The Sax Angle

Follow up on Vocus (VOCS)

Posted on 05. Mar, 2013 by Harvey Sax.

I have to give Vocus management credit for being responsive to shareholders. I know firsthand that the management of a public company can become beleaguered by shareholders when their stock gets crushed.  So when  I complained about not getting one of my questions answered by the CEO , I didn’t expect an immediate response.  Yet I got one today from the CFO no less.

Vocus is one of the new companies staking out the social marketing space.  It’s a cloud based software suite that includes PR Web, iContact, and tools to listen and interact with Facebook and Linkedin users.  I tweeted to the CEO that “for someone who was expert at social marketing, he was tone deaf to shareholders.” It didn’t take long to get noticed.  The CFO, Steve Vintz took time before catching a flight to answer some of my questions.  Anyway you want to slice and dice that, that’s impressive!  That’s what social marketing is supposed to be about, catching that person in line waiting to check into the Bellagio and telling them there is no wait at the  hotel next door, right?

We are enticed by Vocus’s software application.  It’s state of the art.  I can’t tell you how well it works yet because it really is a work in progress and they won’t let you trial run it.  Maybe if management reads my blog post they’ll consider changing that position.  After all giving people a free or near free look got a lot of customers for Salesforce.com.

I still believe, in fact I know I am right that the Company grossly overpaid for iContact, an email list company, but the vision Vocus has for the future is big and they absolutely needed a mail product.  They just didn’t need one at a cost of  over $2000 per subscriber.  I don’t think I’m wrong about that per subscriber figure cost as I gave Mr. Vintz two opportunities to correct my math.  Instead he only talked about how transformational an acquisition iContact was. Mr. Vintz, you are right, it was transformational.  It turned Vocus stock into a dog.

I was wrong though in my earlier post about when the final bill comes due.  They have quite a bit of breathing room, not until February 2017 to come up with the approximate $70 million they will need if their stock is not at or above the conversion price.  Either way these stock conversion deals are horrible for existing shareholders.   Fortunately we weren’t one of them at the time.  If the social media market stays hot  for a couple more years, Vocus might be one of the big winners.  My suggestion to them is that the next time they think about doing an acquisition, add CRM to their suite so small businesses like my own can have a real option to escape from the tyranny of Salesforce.com.  Oh one last thing, Mr. Rudman.  Please don’t overpay  the next time. Sax Angle Partners, are shareholders now.

Silicon Valley Faces Private Sanity Check – WSJ.com

Posted on 10. Jun, 2012 by Harvey Sax.

Silicon Valley Faces Private Sanity Check

By ROLFE WINKLER

A wave of sanity is washing over Silicon Valley after Facebook’s FB +3.00% listing debacle, and that may be bad news for private companies looking to raise money. Suddenly, investors seem to care about business fundamentals again.

Instagram surfed the wave perfectly. Despite having no revenue, it sold itself to Facebook for cash and stock currently worth $920 million. But the new focus on fundamentals makes it trickier for hot start-ups like Twitter,LivingSocial and Square to justify the peppy private valuations they have recently received or are seeking.

via Silicon Valley Faces Private Sanity Check – WSJ.com.

Facebook IPO Seen Deepening Investor Distrust of Stocks – Bloomberg

Posted on 27. May, 2012 by Harvey Sax.

Facebook IPO Seen Deepening Investor Distrust Of Stocks

By Elizabeth Ody and Margaret Collins – May 25, 2012 10:01 PM MT

Facebook Inc. (FB)’s initial public offering, plagued by trading errors and a 16 percent drop in the share price, will push more individual investors out of a stock market they already distrust after the financial crisis.

“This is clearly the latest in a long string of events that is eviscerating the confidence investors have in the market,” said Andrew Stoltmann, a Chicago attorney who represents retail investors. “The perception is Wall Street jiggered this IPO so the underwriters made money, Facebook executives made money and the small investor got left holding the bag.”

Ironically I feel pretty much the opposite of the headline.  If the IPO worked well and crowd mania held sway, I’d say that the market is irrational and impossible to make money or predict correct behavior.  Facebook is grossly over-valued as are  all social media stocks.  Technological obsolescence is so great in this industry, it’s hard to put long term growth rates on any business.  Furthermore barriers to entry are low and behavior is fickle.  Tomorrow’s disrupter is happening somewhere right now.  The Internet, cloud, web, whatever is becoming balkanized.  Facebook, Linkedin, Google +, iPhone, etc are all full steam ahead creating silos of users instead of the grand connected experience that advertisers are banking on  Once they realize the web is mature in this country and soon most of the world, it’s growth rate won’t be much more than population rates and a fight for market share.  This is not a high multiple growth business as the stocks indicated.  They are all shorts, everyone of them.

via Facebook IPO Seen Deepening Investor Distrust of Stocks – Bloomberg.

