April 14, 2007

Google New Motto: "All Your Ads Are Belong to Us"

posted by MR WAVETHEORY at 4/14/2007 11:24:00 AM
You have to be amused when you see Google Inc. (Nasdaq GOOG) pay $3 billion for DoubleClick. Yes, it does have strategic value. But with $300-400 million in revenues? That was some bidding war!

The new motto at Google: "All Your Ads Are Belong to Us" (see AYB)

I'm dying to see the model they came up with to justify the purchase price.

April 13, 2007

Dell China - Questionable Sales Practices Abound

posted by MR WAVETHEORY at 4/13/2007 10:14:00 AM
Dell China (Nasdaq DELL) is apparently rationalizing some of their cost structure in China while everyone else is ramping up their China strategy. Layoffs of 10% are being planned by end of April. Apparently, the problem has to do with the questionable sales practices of the sales force. Insiders claim that more than half of the sales staff at Dell are engaging in questionable sales practices. They would have relatives place orders, deposit the cash for the order, and then cancel the order - and withdraw their deposit. Of course, when this is perfectly timed, the salesmen and women have taken their bonuses and their money! Sounds like '99!

Baidu CEO - Surfing Porn is Part of My Job!

posted by MR WAVETHEORY at 4/13/2007 10:09:00 AM
You have to love it when CEO's come out and admit that surfing porn is part of their job. Apparently, that's what Baidu.com, Inc. (ADR) (Nasdaq BIDU) CEO, Robin Li admitted during an interview on national TV in China.

Baidu CEO Robin Li told Phoenix TV talk show "Lu Yu You Yue" that visiting porn sites is part of his job, reports Ce.cn. According to Alexa.com statistics, 76 percent of the searches on Baidu (Nasdaq:BIDU) Japan are for pictures, reports eNet. Baidu Japan currently provides web and photo search services.
Baidu recently launched their service in Japan at Baidu.jp but curiously more than half of the traffic is from China. About 59.5 percent of visits to Baidu Japan come from China, with the remaining from Japan. Why the big amount of Chinese traffic? It's because Baidu censors their Chinese site Baidu.com (regulators from China demand it) while the Japanese index is not censored! Now we know why they launched their Japanese site!

Housing Prices Are Collapsing Upwards

posted by MR WAVETHEORY at 4/13/2007 10:03:00 AM
I love it when you have so many divergent data points on things like housing. I read a report today from Deloitte on housing and the first quote was:

I don't want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year. Our future is not as bright as what we would like it to be.
— D.R. Horton Chief Executive Officer Donald Tomnitz

Then the author goes on to say

So what has happened to housing prices since the bubble supposedly broke in 2005? The problem the bubble heads have is that housing prices for the most part are still collapsing upward. Since the summer of 2005, existing home prices are up 12 percent while new home prices have risen 3 percent.

Collapsing upwards! Now that's a great one. I'll have to use that one more frequently!

To his credit, the author does show an interesting chart of housing prices vs Nasdaq. I think the only conclusion you can draw from the chart is that Nasdaq and housing are both up in the past 10 years - the difference being that Nasdaq is much more volatile then housing prices.

The Inside Scoop on Credit Card Lending at American Express

posted by MR WAVETHEORY at 4/13/2007 09:14:00 AM
I've been a customer of American Express for years and each year, I use my American Express card for everything from coffee, travel, business expenses and everything else under the sun. I would consider my spending with them to be in the top percentile of their customers. As a result, I decided to try out some of their new products and boy was I surprised to learn how the organization was setup at American Express Company (NYSE AXP) and learned first hand why America is having such a big problem with subprime lenders like New Century Financial Corporation (REIT) (Nasdaq NEWC), Fremont General Corporation (NYSE FMT), and Accredited Home Lenders Holding Co. (Nasdaq LEND), and even Citigroup Inc. (NYSE C)

I was looking around for cheap credit - read "0% card offers" - on the American Express website and I saw a few ads for OPEN their Small Business credit card and applied for it. I also applied for a few other cards that offered 0% as well including their Blue Cash and Blue Reward cards just for kicks. Since it was all the same form, it took about 15 minutes to apply for the cards. Done. I really think they have done a terrific job with the customer acquisition process at American Express.

