Trade shares of players and teams on OneSeason

November 27, 2008 § Leave a comment

My friends Mike and DJ launched OneSeason about two months ago and have built a very interesting platform for buying and selling synthetic ownership interests in sports teams and players among friends. Think playing cards merged with an online industrial strength trading platform. « Read the rest of this entry »

Buffett on equities

October 17, 2008 § 1 Comment

Great Op-Ed by Warren Buffett in the Times yesterday.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Expert networks and sell-side research analysts

September 24, 2008 § Leave a comment

The recent partnership announcement between the Gerson Lehrman Group and Credit Suisse sparked some commentary from research industry insiders who were surprised that GLG was letting sell-side analysts access the GLG network, even for what is sure to be a hefty fee. I was a bit surprised to learn they weren’t doing this already. GLG and other expert networks have tens of thousands if not hundreds of thousands of experts in their networks. Sell-side research operations, while they may be on the decline, still control 75% of the $5.7 billion in trading commissions distributed to research providers annually. At KnowledgeBid, our best customers are firms that sell research and services based on primary research.  Contact us if you’d like to learn more about our network and how we can help you meet your customers’ needs.  We’d love to help.

The classified puzzle

July 31, 2008 § 4 Comments

It’s a funny coincidence that Microsoft will be pulling the plug on their little known Live Expo classified service just three days after MySpace announced that they will be ramping theirs up with Oodle. These changes are indicative of the larger trend: the classified game remains elusive for large major new entrants. Facebook‘s classified service has been less than stellar (I can’t even find a link to it right now) and Edgeio has been shuttered while Craigslist and eBay continue to dominate the all-in-one classified scene. « Read the rest of this entry »

LinkedIn quietly launches Research Network and DirectAds…let the monetization begin.

June 30, 2008 § 8 Comments

LinkedIn DirectAds
LinkedIn has quietly launched a beta version of a dynamic CPM text advertising platform called LinkedIn DirectAds. No formal announcement of the launch was made on the LinkedIn blog or elsewhere. According to the DIrectAds FAQ, advertisers will be able to dynamically target ads by age, gender, geography, educational institution, industry, and seniority. Minimum order size for an advertisement is $25, with the minimum number of impressions dependant on the targeting audience chosen by the advertiser. The rate that you pay for a CPM (1000 impressions) changes as you add or remove targeting options from your ad. Apparently the product will give click-through rates to advertisers, but billing will be based on CPM. In a unique twist, ads will also include the advertisers name and a link to their LinkedIn profile in hopes of “increasing transparency and visibility into the advertiser.” Much like the Facebook SocialAds platform, advertisers must have a profile on the network to launch an ad, although LinkedIn says they are limiting advertisers by completeness of profile, number of connections, date of profile creation and a number of other factors. I was unable to access the platform through my profile.

The DirectAds platform will bring LinkedIn closer to Facebook’s Social Ads technology, with these two leaving Bebo, MySpace, Plaxo, Friendster and the rest of the social networking world behind for now. I hope to be able to try the LinkedIn platform soon and give a head-to-head comparison. LinkedIn will continue to extract a premium on their advertising, as it seems they will be setting the price per CPM internally. A true market (e.g. Overture/pre-Panama Yahoo) or partial market (e.g. Google quality score) influence on price would likely result in prices lower than they would like, and they are clearly avoiding a CPC model for a reason since they are measuring CTR anyways. I think this slow transfer is very smart on their end especially considering their pre-IPO status, but as an advertiser I wish they would switch to a free market faster. Their ad margins will likely be lower than what they were getting with their rate card (although perhaps not), but the volume of advertisements will definitely spike upwards as you no longer have to go through a traditional advertising salesperson process to launch a targeted ad on their network.

LinkedIn Research Network
Additionally, on Thursday of last week LinkedIn quietly launched the LinkedIn Research Network, a product the company first mentioned back in February. No formal announcement of the actual launch was made on the LinkedIn blog or anywhere else, but the Research Network product page is live and linked to from the Premium Product footer, along with job, corporate, and upgrade links. Also linked is a 2 page product summary PDF. The product page outlines what is essentially a premium version of InMail (pdf). A Research Network subscriber can send send 20 InMails at once, and no monthly or daily limits are mentioned. Previously, LinkedIn BusinessPlus subscribers had the most InMail access and were limited to 10 InMails per month, so this is a dramatic increase in potential InMail volume. In the past advertisers could send targeted InMail blasts through LinkedIn’s advertising platform at $1 – $5 per recipient.

The LinkedIn Research Network is an attempt to move into the expert network industry and will be sold primarily to hedge, private equity and venture funds. According to a recent Integrity Research Associates report, there are roughly 25 expert networks in existence today. Aside from my company KnowledgeBid, every other expert network service operates on a subscription model. LinkedIn is likely gunning for the fat subscription fees that players like the Gerson Lehrman Group are pulling from investors (+$50k for access to one industry vertical of experts for 6 months), but the product they have launched is far more like the resume search/direct email services offered by Monster, HotJobs, CareerBuilder, Dice, etc. than an expert network. Perhaps down the road LinkedIn will try to facilitate the actual expert matching, but this iteration of the product just enables subscribers to send a large volume of cold emails to potential consultants. Additionally, the product page makes no mention of facilitating consultant payment and the only compliance functionality mentioned is a “research history”. Legal compliance is arguably the largest issue faced by expert networks today, and something that expert network users have come to expert from service providers. It’s possible that LinkedIn is intentionally not involving themselves with payment of experts in an attempt to remove themselves from the chain of liability if their service were to be used to facilitate insider trading or the like.

