Bronte Media

I am still in love with Yahoo’s SearchMonkey program and now it’s live.

The way I think of SearchMonkey is similar to the improvements AJAX offered to the User Experience in reducing page load bloat and page views. Consumers find what they are looking for more quickly.

God, it’s not pretty. The project seems to be falling apart under Nicholas Negroponte incompetence. Still the project has spurred an important movement and I am happy to have firstly given a laptop to a kid in the developing world and having a piece of history that now functions as my ‘living room laptop that looks up menupages.com to order dinner’.

Analogs to Bear Stearns’ Cayne playing bridge while the firm burned?

ESPN:
“Agent Marc Fleisher said Kirilenko had to finalize a travel visa for a family trip to France this summer and Thursday was the only day he could do it without having to wait another month.”

My list of the top two moronic questions VCs/financiers ask entrepreneurs/startups are:

1) Is this a feature or a company?

and

2) Used to be: What if Microsoft decides to build something similar? Now: What if Google decides to build something similar?

There is a delicious irony to the two questions.

As late as 2002, search was considered a feature and not worthy of the company status. Portals paid technology companies like Informix single digit millions in licensing fees to use their search and threw away their internal efforts. If you were a search engine even as recently as then you were dismissed as a ‘feature’ and not a product.

And so it stands now that advertising on Google sites will pass Windows in revenue next year (with similar margins) and that because of this trend the second moronic question has become ‘what if Google decided to do something similar’.

The folks who ask this question display zero recognition that their current framework would have prevented them from investing in Google at any stage along the way. And so if you are an entrepreneur having to hear the question, you can smile at the irony.

Russ Horowitz over at Marchex has been a big proponent of direct navigation sites (the company owns hundreds of thousands of domains). He has argued that the space is a subset of search and the intent of a user is similar but interesting data from Efficient Frontier seems to point otherwise:

Yahoo is most levered to the domaining industry and the quality of the traffic suggests it does not convert as well as search. Even with Google, the partners outside of AOL and ASK (AOL btw, converts at a huge premium to other search engines) don’t seem to be driving that many conversions for the four sample advertisers Efficient Frontier ran the analysis on.

Unfortunately, in risk-based trading, whether in financial services or sports betting, there will always be a business model in one party being more confused:

“Football betting on exotic markets - such as tackle counts and metres gained - has been suspended by bookmakers because punters are confused which statistics agencies use when paying out on bets.”

Last December of last year, I pondered the future of MOVE, the leader in online real estate in the US.

A quick recap: The company does around $300m in revenue per year, but growth is flat. It’s cashflow is positive but barely since they are investing a lot into a new office in the bay area and new people. They have new management who are finally making progress in fixing the core real estate search experience and are on the right track.

The most startling thing about the company is the valuation. Last December when I said the stock would go to double digits it was worth approximately $400m. Now it’s worth around $500m today. Because I have $0 skin in the game, that is a healthy 20% gain on my $0 bringing my total invested amount in the company to $0, an excellent return by any standards in today’s environment.

But with so much cash (well cash + auction rate securities of nearly $200m), the company still has a puzzling valuation when compared to private companies like Zillow or even Trulia.

Before we dig into the quarterly earnings, it seems that something is about to happen, and about to happen soon. Investor David Nierenberg has significantly boosted his stake in the company to a point where he now owns over 13%. He has bought around 5m shares in the past few weeks or another 3.25% of the company. I couldn’t find much about him other than he fancies himself as a mini-Buffet for micro-cap stocks.

Now to the company. Although revenue is flat, the agents who are advertising on the site are starting to show weakness. The weakness is first manifested in deferred revenue since they pay on an annual subscription basis that is then amortized over twelve months. This from the transcript:

“On our balance sheet you will note deferred revenue though up slightly from year end has declined compared to the first quarter of last year. This is largely a result of our continued growth in broker advertisers at the same time we experienced a slight decline in our individual agent business. Individual agents generally pay for their annual subscription up front so that payment shows up in deferred revenue and we recognize the revenue ratably over the 12-month contract. In contrast most of our broker company advertisers pay on a monthly basis which has no effect on deferred revenue.”

One of the company’s bedrocks has been it’s huge lead in traffic and engagement, since they are really the only site out there with comprehensive listings on a national scale. But curiously:

“We also made the decision to spend as I mentioned about $800,000 in maintaining our traffic position”

For some reason they also spent $800,000 in legal costs related to ‘defending patents’ which seems like a huge amount of money for a company this size.

Because of their core position in the industry, the fact that even though real estate classifieds in newspapers are off 20%+ year over year MOVE is holding it’s ground and they seem like they have more lardo than a David Chang-served pig in their cost base, one thing is becoming increasingly likely: a takeover or take-private transaction now the company has two investors, Elevation Partners and David Nierenberg, breathing down their neck.

From Joel Spolksy on Microsoft running down the ’synchronization’ rabbit hole once more and all the other firms with their head in ‘the cloud’:

“When did the first sync web sites start coming out? 1999? There were a million versions. xdrive, mydrive, idrive, youdrive, wealldrive for ice cream.”

The WSJ reports in brief:

“Accel Partners, a venture-capital firm, has hired a new investing partner from rival Sequoia Capital. Sequoia partner Sameer Ghandi, 42 years old, is joining Accel to beef up its Internet and software practice, said Accel partner Theresia Gouw Ranzetta. During his 10 years at Sequoia Mr. Ghandi made many high-profile investments as Sequoia aggressively went after hot Internet start-ups. A Sequoia spokesman didn’t respond to requests for comment.”

That’s interesting in my neck of the woods as Gouw Ranzetta lead Trulia’s series A round, and Ghandi lead the company’s series B round. I’m sure the move will make for some scintilating ice-breaker chat at upcoming Trulia board meetings for whomever the new Sequoia partner to join Trulia’s board is.

Todd Vernon, CEO of Lijit, has an excellent segmentation of the different types of angel investors; breaking them down into family, relationship, idea and once removed angels. Required reading for any startup founder.