January 20, 2007

Anti-Capitalist - A Conference Against Capitalism

posted by MR WAVETHEORY at 1/20/2007 03:59:00 AM
The haters are out again this year at the Anti-Capitalist Conference 2007 in Kenya. I'm running for cover!!

More than 80,000 people gathered for an annual anti-capitalist conference in Kenya's capital on Saturday, hoping to network with other activists and protest global policies they say hurt the poor.

The World Social Forum will be a chance to showcase "Africa and her unbroken history of struggle against foreign domination, colonialism and neocolonialism," according to a statement on the event Web site.

The forum kicked off with several hundred protesters marching from Kenya's sprawling Kibera slum to downtown Nairobi. About a third of Nairobi's total population, at least 700,000 people, is crammed into a single square mile in Kibera, with little access to running water and other basic services.

Venture capitalists of the world beware of the Anti-Capitalist! For the festivities, look no further than here. Needless to say I won't be there. Imagine a world without capitalists! Scary isn't it? There wouldn't be any bad people in the world anymore. And there wouldn't be any more goodies either. I wonder what I would miss most. Post what you would miss most in the comments!! Winner gets special mention in Mr Wave Theory.

January 19, 2007

Venture Capital and Private Equity Compensation 2007

posted by MR WAVETHEORY at 1/19/2007 08:34:00 AM
Everyone wants to know what everyone else made. Thanks to a spammer who sent me a report on venture capital compensation - the culprit will go unnamed but I will say they are one of the least reputable headhunters out there - so I thought I'd spam the rest of you with it. After all, isn't the point of spam, the shameless distribution of material to people who have not solicited it? In the spirit of spamming, here's what happened in venture capital compensation 2007.

The short story, lots of self-serving, undeserving people (who have shallow personalities and big egos and big fat pointy noses and oh did I mention would sell their grandmothers) made lots of money. Isn't that always the story? Welcome to the money game.

Basically, associates at VC funds make ($200,000) and PE Funds make ($300,000). Fund of Funds associates make $200,000 - but they do less work. So, that's more money in my book when normalized. VP and Partner comp from the report ... I wouldn't put much salt on the numbers so I feel obligated not to share the misinformation. It's too subjective, so don't let anyone convince you otherwise.

And the touchy feely stuff ...

Just as it seems investors’ comfort level with private equity investments has further developed so too has the infrastructure and overall stability of the industry. And, this growth and development has extended to how professionals are compensated. In many ways the industry has become more institutionalized with more people filling more layers of roles. As the market has developed we’ve noticed that the volume of demand for professionals at nearly all levels has increased and the hiring market itself has become a fluid process both in terms of how professionals are compensated and when and how they are hired.

Some General Observations
Overall, most indications are that it has been a solid year for Wall Street and the financial markets in general where compensation has been up and hiring has been steady. In our view, the same can be said of alternative assets where fundraising has been strong, new positions continue to be created and pay has been rising across all asset classes. In fact, as evident from this report, total compensation for nearly all titles increased from last year’s levels, with most of the gains coming from increases in bonuses.

Not surprisingly,we’ve observed that compensation at later-stage private equity firms (buyout/growth equity funds), early-stage venture capital firms and private equity fund of funds increases significantly as fund size increases and as the titles increase in seniority.

The main driver of the increase in compensation continues to be the large amount of capital that poured into all alternative assets including buyouts (where fundraising set new records), venture capital and fund of funds. As in other years, we continue to see that buyout/growth equity funds pay more than venture capital funds and fund of funds.This is for two basic reasons: (1) they have larger management fees because, on average, they have more capital
under management, and (2) the financial skill sets demanded are usually more rigorous and competitive with Wall Street and thus more costly as compensation there has been driven higher.

Private Equity
• The record-breaking fundraising by several large buyout/growth equity funds (“mega-funds”) over the past couple of years has led to heightened demand for people to help invest those funds. Specifically, the increased competitive pressures for top talent pushed compensation higher at the mega-funds and had a trickle-down effect throughout the industry pushing compensation up at the mid- to larger-sized funds which had to keep pace if they wanted to retain and attract top talent.

• Competition from hedge funds, which continued to lure away some of the same talent, was another factor that drove compensation higher.

• The positions that are considered to be the future leaders of buyout/growth equity firms—the Senior Associates,VPs and Principals—saw the biggest gains in compensation at those firms.Total average compensation for Senior Associates,VPs and Principals rose 16%, 18% and 9%, respectively.