Congrats to LinkedIn on the product launches. I’m glad to see them competing with Facebook on the advertising technology side of things (let’s see an API guys!) and will certainly be keeping tabs on these products as they mature.

Cloud Consulting + Distributed Professional Services

May 27, 2008 § 1 Comment

The Times recently ran an article by Michael Fitzgerald on the red hot cloud computing trend. Fitzgerald defined cloud computing to be “obtaining computing resources . . . from someplace outside your own four walls, and paying only for what you use.” The concept of cloud computing makes perfect sense: instead of paying for massive amounts of computing capacity to be ready for spikes in usage, site owners pay only for what they need, when they need it.

Fitzgerald’s definition illustrates the parallels between cloud computing and what we’re up to at KnowledgeBid as well as, in a larger sense, a growing trend in the professional services space. Like cloud computing services, KnowledgeBid provides services on an as needed basis, the difference being that instead of tapping into a cloud of computational power, KnowledgeBid facilitates access to a cloud of expertise and information.

A new lean breed of professional service companies is maturing with similar operating models, silently taking market share from the incumbent players. These firms have minimal office leases on their balance sheets and aren’t burdened with massive annual partnership payouts. They offer customized, lower priced services and often have broader offerings than their traditional competitors. The management of these firms plays a new and rapidly evolving role, combining matchmaker, headhunter, temp agency, accounting firm, compliance officer, and human resources department.

One of the hottest of these new breed is Axiom Legal Solutions, Inc. Founded in 2000 by Mark Harris and Alec Guettel and backed by Greenhill & Co., Benchmark Capital, and Panorama Capital, Axiom is disrupting the legal world by working closely with the in-house counsel at major corporations to fuel them with niche, qualified attorneys on a contract basis. Axiom “combines the flexibility of outside counsel with the best attributes of a sophisticated corporate law department”, collecting fees on attorney hours but without the weight of partner payouts and massive office leases. Axiom “is not a law firm” and “does not provide legal representation or advice” but does interview attorneys, hire them full-time, then place them directly with clients for specific engagements. Their clients include American Express, Bank of America, Cisco, Dow Jones, Goldman Sachs, Johnson & Johnson, New York Times, Nokia, Sun Microsystems, and Viacom, among others.

The most advanced segment of these new service providers is arguably the web development and design sector. Dominated by oDesk and eLance, these companies give customers access to a global network of developers, designers, and database architects. They don’t hire service providers directly but serve as a platform for clients to screen, interview, monitor and compensate service providers. These companies have seen explosive growth thanks to the web 2.0 boom. The chart above shows the number of hours worked through oDesk by month since 2003.

Running a similar model in the engineering space, Exponent, Inc. hires professionals on full time and staffs them with clients according to their specific needs much like Axiom. Exponent has been around in one form or another since 1967, and has morphed several times. It’s currently a publicly traded company and employs over 500 engineering and scientific professionals, covering 20 practice areas including biomechanics, buildings & structures, civil engineering, construction consulting, ecological & biological sciences, electrical & semiconductors, environmental & earth sciences, health sciences, chemical registration, food safety, epidemiology, biostatistics, computational biology, toxicology, mechanistic biology, exposure assessment, public health, industrial hygiene, industrial structures, mechanical engineering, materials science, statistical & data sciences, thermal sciences, and vehicle analysis. Exponent does have significant lease liabilities (~$5M in ‘07) but most/all is non-premium warehouse and laboratory space. The company saw solid growth vs the S&P last year.

At the end of the day these companies all provide value by making connections and managing relationships. As the world becomes more and more connected, I think this trend will continue. The professional services cloud will become more accessible, and the companies that facilitate access to it will gain market share at the cost of traditional professional service providers.

Investment Research + Massive Industry Shift

April 18, 2008 § 3 Comments

I had the opportunity to present KnowledgeBid at the Investorside Alternative Research conference in New York last week (conference agenda), attended by an interesting mix of independent alternative investment research providers and buy-side folks. The investment research industry has undergone massive change in the last 10 years, much of which is a result of the information technology explosion, Regulation FD, and unbundled commissions. The dominant groups at the conference last week primarily fell into three categories: 1) expert networks, 2) data mining, and 3) research management. Very few, if any, new players are producing traditional research reports with buy/sell recommendations or general industry analysis. Even fewer are associated with particular trading desks, something that never would have been seen 10 years ago. The recent explosion of the alternative research space has in large part been at the expense of traditional sell side research.

Alternative Investment Research Market Size

The sell side and other large financial service players are now actively partnering with, investing, and acquiring alternative research operations. There has been an explosion of activity in the space in the last six months, part of a larger trend that has been emerging since Reg FD was passed eight years ago. I’ve aggregated major announcements and milestones below (let me know if I missed anything interesting).

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