It was easy to get OPEN
I got approved for the OPEN Small Business card immediately. The Blue Cash and Blue Reward cards took 2 weeks, but I got approved as well.

Total combined credit: $XX,XXX (I'll say it was high $XX,XXX)

The letter arrived in the mail with my credit cards. I left them sitting on my desk for a few days and then I decided to start using them. After all, what could be better than 0% interest for 1 year? I have better places to park my money!

So, I used the Blue Cash card and used up about half of the credit. That was fun and easy.

The CALL
Then, came the call. I won't name the person who called but I was just refer to that person as Mr. X (this does not necessarily mean it was a man or a woman or for that matter the person's last name began with an X). Mr. X left a nastygram - if you're a techie, you know what I mean. The point of the message was that American Express wanted to talk to me immediately about my credit cards. Fair enough.

I returned the call and Mr. X started asking me why I applied for so many credit cards. ($XX,XXX is alot?) Anyway, I told them I liked the 0% deals and that they were terrific offers from American Express which was a brand I trusted and admired. Mr. X started pressing me for my financial information like my income, my earnings this year, and told me that I would have to submit my tax information to them in order to keep my new cards. They asked me to submit and sign IRS Form 4506T. If you don't know what that form is, it basically discloses all your tax information to the requester of the form. The privacy implications!? I was not happy about that, so I told Mr. X that they could cancel all the new cards if they wanted to.

Mr. X told me that that was not possible and so I told Mr. X that they could reduce the credit limit on my old Amex cards and put them on the new cards with 0% interest. Fair enough right? After all, if they were considering me a credit risk, then keeping my credit line the same would just do the trick right? Mr. X said that he would look into it and decided that they would still have to cancel 2 of the new cards but agreed that was OK as long as they could reduce the credit on the one remaining card. So, done. Right?

Not so fast. After I thought this little episode of histrionics was about to be over, Mr. X decided that Mr. X wanted to see my Form 4506T after all - and get my entire tax return for the previous year. Why I don't know. I had never missed a payment with AMEX and so I was surprised why last year's tax return would be so important to them, so I asked Mr. X why AMEX needed the return since I had paid all my bills in time and in full. Mr. X stalled and just said they needed the return. I told them that was not reasonable. Mr. X then went back on his word and told me that instead of cancelling two of the new cards, they would cancel all of the new cards as well as my old cards!

The whole episode was a great example about how the right hand and the left hand don't know each other at American Express. The guys and gals giving the credit and the boys limiting the credit clearly have a disfunctional relationship. You can only imagine how much the marketing guys want to grant credit and how much the credit department wants to limit credit.

Why We Will See A Tough Credit Market
I think the whole episode shows how much of a problem easy credit has become in America and its symptomatic of the subprime loan crisis we hear about every day. I could see the same episode being played over in mortgage loan offices nationwide and subprime credit card marketing departments at the largest banks in America.

Give 'em the credit easy and fast. Take it away even faster. It was a hassle to deal with Amex. The people at the call centers are clearly unqualified to make any sort of decision. To give you an example, let's say I am a customer of AMEX and I have credit of say hypothetical $100. AMEX issues me more credit for $100. Total credit $200. Now, if AMEX didn't want to give me the additional credit, then they should have not given me the $100 additional credit in the first place.

That's not how it works. AMEX would give you the $100 credit on top of the existing $100 and then call you and say we didn't mean to give you the $100 credit. Then, they would tell you, not only do we not want to give you the $100 credit, we didn't want to give you your existing $100 credit in the first place - "even though you have been a great user of credit and have never paid late." How dysfunctional is that?

I no longer use my American Express card, because it became too much of a hassle. But I think the lesson learned hear for American regulators in the banking industry is that there is a problem with credit card lenders, and the problem is even worst with the mortgage companies.