Venture Capital
• There is a trend within venture capital toward some funds raising large amounts of capital to do more multi-stage investing. We have seen these larger VC funds raising compensation
as part of their efforts to bring on some of the same people who are predominantly targeted by buyout funds.
• In addition to matching compensation levels of buyout funds, some large VC funds are also implementing a more bonus heavy structure.
• The positions that saw the biggest gains in total average compensation at VC firms were VPs (up 16%), Senior Associates (up 12%) and Associates (up 12%).

Fund of Funds
• As a group, there was not much movement on the compensation front among smaller funds.
• The most significant increases were mainly at the more senior roles such as VP and Principal where overall total average compensation regardless of fund size rose 6% and 9%, respectively.
• Larger fund of funds have been pursuing increased co-investment activities. As they emphasize this strategy they are starting to demand more of an analytical/investment skill set and are competing more with private equity funds for some of that talent.
• To attract those professionals who would normally have later stage private equity options we’ve seen the larger fund of funds starting to mimic buyout funds in the way they structure
compensation—namely that a higher percentage of total compensation is in the form of bonuses.

Google AdSense : We Make Your Life More Difficult

posted by MR WAVETHEORY at 1/19/2007 05:25:00 AM
It's annoying enough that you can't put AdSense and Yahoo Publisher ads on the same page. It's even more annoying now that they force you to switch the look and feel of the ads. I think all this means that Google is losing share to Yahoo and very afraid of the competition. After all, why would a winning team forbid its customers and partners from doing business with its rivals. I think that Google is doing this because the effectiveness of its ads is going down.

Competitive Ads and Services In order to prevent user confusion, we do not permit Google ads or search boxes to be published on websites that also contain other ads or services formatted to use the same layout and colors as the Google ads or search boxes on that site. Although you may sell ads directly on your site, it is your responsibility to ensure these ads cannot be confused with Google ads.

Don't you love the way they describe it? Prevent confusion from what? Isn't this unfair competition?
Google's just instituted a policy that forbids placing rival ads that can be confused with AdSense anywhere on an AdSense publisher's website. And that's a problem for Yahoo (YHOO)'s competing Yahoo Publisher Network, as well as countless other online-ad networks, which have largely copied Google's default look: blue links and a green website address.

Google already forbids publishers from putting AdSense ads on the same page as ads from Yahoo or other competitors. But some publishers had gotten around this rule by rotating Google and Yahoo ads throughout their websites. The new rules make that impossible, unless publishers also switch their sites' color palettes on the fly. That's a major pain for Web designers who'd prefer to keep the look of their webpages consistent, no matter who's providing the ads.
Why do I think this is a very interesting development? Because I think that Google is doing this because the effectiveness of its ads is going down. The text ad format was very innovative when it came out 6 years ago, but today, everyone has text ads. And if there is one thing we know about ad formats, its that new ad formats

1) Have very high effectiveness when they come out.
2) Generate very high click through rates
3) Have low numbers of impressions and inventory
4) Therefore, have very high CPMs

On the other hand, when ad formats become old and burn out, old ad formats

1) Have very low effectiveness
2) Generate very low click through rates because users develop ad blindness
3) Have high numbers of impressions and inventory
4) Therefore, have very low CPMs

Perfect example: Banner ads. $60 CPMs when they came out - untargeted. Today, $.60 CPMs. you're not reading it wrong. Banner ads have lost 2 zeros off their CPM rates.

My guess is that text ads are at the end of the long tail. Yahoo experienced it first - Overture invented the format. Yahoo results are now declining due to the declining ad format - text ads. Google looks like its next.

Why do I think it's interesting? Because it has happened before.

All this is sounding alot like what the railroads used to do. Back in the day (like a century ago), the railroad industry was the ultimate cool business -kind of like Google today. Profits were fat, competition was nonexistent - because they had geographic monopolies - but then these monopolists all decided to roll their profits back into their business - by building railroad tracks in their rivals territory - think Microsoft, Yahoo, Google building railroad tracks into each other's businesses.

With all those railroad tracks, everyone was shipping everywhere. They broke each others' monopoly. Then one day, competition in the railroad industry got so intense that the monopolists decided to gauge their customers. the guys in the big tall hats announced to their customers: You can't ship your meat or livestock on two different railroad lines - unless you wanted your meat to end up rotten when it got to the market from Ohio to New York.

Now Google wants to have your livestock - on its choochoo train - all for itself, because its ad format is waning in effectiveness. Google has one business - text ads - just like the railroads did - shipping. Both are network businesses - ad network, train network. Network effects don't last forever, and when they end, they go in reverse overdrive.

