Showing posts from May, 2012

Enough Facebook, Anyone Remember AOL?

Tl;dr AOL is operating at near FB levels of P/E, on tiny earnings, and this is probably unsustainble.

Tim Armstrong, CEO of AOL, did a talk at Techcrunch Disrupt. In it, Mr. Armstrong said, inter alia, that AOL was “becoming a house of strong brands” as it transitions to be more of a content company:

He admitted that despite having some dissident shareholders that “don’t believe”, in the content strategy, most of AOL’s shareholders do believe in it. I'm not particularly interested in Mr. Armstrong's claims about what AOL is doing. However, I would like to examine the financials of AOL, especially now that we are all in stock-markety-valuation-y moods given FB's bump. Here's AOL's chart, as of close today, 5/22/12:
Just to reiterate, that is a Mkt Cap of 2.54B and PE of 85.38 which translates to earnings of $29.75M. That is very sincerely not a whole lot of money. Again, assuming a 'healthy' PE is somewhere around 13, AOL needs to post earnings of around $19…

From Techcrunch: How the Media is Wrong About Facebook's IPO -- But I'm Still Bearish

Tl;dr Though the FB IPO may have gone of a lot more smoothly than many critics are saying, FB needs to post consistent, high growth in order to justify its valuation, which looks unlikely.

Techcrunch contributor and VC member Dan Scholnick has makes three very astute points about the Facebook IPO, worth reiterating:

1. The best IPOs maximize capital raised by the company while minimizing dilution for existing shareholders and employees.
2. The best IPOs minimize the fees paid and value transferred to third parties.
3. The best investments are determined over months and years, not hours and days.

In general, I agree. And by these metrics, FB's IPO was pretty good. Additionally, now that NASDAQ:FB has closed at precisely 31, as of 5/22/12, I think one could argue that the underlying value of FB is actually pretty well within the range predicted by bankers. That is, it seems counterintuitive to me that one would price a stock as lower than its value when planning an IPO, especia…

Password Security: When the Problem Exists Between Keyboard and Chair

Tl;dr When a third party asks for information that allows them to reset your passwords for other services, you should be very wary.

Technology Review has an interesting story about a potential security hole in gmail. Basically, it works like this:

1. Hacker site offers a user a discount/teaser/whatever and asks them to enter their gmail address.
2. Hacker site sends request to gmail to have an account verification code to the cellphone of the user.
3. Hacker site requests user to enter the verification code sent by gmail into their site.
4. Hacker uses verification code to hijack gmail account.

As the comments in that article point out, this is not actually a technical loophole. It is a prime example of PEBKAC: Problem Exists Between Keyboard And Chair. Specifically, one would hope that your average user would be smart enough not to give a password reset verification code to a third party that they had only just encountered.

Unfortunately, there is no foolproof way to protect gullib…

Gmail, Why Do You Choose to Spite Me So?

I used to do a lot of front end development, so I find bad user controls to be particularly vexing. I doubt this makes me special, as it probably annoys most other humans, too. However, some things just pop off the page at me. The below is one of them.

Gmail, despite the fact that it is my lifeblood, is a frequent perpetrator of bad UI. This is often exacerbated by the fact that Gmail loves to push interface changes on its users without warning, explanation, and frequently without the ability to undo. I understand the necessity of this, but sometimes they get something infuriatingly wrong. Like this: This is an image from my Gmail user pane (yes, everything of mine is space themed -- wanna fight about it?) where there used to be a button that allowed me to scroll to the second page of my Inbox. It looked rather like this: In fact, I can get to those controls by clicking on the words "1-25 of many", which transports me to another Inbox view. However, from my default Inb…

Free Does Not Mean Valueless

Tl;dr People are unwilling to pay for baseline content; make your baseline content free and use it as a loss-leader to sell naturally scarce premium services crafted to engage your target audience.

A coworker forwarded me this article today, entitled "The Emperor has no Content."

It is a short read, and worth reading. Let me say that I am taking this opportunity, as prompted by Mr. Rutledge, to in fact, comment on my own site.

I disagree pretty emphatically with the conclusion that Rutledge seems to make, which is this:
If the content is valuable people should pay to read it. This is a very common misconception. First off, it utterly conflates 'value' with 'money.' Many things that have value have non-monetary value. Second, it assumes that if something does not have a pricetag, it is worthless. This is also obviously incorrect.

More importantly, however, it misses the point: while I fully agree that advertisers probably do not have the interests of cont…

Three Digit PE! / How much bigger can Facebook get?

Apparently, Facebook's IPO will put it in the fabled faery lands of companies with three digit P/E ratios. Specifically, it looks like Facebook may well have a P/E of 100 when it goes public. For reference, Apple's P/E is currently 13.6 and Google's is 18.55. If Apple's P/E was 100, it's market cap would roughly be 3.8 TRILLION dollars, and similarly, Google would be valued at 1.07T. Granted, P/Es that high are not unheard of, but, typically, they are very big when a company is still very early in its growth curve, or, on the way down, when earnings are particularly low but there is still fundamental underlying value to the company. For instance, EA currently has a P/E of ~66. This honestly is probably not great for EA, and, in fact, earnings are way, way down for the gaming industry as a whole right now, apparently to the tune of 25% March 2011 v. March 2012, and 32% April 2011 to April 2012.

