Boston Globe and Snapchat

Two seemingly unrelated stories over the summer of 2013 should seriously wake you up.

At face value, it wouldn’t appear these events are connected but pause and think about them and realize the implications.

The Boston Globe was founded in 1872. It is the dominant newspaper in America’s oldest city with nearly 3x the circulation of its rival. There are apartments in Manhattan for more than the price Mr. Henry recently acquired The Globe for from the New York Times. Think about this – it was owned by the New York Times, arguably the single most well known newspaper company in the world, and it couldn’t survive. Oh, and they paid over a billion dollars for it in 1993.

snapchatThe Snapchat ghost is laughing at you.

Meanwhile, Snapchat started as a student project at Stanford at the end of 2011. Its creators, Spiegel and Murray, were basically dismissed by even fellow students for the notion of a social network based on impermanent pictures.

(Background on Snapchat: users take pictures that last for between one and ten seconds on the recipient’s phone).

The average user of Snapchat is 13 – 23 years old and the majority of “Snaps” are selfies, where the user takes a picture of him or herself. It’s no secret that a healthy percentage of “Snaps” are not safe for work, as a subtle description. Within one year, one billion photos had been shared with twenty million photos shared per day. While Snapchat doesn’t reveal its user base, its users are now sharing 200 million pictures a day. Until early 2013, Snapchat was still operating out of its founder’s father’s house and had less than ten employees, including the founders.

The amount of money Snapchat just raised is more than an almost 150 year old newspaper in one of America’s biggest cities with over 25 Pulitzer prizes just sold for. Let that sink in.

What are the implications?

  • Content: People demand content – and a lot of it. Some newspapers have done a great job of moving to mobile and creating a wider array of content (albeit a bit belatedly). There’s a time and a place for all content – even ephemeral and seemingly nonsensical. Certainly there is a difference between reading a random blog and the Wall Street Journal, but the “content kings” of the media no longer control all that is seen and heard.
  • Consumption: The ways in which people consume content will continue to evolve. It’s no longer enough to just have mobile and a Twitter/Facebook account if you want to connect with everyone. You can choose not to engage with new platforms (whether it’s Pinterest, Snapchat, or whatever’s next), but you may do so at your detriment.
  • Value: Gary Vaynerchuk wrote an amazing piece for Medium last week entitled “Value is Subjective. Even When It’s a Little Ghost.” His point was that you may think Snapchat is stupid (disclosure: I do), but there is a huge number of people who find value in it, so don’t write it off. You can examine it and choose to pursue other routes as the best way to move forward with your time, money, or business, but think back to how many people said Facebook and Twitter were stupid. Early adopters of these new technologies and networks, like Gary himself, have created enormous advantages for themselves.
  • Opportunity: Lastly, take heart in knowing that an idea dismissed by many at its inception is now worth almost a billion dollars (relevant context restated: Snapchat is now almost worth what the NYT paid for the Boston Globe in 1993). Get off your butt and go create something, anything. You have no excuse not to. While I don’t buy in to the inflated valuations of Instagram and Snapchat – and I recommend you not chase them or bank on them as your only option – shouldn’t it prove to you that an incredibly simple idea, even one that seems foolish, could be something huge?

On that final note, something to remember about the difference between an idea and execution.

strikingtruths_go-do-it

What they were bad at was making money…

Things are not going well over at Zynga.

While I always root for companies to succeed, it’s not all that surprising to hear that the company responsible for 1,400 invitations I’ve received to play pretend farming with lackluster visuals isn’t doing well, particularly when they pay nearly $200,000,000 for a company with a history of failures and a poor track record of making money.

A little over a year ago, another app was “on fire” called Draw Something by OMGPOP. It acquired almost 15 million daily active users in 6 weeks. That’s truly an unbelievable figure, particularly because it was a paid app. A bit of analysis by Tech Crunch poked more than a few holes in it’s monetization potential though: people paid a small fee upfront to download the app and in app purchases were “durable”, meaning people could retain their in app purchases (such as color packs) rather than virtual currency like other Zynga games that was “spent”.

