acquisition

Hey Evan, relax! If the strategy is good, won’t matter if everyone knows

My strategy professor from business school once said that if you left your company’s strategic plan on the bus and a competitor discovered it…and you were then screwed, it was a bad strategic plan. I completely agree.

A great strategy is one that’s unique to your company. For Apple, it’s a commitment to simple designs that cater to the every-person, and to deliver integrated, vertical experiences even if that means basic feature sets. Everyone knows this, but only Apple can be Apple. Only Apple has a large, loyal fan base that absolutely trusts Apple’s product taste and are willing to always pay for it. Only Apple can attract the best talent without needing to pay top dollar for them. Apple’s war chest means they’re able to tightly control their supply chain so competitors have a hard time matching its product quality and profit margins.

Elements of Snapchat’s strategic plan were leaked in the recent hack of Sony Pictures, and so I was surprised to read a very emotional reply from the CEO of Snapchat, Evan Spiegel.

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The razor blade market isn’t so razor thin

One way to make e-commerce work is to sell high margin products online — ideally, products that are necessarily high margin in the brick and mortar world to account for distribution costs. Therefore, going online cuts out the middlemen and you can profit even while selling for less. Proven examples include eyeglasses, cosmetics, baby products, and so on.

Re/code has a fascinating story on another example: Harry’s, for razor blades. What makes Harry’s so interesting is that the company raised $197 million on a $350 million valuation on basically zero revenue (they have sales, but at a level insignificant relative to the size of investment).

In short, investors are investing solely on the basis of potential.

Re/code is painting this as yet another example of technology’s growing bubble. But let’s dive deeper — far from a being sign of investor irrationality, this transaction might actually make rational sense.

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Microsoft overpaid for Minecraft by $700 million

Microsoft is acquiring Minecraft maker Mojang for $2.5 billion. I’ve got mixed feelings about the transaction.

The strategic benefits are questionable and financially, Minecraft is worth maybe $1.8 billion — a valuation which assumes a sequel is as commercially successful as the original, and which assumes the intellectual property rights founder Markus Persson took out of Mojang is part of the transaction.

A $1.8 billion valuation leaves $700 million that new revenue streams like additional merchandising, a successful movie, etc. are unlikely to cover.

The best possible explanation might be that Microsoft is using its foreign cash reserves to pay for the acquisition — money that would be difficult for Microsoft to use domestically for tax reasons.

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Here’s an NSA-styled conspiracy theory about Yahoo and Flurry

Yahoo has acquired Flurry for a reported $200 to $300 million.  Ostensibly it’s for Flurry’s targeting ability and fledgling ad network; but I have a more sinister suspicion, totally unfounded.

To wit: Yahoo’s ambition is to be your daily habit, whether that’s mail, news, weather, etc.  Increasingly, that means mobile.  However, their impact there so far is questionable.  What Yahoo app is a must-have?  None.  How can they be smart enough or visionary enough to create the next Snapchat?  The next Instagram?

Flurry can be the answer.  Mine the Flurry database and analyze which apps are doing well — based not on fluff like hype and press coverage, but on the actual metrics that count like growth, retention and engagement.  Study those apps and then decide whether it’s something Yahoo should clone.

Nutty conspiracy theory?  Maybe.  Given Yahoo’s disappointing results so far, Marissa Mayer may decide it’s time to change the rules of the game.  “What matters is we build products that people love,” she said.  If Yahoo can’t do that on a level playing field, maybe it’s time to cheat a little with Flurry.

Niggas heard I fuck with Dre, now they wanna show me love

So it’s true. Apple really did acquire Beats for $3 billion.  It’s Apple’s largest acquisition ever.

Noted New York venture capitalist Fred Wilson raised a few eyebrows earlier this month at TechCrunch Disrupt in predicting that Apple won’t be a top three tech company by 2020.  Because Apple is “too rooted to hardware” and not capable enough with the cloud.

Consider this acquisition a bullet point to that forecast.

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Oculus Rift may be the future, but $2 billion is a lot for maybe

Facebook acquired Oculus Rift because Mark Zuckerberg believes it can be the next communication platform after mobile.

Strategically we want to start building the next major computing platform that will come after mobile… There are not many things that are candidates to be the next major computing platform. [This acquisition is a] long-term bet on the future of computing.
— Mark Zuckerberg

I buy into the vision of virtual and augmented reality. I agree that Oculus Rift, or something like it, will eventually one day after much trial and error become a new communication medium.

But let’s not kid ourselves. That vision hasn’t yet been realized — Oculus Rift is still closer to a niche hobbyist proof of concept than the next iPhone.

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