get to really apply these analytical techniques to the public marketplace, where I can actually take positions in companies that I discover. 

I’ve decided that because I do this relatively often and because I’m finding that blogging makes me be a bit more rigorous when sharing thoughts, I’m going to start talking through some of my ideas on this blog. Perhaps I’ll turn up some promising public companies and maybe I’ll alert you to some interesting private companies.  Hopefully, I’ll occasionally really hit the nail on the head like I did when talking about the Blackberry Pearl last fall in a post titled, “Evolving the Mobile Interface“. In case you haven’t been watching, RIM’s been on a tear, in large part due to the massive success of the Pearl and the subsequent releases of devices utilizing the trackball interface

So, tune in for my next post, where I’ll discuss a private company that I’ve recently come across that I think has a pretty strong future ahead of it.

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Wow, the past few days have seen a noticeable increase in traffic here, which says to me that some of you subscribers are more actively engaged and are maybe even passing on my posts to friends of yours. Thanks!

A quick shout out to a few folks who’ve been commenting:

Valeria - for always taking the time to comment when I link to you. Very impressive.  Mark -  I always appreciate that you take the time to leave a quick note when you like something. Thanks bud.  Jim – Wow. Awesome comment on my “Go Fail Yourself” post. Between the comments from you and Ben on that post, that has to be one of my personal favorite posts so far.  Ian – For sharing your little javascript code on my “Proactive Discovery” post. Amazingly, you were the only one to contribute something there

So, on to the networks version of my “Things I’m thinking about right now” series (here are Part 1 and Part 2):

Web Worker Daily brings us back to the point of networking: remembering that it’s not just a series of transactions is important.

Fred Wilson hits on something near and dear to my heart - he’s unsure of where this is going and about the difference between what users want and what developers will seek out. I believe that I have a very good idea of where it should go. Let’s talk Fred. 

He also links to Dave Winer, who gets provocative in Fred’s comments (Scott Rafer also adds in his useful pragmatic view). I think that he’s right on here – real platforms look different from Facebook F8, folks.

Scoble points me to:

Jason Calacanis’s post which spins the discussion around and essentially asks, “Does this stuff have any substance?” He also continues on in a second post, lightly touching on something that I think is being left under-discussed: the younger generations are being raised, at least in the U.S., with the expectation that they have to market themselves.

Proving that he really is a portal, Scoble also points me over to new stuff coming out of Plaxo. I’m  hoping to make it to Lunchaxo tomorrow, to see what’s going on.

The NY Times does a piece on how the businesses who create networks impact real-life relationships in significant and negative ways.

Ok, I’m realizing this could be a bit of overload for people, so I’m going to stop now. As promised, I’m working on a more coherent piece that will hopefully pull these things together better.

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Holy crap!

I didn’t think it was going to take so long to get up part 2 after my last post, sorry about that. Between my laptop dying (replacing h/w at a big company can be a HUGE pain, let me tell you..) a hugely consumptive weekend (drinking, dancing, reading, movie watching) and traveling (I’m up in Seattle visiting friends and attending the grand opening of one of their stores) I’ve been just overwhelmed.

You know what they say about excuses, of course..

So, other stuff that I’ve been thinking about, the advertising edition:

Creating value with advertising

Targeting, personalization and your personal involvement

Becoming an evangelist

Pontifications on Yahoo!, the ad market and how we should go make life even more confusing..

Part 3 will be dealing with networks (social and otherwise..).

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Ok, so this is going to be a bit of a blog experiment. I’ve been reading and seeing a large number of items that relate to a vision I have of the future. So I’m going to pass them on with some short commentary, for the most part. If you’re so inclined, see if you can piece together where I’m going with it all. I’m going to attempt to follow up next week with a larger post explaining myself. Let’s see how this goes..

Let’s start with something my friend Mike passed on to me, which he found at this site:

Video: Cisco Systems: Meltdown

A little extreme but a good example of something really starting to bother us digital knowledge workers.

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