But… like a lot of what happens in tech, there was a huge amount of hype with very little meat on the actual bone. FOMO, or Fear of Missing Out, ruled the day. Plus, with so much hype and people engaged, it’s a guaranteed success, right? Where has that not worked out before?

Andrew Carr wrote a great piece recently with some very enlightening insider interviews about the bungled acquisition which has caused Zynga to write down nearly $100 million on the OMGPOP acquisition. The most enlightening quote of all?

“I knew the OMGPOP guys–they were really talented, and really good at making games,” says a former Zynga general manager. “What they were bad at was making money, and they were struggling for a long time.”

The enormous war for talent in Silicon Valley – and the broader tech world – is no secret. Many companies are bought outright by larger ones just to bring in good engineers and developers, with the company purchased being not all that important to the new parent. This “acqui-hire” model is currently being debated in many circles, but it’s clearly not without its major flaws. The biggest flaw has been watching those “acqui-hired” depart as soon as their lockup period expires. Another insider was quoted saying “The cofounders who get hired in will stay for exactly how long it takes to vest in whatever exclusionary clause was in the acquisition. I think there are very few people who are still left who came through acqui-hires…” This has implications, on stock price and profitability, as others see things being run poorly along with hitting employee morale. Says a former designer, “I wish that they would focus in on their own employees a little bit more, because people in there have great ideas.”

When companies focus a bulk of their energy externally, chasing the next hot thing for fear it will overtake them, rather than focusing on creating value internally and building products and services that people are actually willing to spend money for, it catches up with them. Zynga’s market cap at the time of the OMGPOP acquisition was just over $10 billion. What’s a measly $200 million? Zynga’s market cap today hovers around $2-3 billion. One mistake or failed acquisition is understandable, and OMGPOP’s astronomical acquisition price and very real flameout bring a lot of attention; however, it’s clear this strategy has been more the rule than exception, and reality is beginning to set in. I wrote about this problem recently.

OMGPOP did not have a successful track record. The (overpriced) acquisition was mostly based on the skyrocketing (month long) growth of one app and apparently the talent of some of their developers. Some people may disagree with my (and other’s) analysis, saying that talented developers eventually create value, even if they aren’t successful at first. That is completely reasonable. Paying $200 million (for one popular, but fiscally lukewarm success) is not. A great deal of what Apple has built over the last decade has been predicated on acquisitions (touch screen technology, a good deal of the software). Acquisitions are a valuable tool for growth and innovation, when pursued rationally and successfully incorporating them into the company’s already proven innovative ecosystem.

What’s clear is the focus of Zynga has been more skewed towards chasing popularity than creating real value from the inside out.

Start Something.

Start Something. I think this is an amazingly simple challenge that can have profound implications for our economy and society at a macro level and our overall wellbeing and outlook on so many things at a micro level.

Start something, anything really, as long as it something in which you can make money. You don’t have to go start the next multibillion dollar business empire, next Facebook, or even the next hot gaming app. Why? There are a few main reasons.