Lenders Are Creating Their Own Crisis and The Mortgage Version of American Express
In a way, lenders like American Express and even mortgage lenders have created their own credit crisis. Imagine you are a mortgage lender like New Century Financial and you got skittish on your lending, so you take back the credit that you have given, like American Express decided to take back my credit line for no good reason. In the world of lending, I am triple AAA credit.

What does that do to the liquidity of the financial system? Quite simply, it creates a crisis of confidence because nobody wants to lend anymore - even to their top and prime customers who have terrific credit histories.
America, American Express on the Brink of a Crisis?
I think America may be on the brink of a liquidity crisis because lenders are getting scared. When New Century goes under and Fremont follows and LEND falls apart, nobody wants to lend and extend credit, even to their biggest and best customers. Think Japan of a decade ago - low cheap rate loans over the past 10 years, yet the economy has stagnated because lenders haven't wanted to lend. Think America during the Great Depression. God forbid America today.

I think American regulators have a duty to keep liquidity flowing the financial system and that means fixing this kind of knee jerk behavior in the financial industry. I hope they do it, because if they don't, capital will be flowing very fast out of this country!

April 12, 2007

Top 10 Reasons I Can't Live Without TurboTax

posted by MR WAVETHEORY at 4/12/2007 08:13:00 AM
It's almost tax day April 15th and for the past few days, I've been doing my taxes. Yes. I do my own taxes. It's tortuous and painful but I do it ... with the help of TurboTax brought to me every year by the friendly folks at Intuit Inc. (Nasdaq INTU). I've always done my taxes and TurboTax has been my best friend and my worst enemy from the start. TurboTax, I can't live with you but I can't live without you!

Like any long term relationship, I have my gripes about TurboTax, but here are 10 reasons I can't live without TurboTax.

10 Reasons I Can't Live Without TurboTax

1) I love the fact that the forms are quick and easy to fill out. It's unbelievable how easy it is to use Turbo Tax. It's completely idiot proof and it saves all the data every step of the way. I have never lost any data while entering information into TurboTax.

2) I can't live without the fact that TurboTax can import my stock transactions seamlessly from Fidelity. The guys who wrote the Fidelity data import module desire a big raise. Every year, I spend hours entering my buy and sell transactions into TurboTax for brokers that are still living in the stone age and haven't implemented OFX and EDI. You know what I mean if you've ever had to fill out Form 1040 Schedule D. The Fidelity import feature is a huge blessing. Not only does TurboTax import stock sales, it also imports the buys and calculates the cost basis automatically.

3) I can't live without how TurboTax asks for all the little things that I can list as being tax deductible expenses. Did I know that I could capitalize my laptop, my cell phone, even get a tax credit for my phone bill? No way. Did TurboTax know? Hell yeah! I got a refund for having landline! I had a hunch that POTS (plain old telephone service) line was good for something!

4) I can't live without how TurboxTax keeps and prefills my tax forms with all my information from my previous tax returns. Tax loss carryovers? Tax loss carry forwards? Accumulated long term cap gains losses? Short term losses? I don't know how you do it TurboTax, but I love that you do it.

5) I can't live without how TurboTax calculates the depreciation on my house. Every year, it takes less than no time for me to figure out the interest expensive, depreciation, improvements and all the nitty gritty costs taht I can deduct for owning a house. Do I care about straight line or accelerated MACRS depreciation formulas? Do I have to? Not with TurboTax

As with any great product, I have my gripes about TurboTax. There are quite a few things I can't stand about TurboTax.

6) I can't stand how slow TurboTax is! If you've used TurboTax in the past week or two, you know how slow it's been over the past couple of days. After filling out the forms and clicking "Next," I could literally go and surf 5 other websites before the data would be saved and TurboTax actually takes me to the next screen. I don't understand why it takes so long to "Save Data." Buy some more servers for goodness sakes. I must have spent 5 hours waiting for the "Saving Data" screen to complete.

