I am a strategic investor focused on digital consumer industries. Most recently, I worked at Liberty Media, the media holding company founded by John Malone, where I led and oversaw most digital media, eCommerce, and online gaming investments and companies. Prior to my tenure at Liberty, I was a partner at McKinsey & Co. in New York, where I co-founded and led McKinsey's internet practice.
My involvement with the internet and digital media began in the early 90's. I have witnessed or been involved with a few successes and many failures, which has given me a perspective that I enjoy sharing and discussing.
This is not a blog. I will only publish content on this site occasionally when I have something to contribute about digital businesses or issues related to the digital transformation of consumer media, retail, and service companies.
THE DARWINISM OF INTERNET BUSINESS MODELS Oct 2012
Why are the stock prices of internet companies such as Facebook or Zynga all over the map? Because consumer internet business models are far from established - in fact, they appear to be evolving more rapidly than ever before. Consumer internet business models are subject to a Darwinian evolution that makes it hard to predict what companies are worth, and what kind of returns investors should expect. Physical-world businesses can only serve as imperfect models for internet-based businesses. The only thing we know for sure is that winning internet companies and winning business models are those that are truly designed around users. Discerning investors must be able to tell the difference between a fad, an unsustainable copy-cat, and a truly consumer-centric business model that is grounded in insights, ideally proprietary, about the users it serves.
NO SECOND CHANCES August 2011 The lesson to learn from MySpace is that the consequence of failure on the internet is a fade away, not a turnaround. In the physical world, there are many examples of consumer companies losing and then regaining their industry leadership, sometime after turnaround programs. In the consumer internet industry there is not a single such case. There are no second chances on the internet because companies that miss a step simply lose too much momentum to ever fully recover. So far, every 4 or 5 years a massive change has reshaped the internet landscape, profoundly altering the basis of competition and the structure of the industry. These virtual earthquakes have created new companies and destroyed established ones that failed to keep up. The Law of No Second Chances has profound implications: first, focus on long-term value creation by obsessing about staying relevant to users; Second, if there is decline, get out fast
UNLOCKING THE ELUSIVE POTENTIAL OF SOCIAL NETWORKS July 2010 Social media sites are powerful enablers and amplifiers of internet word of mouth.The goal of advertisers should be to influence 2 groups of people on these sites, those who have emerged as a brand's opinion leaders, and the others who seeks their guidance and endorsement.The question is how. This McKinsey Quarterly article argues that social media optimization should treat word of mouth generated on social networks as a distinct form of media that should be used to create genuine value in the eyes of influencers and those they influence.Principal sources of such potential value include making consumers feel important in their social setting, creating monetary benefits, or providing fun/entertainment. Virtual items will probably play an increasing role in any of these strategies.
A DIFFERENT KIND OF COMPANY March 2009 It is said that General Motors “invented” modern management. If so, its bankruptcy may mark a milestone, the passing of an era of management practices characterized by hierarchies and command-and-control decision making. That approach no longer works in rapidly changing competitive environments. In selected internet companies, an alternative management system is emerging that reallocates authority and power within the organization and mobilizes higher-level problem-solving capabilities through leadership, culture, and technologies.
COMPETITIVE ADVANTAGES FOR INTERNET COMPANIES September 2008 Everyone agrees that competitive advantages matter to protect investment returns.Why is it then that so many investors fund companies that don’t have any?For one, many people hold a sloppy and mistaken understanding of what are competitive advantages in the first place. But in addition, the internet as an industry without barriers to entry, tremendous transparency and almost perfect competition, forces us to update our conventional view of competitive advantages.This article offers a point of view about how to do that for internet companies by highlighting factors that determine success in information-based industries such as network effects and social influences.
THE CHANGING VALUE OF CONTENT August 2008 The creative destruction at work in the media industry today is without precedent.Changes in consumer media consumption, enabled by digital technologies, have wrecked havoc in industries as varied as music, newspapers, magazines, and many are asking whether TV content and movies are next.Incumbent management teams have largely been incapable to respond adequately to these changes, destroying billions of dollars in wealth.There are many reasons, but one in particular is a failure to challenge mental models about the value of content, namely the belief that what used to be valuable in the past will remain so in the future, and vice versa.This article argues that narrative TV content may have less value in a multi-platform environment than most people anticipate, that conventional ways of thinking about content (i.e., by genres like sports, comedy, reality) may not be able to explain the shifting value of existing content types and emergence of new content types, and that reach-based TV content aggregation models may be aggressively challenged by vertical online advertising networks.
This is an op-ed I wrote for the McKinsey Quarterly. It summarizes my view that the changing media landscape is radically reshaping the way advertisers interact with consumers.Investors should care about this change since it compromises the advertising-based revenue model of most media businesses.I believe traditional marketing practices and allocation models have fallen behind changes in consumer behaviors.To adapt to the new interactive media environment, media companies, consumer product manufacturers, and consumer service providers (e.g., retailers) have to break away from the traditional mass advertising-era mindset and think about consumer interactions holistically, to refocus managerial activity on reducing search costs between buyers and sellers.
IS THE WEB "KILLING" THE CATALOG BUSINESS? May 2008 Lillian Vernon, Sharper Image, and Red Envelope filed for Chapter 11 bankruptcy protection in early 2008.At the same time, Bloomingdale’s closed its catalog business.Were those isolated incidents, or is there a common pattern behind their failures, perhaps the impact of the web?It would be hard to deny the impact of the internet on the catalog industry, or the parallels with the magazine publishing business.The analogy with the magazine industry may help explains how the web’s impact need not be uniformly negative on all catalogs, and could be negligible and even positive in certain cases.
Building Digital Brands was written at a time when the most idiotic dot.com business plans were getting funded. The article attempts to provide a framework for designing a successful internet business. I believe a lot of it is still relevant today. The primary insight is that digital businesses need to be defined from the perspective of the user, not the service provider/producer.The core of the digital business should be a consumer promise, and the article provides a Maslow-type taxonomy (wikipedia.org/wiki/Abraham_Maslow) for what are generic consumer promises, namely convenience, achievement, fun and adventure, self-expression and recognition, belonging. It further argues that business builders need to align the promises they make to consumers, the web technologies necessary to deliver these promises online, and an economic model required to turn a profit. These three elements – the promise, the technologies, and the economic model – together form the inseparable components of a successful internet business.
DON'T TAX THE INTERNET - YET (Wall Street Journal Op-ed) June 1998
I believe deeply that bureaucracy stifles innovation.As I articulated in this Wall Street Journal op-ed published in 1998, it would be both futile and dangerous to tax the internet too soon.“What the tax enthusiasts don’t understand is that by the time their bureaucrats print the tax code, the mercurial internet will have made it irrelevant.At this stage of the internet’s development, governments should be focusing on building an infrastructure that will help the Net grow”.I still feel that way 10 years after the article was published.
LIBERTY NETLEADERS FORUM In 2006, a group of Internet industry leaders and I created the NetLeaders Forum because we wanted a networking event dedicatedexclusively to founders and entrepreneurs who have built meaningful internet businesses. Once a year, we brought together 100 or so of the industry most accomplished business builders for a day of wide-ranging discussions about digital media issues. Rich Barton, Bing Gordon, Bill Gurley, Reed Hastings, Jeff Housenbold, Kimball Musk, Mark Pincus, Mark Vadon, Mark Mahaney, and Mary Meeker were among the leaders who joined us in Colorado. Every year, John Malone would close the event with an off-the-record, unfiltered Q&A session. I am very proud of Liberty’s association with this event. For more information, please visit www.LibertyNetLeaders.com.