Personally I think Google should focus more on innovation and less on creating annoyances for its partners. Stop building train tracks into their rivals' territories, and start building tracks into virgin territory. There will bound to be a day when these annoyances add up to the point where users just leave - because the competition is good enough. I'm a perfect example. You don't see AdSense ads on my blog do you? Why? Because AdSense pissed me off. Making enemies out of your partners is just idiotic and sorry for saying this, but annoying your best customers is even more idiotic. Most of Google's partners joined with them because they had a friendly brand, but doing things like this really breaches the trust and the value of the brand - or at least, my naive view of the brand as a friendly, open, tech innovator.

I know that all those Googlionaires wouldn't give a dam* about what I think because they're all rich and "un-humble" now. Most just care about vesting in peace (VIP) and cashing in their options. These are not the code warriors of 8 years ago. After all, code warriors live on ramen noodles and cold pizza not on steak and wine. They have buses that take them to work at 8 and buses that take them home at 5. Did I mention their daily volleyball drill at 11 am? OK. I'm being facetious now, but the truth is that the Google of today is not the innovative Google of the past. Google is now run on business metrics rather than tech innovation. They want a larger share of their partners' revenue and a larger share of their page views. Fair enough, but as an investor, understand that the company's innovation stage is over and it's now trying to protect its monopoly just like those big, money making railroads of a century ago. Why? Business is about making money. History repeats itself again and you're seeing it live from Silicon Valley rather than live from New York. Don't believe for a second that Silicon Valley is run by software geeks. At heart, these guys are financial engineers.

The long and short of it is that Google is no longer just a great search company. Its a great monopolistic search company that's trying to protect and take market share. And some of the things it has to do will piss off its users - people like me.

Like everyone else, I use Google because it does a great job - today. Ten years ago, I used AltaVista. And there is no telling that, if another search engine came out, that was faster, cleaner, and easier to use, I would be using a different search engine ten years from now - without those silly, annoying text link ads.

Hello world. I'm Barak Obama and I'm Running For President

posted by MR WAVETHEORY at 1/19/2007 05:22:00 AM
Barak Obama is the latest candidate to announce his presidential intentions online. Everyone's doing it and I think this is so dull and uncool.

“I’ll be filing papers today to create a presidential exploratory committee,” said Obama.”For the next several weeks, I am going to talk with people from around the country, listening and learning more about the challenges we face as a nation, the opportunities that lie before us, and the role that a presidential campaign might play in bringing our country together. And on February 10th, at the end of these decisions and in my home state of Illinois, I’ll share my plans with my friends, neighbors and fellow Americans.”

Is MySpace the New Net Nanny?

posted by MR WAVETHEORY at 1/19/2007 05:16:00 AM
Parents are suing MySpace because their kids got sexually abused through "friends" they met on MySpace. Now, has MySpace become the new net nanny? Shouldn't parents be taking care of their kids and watching what they are doing online?

Four families have sued the popular social-networking site MySpace and its owner, News Corp., after their teenage daughters were solicited online and sexually abused by adults they met on the site, lawyers for the families said Thursday.

The Texas law firms of Arnold and Itkin of Houston and Barry and Loewy of Austin said that families from New York, Pennsylvania, South Carolina and Texas filed suits Wednesday in Los Angeles Superior Court, charging recklessness, fraud and negligent misrepresentation by the companies.

MySpace is not a NannySpace. It's not like people don't know about MySpace. Everyone does. MySpace is a wide open community. If kids use it, parents should spend the time to watch them.
These parents should really spend more time taking care of their children.

January 18, 2007

Slim Pickings for T. Boone Pickens - No $70 Oil. Actually $50!

posted by MR WAVETHEORY at 1/18/2007 12:38:00 AM
Hedge fund hotshot T. Boone Pickens made a Texas-size mistake about the price of oil.

Pickens, worth $2.7 billion according to Forbes magazine, is confident oil will average $70 a barrel in 2007. His prediction, made to the Houston Chronicle, flew in the face of the current clump in oil.

Oil is now down to almost $50 a barrel.

In October, Pickens had gone public with a prediction that oil would rebound to $70 a barrel before Jan. 1. It was a wrong guesstimate, the Lone Star State oilman admitted.

"There is no question I miscalculated," he said.

A mild winter in America has hurt the energy sector all-around.

Still, Pickens told the newspaper his BP Capital hedge fund company was up 26% for the year. His energy vehicle rose 92% in 2006, he said.

He could not say when the oil rebound would take place, noting "it could happen any time."