The world is coming to an end but we can share it on Facebook?

Posted on 17. May, 2012 by Harvey Sax.

Reasons why Facebook marks some kind of weird market top.

1.Round the clock coverage on CNBC and Bloomberg about the Facebook IPO and how much money everyone is making.

2.The largest tech (maybe any IPO) in history.

3. People you know that you didn’t know ever bought a stock, asking if you could get them some Facebook stock.

4.Savy insiders selling enormous stakes.  Who cares if Goldman keeps half. At the valuation they’re getting the 50% remaining is all a free toss of the dice.

5. Billion dollar side deals for companies with no revenue to speak of.

6. The fact that Marc Zuckerberg consulted Warren Buffett on business and Buffett declined all investment opportunities. Does anyone honestly believe Warren couldn’t have gotten in the first round of anything he wanted, especially Facebook?

7. Let’s see, the whole financial world is coming unglued, 30 yr. and 10 yr. treasury bonds are hitting all time high prices and yet people are willing to give up $15-30 billion dollars to get a piece of Facebook. I’m sorry, it’s hard to have it both ways.  The world is coming to an end but we can share it on Facebook?

8. Time Magazine Person of the Year, bank on it. That’s always the top.  Remember these are the same folks that picked Adolph Hitler as Person of the Year in 1936. Not to compare anything (Facebook’s a great company) but the unfortunate sense of timing.

Adobe Systems (NSDQ: ADBE): On the Fast Track to Growth

Posted on 09. Apr, 2012 by Investing Daily.

The 2000 technology bust and subsequent collapse of the high-flying Nasdaq left many investors with the perception that technology is a high-risk, volatile sector that’s only appropriate for the most aggressive growth investors.
That sentiment is downright anachronistic. The S&P 500 Information Technology Index has a beta of 0.96 over the past five years; indexes with betas lower than 1.0 are less volatile than the broader market. More important, technology stocks have outperformed the broader market by a sizable margin despite their below-average risk. (See “Tech Sector Shines.”)
Technology is the most cash-rich and least indebted sector in the S&P 500. Some of the bigger tech stocks including Apple (NSDQ: AAPL) and Cisco Systems (NSDQ: CSCO) generate so much idle cash they’re initiating dividends to return value to shareholders. Tech companies now hold 30 percent of all cash among non-financial balance sheets in the S&P 500 ($360 billion out of $1.1 trillion).

Facebook IPO Is On Nasdaq

Posted on 05. Apr, 2012 by Wilensky.

Well, we can all stop holding our breaths..  FB is on the Nasdaq.

Facebook Picks Nasdaq for I.P.O. – NYTimes.com.

Facebook Action Done In Secondary Markets

Posted on 29. Mar, 2012 by Wilensky.

Looks like May will bring Facebook shares out of the shadows of the secondary markets and into the spotlight. The month before may will be a quiet one though, as the social media company halted all trading of its shares this week.   According to SharePost, Facebook is looking “to help ensure its orderly transaction into the public markets”.  While it’s common to see a halt before the IPO, this is the first time trading has been halted for as long as a month.  Although the $100 billion valuation on the company should merit some special consideration.

Facebook sets private market exit – FT.com.

Google Probed By Regulators Due To Privacy Issues

Posted on 19. Mar, 2012 by Wilensky.

Google just can’t seem to stay out of the spotlight in the arena of online privacy.  Ever since they decided to “simplify” their online agreement, (see here, and here, and here) they have been scrutinized from every angle possible.  Sure, the policies they had in place were convoluted and ineffective.  Sure, they needed to play catch up on the data mining front to compete with the likes of Facebook.  However, they managed to do so with the grace and precision of a hand grenade.  This time around, the FTC is investigating to determine if Google intentionally tried to set a number of ad cookies through Safari’s browser in conjunction with violating consumer consent laws.  Even if this ends well for Google, it won’t be the last time in the limelight..

Regulators probe Google privacy breach: report | Reuters.

China’s High-Tech Spy Network: Just Had An IPO?

Posted on 12. Mar, 2012 by Wilensky.

In the high-tech world of espionage, deep pockets prevail.  Not this time though, as Chinese spies have mined substantial amounts of data.. through Facebook.  Proving that the social data mining machine is a double-edged sword, the spies gathered email addresses, phone numbers, names, and details on family members on a number of high-ranking military officials.  The fake account of United States Navy admiral James Stavridis befriended a number of other officials for an undisclosed amount of time before the intrusion was identified.  Considering the number of ‘spoof’ accounts of a number of famous celebrities and the sensitivity of these high-ranking officials positions, it’s disconcerting such a simple and well-known technique was so successful.