7) I can't stand the fact that TurboTax can't import my purchase transactions from Charles Schwab. Anyone who does any investing knows how much a pain in the ass it is to fill out Form 1040 Schedule D . Every year, I dread having to fill out Schedule D because it takes hours to enter every single buy and sell into TurboTax because it can't get the import right. TurboTax has no problem importing the sales transactions, but it just can't import the stock buys. And what good is that if I have to pour through every single stock transaction to figure out my cost basis? To be fair, this could be Charles Schwab's fault as much as TurboTaxes. One of them is not keeping the data. I literally spent 20 hours doing this Schedule D this year. It was horrendous! TurboTax team, I hope you will get it right for the tax year 2007!

8) I can't stand how I can't file amended returns aka Form 1040X electronically using TurboTax. It's incredible how much time it takes to actually print, sign, and mail a tax return and I thought I was over all that until I found out that I needed to file an amended 1040x this year. It wasn't hard to do. In fact, TurboTax made it easy to made the amendments. It actually took 10 times longer to print and mail it!

9) I can't stand how TurboTax doesn't tell you how you have to pay separately for your state returns after you have filled out and completed your federal return. I get sticker shock every year when I find out how much I have to pay for TurboTax because every year they have raised prices. It's annoying enough to have to pay to file your taxes. It's even more annoying when you realize that the advertised price on their websites includes only the federal 1040 return and not the state return which costs another $34.95 or so. That pretty much doubles the costs!

10) I can't stand how they've made it harder to navigate the entire TurboTax application. After I filled out my tax return, it took me forever to navigate and check everything. TurboTax used to have a feature to list all the forms easily - in full screen mode. But this year, they somehow decided to use these tiny float over boxes where they jam the entire list of forms into this floating box. I hope they fix this!

And there, those are the top 10 reasons I can't live without TurboTax. Happy April 15th 17th! I hope my list can be half as long next year!

April 11, 2007

How Competition Can Change Your Startup DNA

posted by MR WAVETHEORY at 4/11/2007 11:13:00 AM
Not a day goes by, without an article about how Google China is getting pounced by Baidu, Sohu, or Sina, the top portal in China. Competition can change your company DNA. I read a recent article that Google China had "borrowed" the Chinese character database of a rival search engine named Sohu when it recently launched Google Chinese search.. It's amazing, because the database contained names of employees of Sohu and the code monkeys at Google apparently forgot to delete them before launch. Did you say ... Snafu? Plagiarism is a pretty serious crime in academic circles and it's amazing how competition can change your startup DNA.

Cyworld - What Goes Up Fast Comes Down Faster.

posted by MR WAVETHEORY at 4/11/2007 11:02:00 AM
Whatever happened to Cyworld, the cool Korean avatar community? A few years ago, Cyworld was known as the inspiration behind MySpace and Friendster. It was the king of social networking in Korea. But whatever happened there because the traffic on Cyworld appears to be way down. Look at the following Alexa chart and you can see that this once popular and ultra cool site (one of the top 100 in the world in 2003) is not even scraping by in the top 5000.

Whatever happened? That's what I was wondering when I checked out the service recently. Cyworld has been busy launching in the US, but all is not well at home. Maybe it's investing in the US to go after MySpace, but I really doubt it will be very successful. The site is too Flash heavy. It is also launching a service in China with Cyworld China where it has planned to invest about half a million dollars to launch its service.

The rapid demise of Cyworld makes me wonder whether MySpace, FaceBook, and Friendster will follow a similar path.

April 10, 2007

The Bully of Mountain View

posted by MR WAVETHEORY at 4/10/2007 10:14:00 PM
There are bullies everywhere. In high school, there were the high school bullies - typically the jocks. In politics, there are the backroom bullies who rig the elections - yes, even in America. In every American town, there are bullies by decree - yes, the police. And guess what? In every single case, there is nothing you can do about these bullies. They've got power. Like today, when I got a ticket for allegedly rolling through a stop sign. Was I going to argue with the cop? In my dreams. That would have made my moving violation into an arrest. What do I have to gain from that? You know it, we all hate cops, but we not only put up with them but we fund them aggressively because they provide order in a world where there is none.