So, no matter how you look at it, Facebook's valuation is really, r…

Better Math on Online v. TV / Forgive Me, for I am Mortal

In an earlier post, I did a very rough comparison of the economics of television v. online users. I committed a pretty big mathematical blunder, and, also, found some better data. So let me correct myself.

Apparently, Pinterest users spend about 15 hours a year using the service, which would give a per-hour valuation of ~$1. This would value Mad Men at $42M, using the same math I did in the previous post. However, if you just calculated that Mad Men viewers have the same value as Pinterest users, instead of doing my elaborate (and probably useless) per-user-hour-valuation, that number is $57.5M

It is important to note that these are really from-the-hip estimates. In fact, the mistake I made in the previous post actually demonstrates quite well the problem with doing this sort of comparison: in order to get the value of 37¢ an hour, I just divided user value (16.50) by 50% of the hours spent on Facebook per year (48)†. The fallacy here is assuming that the value is unrelated to the a…

Orwell's Armchair

A former Professor of Mine, Derek Bambauer, has recently written a very interesting article on on-line censorship. You can read it here. Abstract reproduced below: America has begun to censor the Internet. Defying conventional scholarly wisdom that Supreme Court precedent bars Internet censorship, federal and state governments are increasingly using indirect methods to engage in “soft” blocking of on-line material. This Article assesses these methods and makes a controversial claim: hard censorship, such as the PROTECT IP Act, is normatively preferable to indirect restrictions. It introduces a taxonomy of five censorship strategies: direct control, deputizing intermediaries, payment, pretext, and persuasion. It next makes three core claims. First, only one strategy - deputizing intermediaries - is limited significantly by current law. Government retains considerable freedom of action to employ the other methods, and has begun to do so. Second, the Article employs a process-based meth…

Last One on Apple Passwords... For Now

In previous posts, I have complained, at length, about Apple's new password policy.

This weekend, the first time I wanted to use my new Apple password, after nine attempts, I discovered I could not remember it. Then I went back to my security questions, and, once again, on my first attempt, I got one wrong.

I sincerely wonder if the Steve would have allowed a password policy that is such an infuriatingly poor user experience to have been pushed to production.

"Cyber" Attacks on America's Pipelines

Disclaimer: I am not a security expert. However, this guy is, and he posted that story just about a week before this one hit the net-waves.

Summary: DHS has issued a statement saying that what they suspect was a single entity made a bunch of so-called 'spear-phishing' attacks at companies that control oil pipelines. It is being played up by all the standard press, including that media outlet, as a reason we should pump more money into 'cybersecurity.' This is false. Here's why.

1. This was not a "cyber" attack: it may have been perpetrated with email, but it is essentially fraud. It relies on weaknesses in the humans at these organizations, in an effort to get their passwords, thus giving the antagonists access to the corporate networks. 'Phishing' -- the type of attack employed -- is explained aptly by Wikipedia. Please note the distinction between trying to get humans to trip up and give you their passwords vs. engineering your way into the…

Value: Television Ratings v. Online Users

I'm a huge fan of the Nerdist Podcast. I only found it a couple months ago, but I've listened to multiple dozens since then. Great interviews, great banter, great stuff. However, a warning: it often runs very, very blue, so, if you go and listen and are offended, don't say I didn't tell you.


Kevin Smith was on in a very recent episode, in fact, his second appearance.

A fair part of the discussion was about TV ratings. I found it interesting because they referred to (albeit without explanation†) the arcane, and, in my eyes, utterly, fantastically, and absurdly outdated measurement system that is called TV Ratings, and their discussion was very telling. In essence, let me just say that I am not the first person, nor shall I be the last, to say that the Nielsen box system is a living incarnation of the inductive fallacy.

Kevin smith pointed out that a show with a "seven share" is considered a network failure of such astouding proportions that it wou…

Note on LLC Publication Requirements in New York State

Read the standard disclaimer, in the right column.

Recently, I was forwarded this blog post by a colleague.

In summary, these guys are starting a service that lets you order coasters with photos from your instagram account. Seems like a great idea and I wish them the best of luck and success. However, they have included a pretty serious legal error in their advice.

Fundamentally, they suggest that by forming an LLC in Delaware, you can circumvent the New York State LLC Publication Requirement. This is 100% false. No matter where your LLC is formed, if it is DBINY, you have to publish, as well as apply for an "Application for Authority."

The New York Secretary of State Guide to forming a New York LLC is here.

Citizen's Media Law Project has a pretty good looking checklist here. Please note, I have not fully checked the veracity of this checklist, but, upon first glance, it looks pretty thorough. As always, read my disclaimer.

Though I've never used their service,…

Apple Doubles Down on Bad Password Policy

A coworker had her iPhone stolen this morning, so I thought it would be an appropriate time to update my "Find my Phone" settings. In the process, I wanted to create a new, more secure password for my Apple account. I don't know if it was the fact it was first thing in the morning, that I had low blood sugar or that this policy is genuinely idiotic, but seeing Apple's new password requirements put me into a near apoplectic rage.

Requirements: 1 capital letter, 1 lowercase letter, 1 number.

Honestly, this is just awful. The chances I will now forget this nonsense password are now very, very high, and I will have to rely on the horrid security questions I filled out just last week. Which, for the record, I got wrong today when I was prompted by iCloud. Proving my point rather well, I'd argue.

Also, for the record, I'd like to point out that, in particular, the uppercase lowercase distinction is extremely poor password policy. First off, it does not substantia…