Chinese Spies Use Fake Facebook Pages to Gain Intel | Defense Tech.

Here’s What To Expect From Apple Today On The iPad 3

Posted on 07. Mar, 2012 by Wilensky.

In case you’ve been trapped in a car for the past two months like this guy, the new iPad is coming out today.  Here’s Business Insider’s coverage of what you can expect from the new device.  Although, 4G is probably the only thing that most people will notice on the third version of the extra large Facebook device..

• Retina display
• Quad-core processor / more RAM
• Improved camera
• LTE
• Siri integration
• Slightly different form factor
• Similar pricing
• iOS 5.1
• Home button
• March 16th release date

THE APPLE INVESTOR: All Eyes On Apple’s ‘Special Event’ Today, Here’s What To Expect.

More Ads? Facebook and Twitter Stepping Up Mobile Coverage, And Revenue

Posted on 29. Feb, 2012 by Wilensky.

Enjoy the unusually ad-free browsing of Facebook and Twitter on your phone?  Not for long..  Both companies are adding an ad platform to mobile devices in the upcoming weeks (reaching 425 million Facebook users and 55 million Twitter users)  While this will fill major gaps in both social media companies revenue streams, it will result in the following changes:

Twitter: Promoted (paid advertising) accounts will be recommended for you to follow, Tweets by promoted accounts will appear no matter if you follow them or not, and Tweets from brands you follow will move to the top of your newsfeed.

Facebook: the ad unit Reach Generator will put posts from brand pages and insert them into the news feed on both desktop and mobile applications.

This won’t change the overall look of either application, rather attempt to seemlessly blend advertising in with desired information and forcing the viewer to sort through the ad content.  The approach used by both companies is quite similar in structure, maybe due to some collaboration between both companies?  One thing is for sure, Twitter is a prime acquisition target and Apple has an absurd amount of cash on hand..

Via: FINALLY: Facebook Will Show Ads To Its 425 Million Mobile Users.

and

Via: Twitter Ads Will Start Appearing On Your Smartphone Soon – AllTwitter.

Google’s Privacy Policy: Strike One

Posted on 17. Feb, 2012 by Wilensky.

Not nine days after Google releases their new-and-improved privacy policy, we have some first hand results of its intrusiveness.   Jonathan Mayer, a graduate student from Stanford University, discloses some rather disappointing findings.  In his comprehensive article (found here) he identifies four ad-based companies that place trackable cookies in Safari’s browser, and code in two of the four show an intentional circumnavigation of Safari’s privacy feature.  I’ll give you a hint: one starts with a G and ends in oogle.  Now almost every browser has some type of privacy feature in place:

“Every popular web browser, save Opera Mini and the Android built-in browser, includes a “third-party cookie blocking” privacy feature. (The remainder of this post uses the term “cookie blocking” for brevity.) These options share a common high-level purpose: impose limits on cookies from “third-party domains,” that is, domains that differ from the “first-party domain” in the browser’s URL bar. In practice, however, implementations vary substantially; for (slightly out-of-date) specifics, see the Center for Democracy and Technology’s 2010 Browser Privacy Features report and Google’s Browser Security Handbook.”

Now Apple ships all of their web-ready devices with this feature already activated, which differs from all the other browser manufacturers.  But according to the WSJ, Google used special computer code that tricks Safari’s software into allowing the monitoring of many users.  Of course Google has an explanation for the blatant violation:

The spokeswoman acknowledged that Safari blocks third-party cookies by default, but said “Safari enables many Web features for its users that rely on third parties and third-party cookies, such as ‘Like’ buttons.” As a result, Google started using this functionality last year for Safari users who were signed in to Google and had opted to see personalized content – like Google’s +1 button.

“To enable these features, we created a temporary communication link between Safari browsers and Google’s servers, so that we could ascertain whether Safari users were also signed into Google, and had opted for this type of personalization,” the Google spokeswoman continued. “But we designed this so that the information passing between the user’s Safari browser and Google’s servers was anonymous – effectively creating a barrier between their personal information and the web content they browse.”

Safari, however, “contained functionality that then enabled other Google advertising cookies to be set on the browser,” Google said. “We didn’t anticipate that this would happen, and we have now started removing these advertising cookies from Safari browsers.”

While Google’s actual intent is debatable, the company’s timing couldn’t have been more harmful to an already shaky level of public trust.  One thing’s for sure though, this leaves the door wide open for Microsoft’s new version of Internet Explorer with the stinging slogan of  ”the browser that respects your privacy”.