You're probably wondering: What does all this have to do with technology?

The Bully of Mountain View
In technology, there has always been a bully. In the 60s and 70s, the bully was IBM. In the 80s and 90s, the bully was Microsoft. In the '00s and '10s, the "Bully" is going to be from Mountain View.

We all know the Bully of Mountain View. From fear of retribution, as with all bullies, this one shall go un-named. The Bully of Mountain View enjoys a monopoly in its business of selling services to hundreds of thousands of customers (some even say millions) worldwide.

The Education of a Bully.
How's it so? Like most bullies, the Bully of Mountain View grew up unloved. Most of the people who work there grew up being bullied in high school where the definition of cool for their ultra uncool group was who had the coolest graphing calculator in class. These kids couldn't get a date save their life and got pushed around in school. They were traumatized as kids and couldn't spell fashion in school. Needless to say, they all ended up with big chips on their shoulders. But they learned quick from these bullies.

Traumatized, they are no more. They're all grown up, and when they joined the Bully of Mountain View, they're suddenly the coolest people in town. They used to shuffle into class head down, shoulders slumped, stuttered when they spoke. Today, they walk into meetings chin in, chest out, and head high, and don't think twice about sparring in a heated business negotiation.

It's All About the Power
Most of us love the Bully of Mountain View, but some of us also hate him. There is a bit of personal Silicon Valley history to this. I knew the bully of Mountain View well while it was growing up. While the Bully was still an adolescent, it had no traction for its super cool, whiz bang tool. The coolest kids in class were doing e-commerce infrastructure and optical networking. No one paid even a pittance of attention to it. And boy was everyone a fool for not seeing the potential in the junior Bully.

It's About Where You Are Going Not Where You Are
I know a company (which I will call "Jock") very well that was offered a very large piece of equity in Bully 1.0. That company, "Jock," was one of the hottest plays in town in '99-'00. "Jock" had the finest board, the best venture money, and the coolest whiz bang tool. Needless to say, everyone wanted a date with "Jock" and "Jock" without hesitation turned Bully down. And boy does "Jock" regret its choice.

Since then, "Jock" has been left in the dust by Bully 1.0. To put into perspective, that piece of equity in Bully would have been worth 100 times the current value of "Jock." Billions. Today, "Jock" is what typically Valley people call a "living dead" company.

The Fall of the Jock and the Rise of the Bully
So, why did Jock get left behind and Bully rise like the phoenix? Jock got arrogant. It had a great product, well ahead of its time. But rather than staying to true to its consumer focus, it tried to turn itself into a B2B play and chase ever escalating valuations awarded to B2B plays. While consumer dot-coms were melting down, Jock thought it could be smarter than everyone else and avert the dot-com destruction by becoming a B2B play. Unfortunately, Jock didn't have the DNA of a B2B, but the DNA of a consumer play.

Unlike "Jock," Bully stayed to its roots as a consumer play, and kept chugging along until it found its place. It didn't need to be cool, because it never was all that cool. There was no pressure to perform, but perform and deliver, it did.

The Lesson
Today, you see alot of excesses in Silicon Valley, like what you saw in 2000. I recently heard that a group of entrepreneurs got funded at a $100 million valuation for a company to do social networking for seniors. Stellar team, great funding, gee whiz bang tool. Another one was getting funded to do social networking for I forget what. Many companies I hear about today strive to be like "Jock." All of a sudden, social networking has become cool, because the valuations are sky high. Ask any entrepreneur who they want to be, and invariable, 8 out of 10 answers will be the next MySpace. Few of the entrepreneurs strive to be like the junior Bully.

I have a hunch that there will be many blowups for those "Jocks." If there is one lesson to be learned about all this, it's that the next big bully to come out of Silicon Valley will probably be a stealth company like the Bully of Mountain View.