Start Something

  • Experience. The experience of accomplishment (or failure) that is yours. Working for others, for companies, will mean that your successes and failures are always on on other’s shoulders – your boss, your coworkers, your direct reports, and the company’s shareholders. When things go well, or poorly, generally, the accolades or blame get spread around, even if it was virtually all because of you or in spite of you. Even if it was your idea, your execution, and even your job on the line, with almost virtual certainty you relied in some way on company resources, capital, prior experience, connections, reputation, and personnel.
    It’s an indescribable feeling when you can look at something you made or a service you provided and know that someone paid their hard earned money for it.
  • Ownership. If I were to say “lemonade stand”, most of you would likely think of young kids selling lemonade in their front lawn. It’s a fantastic experience as a kid, mostly because it’s all profit for you, but to make something yourself, then watch as people give you money for your time, effort, and product.
    What I’m speaking of isn’t vastly different – maybe you have some artistic or crafty talent, you’re really good with computers, or perhaps could be a freelance personal trainer to help friends or family get in shape. Whatever your talents, use them, even if it’s selling hand made candles out of your house or apartment. The feeling of ownership is one our society is lacking on a growing level. Knowing that you can build something or offer your skills or talent is a powerful feeling, and one that you will never fully realize working for someone else.
    This doesn’t mean you have to quit your job and be a starving soap maker. I’m merely saying start something that is yours, even as an occasional activity at night or on the weekends, to really get that amazing feeling of ownership.
  • Opportunity. Do you notice how those that are successful just seem to have the right opportunities fall into their laps? I promise you, that isn’t true. They are out there working their tails off every day, whether it’s building a business as an employee, as a partner, as an owner, investing in others with their time and resources, or networking and proving their worth as a person with whom others would like to do business or just simply be around.
    You’ll be surprised at the opportunities that begin to present themselves when you begin to put yourself out there.
  • Understanding. There’s a great deal of hostility towards business owners these days. Walk a mile in their shoes, even in your own small way, and begin to understand things in a new light.
    Certainly negligent or malicious business owners deserve the scorn they receive, but the large majority of business owners are men and women who wanted to build something of their own, hire a few employees, and make their own way in the world.
    Daymond John recently said “Being a boss is this: Your employees don’t like you. Your family doesn’t think you’re doing enough at home. You share the success with everyone, and the failure is yours alone.” It’s no cakewalk, despite the widespread perception.
    Business owners are also the ones who create jobs – no one else.
  • Economy. That is a perfect segue. New businesses, new products, new services. These drive us forward. The beautiful thing about starting something is it’s not a zero sum game. Think about GoPro – they created an entire industry around high quality video cameras on the go out of virtually nothing and destroyed no other businesses in the process. This results in more jobs and new opportunities others had never imagined.
    We need people who are willing to take risks and grow this economy. Status quo is unacceptable.

Start something. Anything. Do it for the experience and fun at first, then grow. Get to a point where you are ready to start something great. Something that will have a real impact on the world. Don’t worry about changing the world with your first go – doing it at all is more than 99% of people. As you gain experience, aim higher than a flash in the pan or a quick buck. It will be so much more rewarding than all your past experiences combined.

Please don’t misconstrue this challenge. It is vitally important that people start and continue efforts to help those around them, their community, and those that deserve our assistance. Another disclaimer that must be said: anyone who starts something is likely going to rely on the help of partners, employees, investors, or family and friends at some point. That does not diminish the points made above, and if you are fortunate enough to start something and receive help from those around you, be sure to recognize it.

Do something that matters.

Brent Beshore recently shared an article titled “The Hypocrisy in Silicon Valley’s Big Talk on Innovation” which challenges many out there talking about their hugely important projects and super sexy startups to remember that the newest timewasting app (or, let’s be honest, the 10,000th productivity app) may not be all that innovative, or all that important.

It’s an interesting article, particularly in the light of the current reality of many of the “hottest startups” in recent memory. Andrew Mason of Groupon was forced out of the company he started last month. Living Social is in dire straits (some may disagree, but their financials speak volumes). Remember when group couponing was going to revolutionize commerce? The insane valuations of investors crazy to pour money into a “sure thing” that was “innovative” beyond any doubts seems almost comical, in retrospect. One thing Groupon and Living Social have accomplished is a strong contribution to the race to the bottom on prices and quality many companies are locked into these days, destroying company and product value and consumer perspectives on what something is actually worth. Looking at Zynga, another innovative next big thing, tells a somewhat similar tale. Things aren’t going well, in terms of management (Founder forced renegotiations on equity promises when things were going well), stock price, or future. Even Zynga itself got caught up in other’s hype when it paid $180 million for Draw Something, an app that became hugely popular in a relatively short period of time. It’s taking a $100 million write down on that purchase. These are just a few examples. Certainly we’re seeing great things in innovation and tech these days (from Twitter and Square to Tesla and Shopify), but there is a continued fascination and obsession with a multitude of companies that seem highly talented at raising money and making noise rather than building real companies of true value. Why?