Via: Safari Trackers « Web Policy

and: Google Accused of Tracking Safari Usage Without Permission | News & Opinion | PCMag.com.

Use Google? YouTube? Have a Gmail account? Worried? Maybe You Should Be: Part 3

Posted on 09. Feb, 2012 by Wilensky.

It’s here.  Google’s new simplified privacy policy popped up today when I opened my Reader account, (if you don’t follow, here’s Part 1 and Part 2) and after 30 minutes or so I came to a single profound, concrete conclusion: it’s long.

Now I have to give Google credit, it’s the most user friendly privacy document I’ve seen to date; complete with unsophisticated illustrations that firmly reinforce it’s benign nature.

A caricature of how Google uses the information it gathers to improve the user experience.

Simplicity aside, what does this mean for the user?  Well, as previously stated it’s a matter of perspective.  Interestingly enough, the manner in which Google frames the changes immediately brought to mind a very specific phrase: “The Greater Good”.  While a vast range of connotations are associated with these words, I feel they appropriately illustrate the multitude of grays that comprise the situation.  In an effort to consolidate the experience, I provided excerpts of the policy below with some of the integral changes bolded.  A link to the complete policy is also provided below.

From Google’s New Privacy Policy:

Your data on Google

Knowing a little bit about you can help make Google products better, both for you and for others. By understanding your preferences we can ensure that we give you the search results that you’re looking for, and by analyzing the search logs of millions of users in aggregate, we can continually improve our search algorithm, develop new features, keep our systems secure and even predict the next flu outbreak.

When it comes to the way that we look after your data on Google, our approach is based on transparency, control and security.

We have five privacy principles that describe how we approach privacy and user information across all of our products:

1. Use information to provide our users with valuable products and services.
2. Develop products that reflect strong privacy standards and practices.
3. Make the collection of personal information transparent.
4. Give users meaningful choices to protect their privacy.
5. Be a responsible steward of the information we hold.

Time limits on data retention

We anonymize IP addresses after 9 months and alter the cookie numbers in our logs permanently after 18 months. This breaks the link between the search query and the computer it was entered from and is similar to the way in which credit card receipts replace digits with hash marks to improve customer security.

Here is what an IP address could look like in our logs after 9 months: 123.45.67.XXX. After 18 months, the cookie will be replaced by a newly-generated cookie number.

Why we store search logs

We use search logs for many purposes, for example, to keep our services secure, develop new features that make search faster and more relevant, and even to predict outbreaks of disease.

Search

The ads that appear on Google Search are targeted based on your search queries. If you type “cheap flights”, for example, into Google, you will probably see sponsored links at the top of the page and on the right hand side showing ads from travel companies. To decide which ad to show you, the automated system looks at the search query that you enter, the relevance of the ads to this query and how much the advertiser is prepared to pay in the auction and, in some cases, your very recent query history, amongst other factors. These are examples of contextual ads as they are related to what you are looking for on that page at that time.

Interest-based advertising

In addition to the sponsored links you see on Search, Google places ads across the web by acting as an intermediary between advertisers and website owners. In some cases these are contextual like search ads, i.e. they are based on the content of the web page where they appear. In other cases they are interest-based ads and these are shown because we’ve made a guess at the types of things likely to interest you. We base this on other pages you’ve previously visited. So if you’ve visited many gardening sites, you may see more gardening ads across the web.

This is how it works:

• When you visit websites and watch videos where Google shows ads, we store a number in your browser by using a cookie to remember your visits. That number could be something like114411.
• Because many of the websites you visit are related to gardening, we’ll put your number (114411) in the “gardening enthusiast” interest category.
• So we may show you more ads that are relevant to gardening enthusiasts as you browse websites where Google provides ads.

Throughout this process we don’t store your name or keep any personal information about you. We just recognize the number stored in your browser, and show ads related to the interest categories associated with your cookie (so we’re recognizing your browser, not you). We don’t show ads based on sensitive information or interests, like race, religion, sexual orientation, health, or sensitive financial categories.

You can control which types of ads you see using Ads Preferences Manager. This allows you to change the interest categories associated with your browser (or if you don’t want us to store your interests at all, you can opt-out altogether).

Using Web History also means that you will get more personalized search results:

Signed-in personalization:

When you’re signed in to a Google Account with Web History, Google personalizes your search experience based on what you’ve searched for and which sites you’ve visited in the past.

Signed-out personalization:

When you’re not signed in, Google customizes your search experience based on past search information linked to your browser, using a cookie. Google stores up to 180 days of signed-out search activity linked to your browser’s cookie, including queries and results you click.