Real Work

For what little my opinion matters on the subject, I think it comes down to three things.

  1. Short sightedness. This is on behalf of both the investors and the entrepreneurs. The few stories we hear today of founders and investors cashing out for hundreds of millions after 3 years has poisoned people’s thought processes. Building something of real value takes a long time, great sacrifice, and more than most could ever imagine. If you’ve cashed out early for hundreds of millions, it was almost certainly a fluke. Since tech companies seem to be all the focus, let’s look at the ones we rely on the most: Google, Apple, Microsoft, Samsung. These companies took years, even decades, to build and massive investments. There is no get rich quick. There is no build value quick. There is only hard work. Time will tell on Facebook’s real valuation (read: value). Right now, in pursuit of calming investors, they are making just about every single one of their users incredibly frustrated at every turn. Look at LinkedIn: once the ugly duckling of social media, they are the darling of the investor world today because they are creating real value and something people actually want and need. Twitter remains a toss up in my opinion – it is fundamentally the most transformative communication tool since the cell phone, but let’s see how they handle things moving forward.
  2. Tech. Tech isn’t a dirty word, but it is distorting perspectives on what is worthwhile and valuable. The ability to scale an app company quickly, reach millions, and quickly flip it for $180 million (see Draw Something) or $1 billion (see Instagram) has changed the way people pursue innovation, has changed the way investors look at risk and reward, and has changed the public’s perspective altogether. Look at Elon Musk with SpaceX and Tesla Motors. One man (supported by investors and an all star cast of employees, of course) is responsible for carrying the greatest nation on earth’s dream of space travel forward through his private sector efforts WHILE ALSO building the first real attempt at a viable electric car company. Most of the country laughs at him and says he’ll never make it. While many probably laughed at Steve Jobs and Bill Gates, monumental gains in demonstrating what is possible (computers, cell phones, satellites, the internet) should have us cheering for Elon and others like him rather than worshipping a photo filter app… For some reason, most aren’t.
  3. Distractions and Ease. The first two aren’t really the general population’s fault. They’re really more reserved for investors, entrepreneurs, and the media (particularly the startup media). We aren’t getting off that easy though. As Gary Vaynerchuk said, “Stop watching F-ing LOST” (I’m paraphrasing here and in full disclosure I absolutely loved LOST). Many people say how busy they are and how little time they have to a) do something that matters or b) do something they really want to do. I don’t need to quote any articles to point out how much time is spent wasted on Angry Birds, Social Media, or picking your latest filter. Sure, there’s a time and place for fun and social media is an amazing tool for business, communication, and maintaining friendships… but they’re also fantastic time wasters. Many people have lost sight of the big picture because they are focused on the very small screen right in front of them with flying birds that knock down pigs. People can get quite frustrated when their phone freezes or they lose service on a phone call. While this is indeed a frustrating experience, many forget the hundreds of billions of dollars and too many hours to count that went into creating computers, processors, cell phones, satellites, infrastructure, new forms of programming so on and so forth. The ease with which we live our lives, and the very entertaining distractions, have made most of us lose sight of what really matters and how hard it is to really build something of value.

I’m not trying to suggest that Mizzen+Main is a cure for cancer, or that we shouldn’t be excited and engage with fantastic tech developments. Not at all. I am all the more convinced, however, that we are on the right path to building something of real value, something that matters, and something that can have a very positive impact on our communities and our country. For a great perspective on our journey so far, please check out my brilliant cofounder’s thoughts on How to (Really) Found a Startup. It feels good to be getting our hands “dirty” (don’t worry we wash them before handling the fabric!), it truly is a labor of love. We’re building real products and aim to build something of true value.

In response to Brent, I said that companies need to aim for more than the next “hot app” while investors need to aim for more than a quick flip. Brent summed it up nicely: “Do stuff that matters”.

Please let me know what you think on Twitter @KevinSMU.