Blackfire Research Blackbook

In the Shadow of Giants by Rohit Verma

Something you hear a lot in Silicon Valley is how hard it is for the little guy to compete against the Googles, the Facebooks, and the Amazons of the world. They have a platform. And, it’s hard to compete against a platform.

A lot of the value of platforms is driven by data and how that data can be used to optimize business decisions. The Economist magazine claims that “The world’s most valuable resource is no longer oil, but data”. No surprise, then, that substantial investment focus by Amazon and Google is in artificial intelligence (see CBInsights’s very detailed analyses on these two companies). For a good understanding of the incumbent value of platforms, however, Facebook’s relatively clean business model is the easiest to examine.

Facebook revenue increased almost 6 times from $5B in 2012 to $28B in 2016. Certainly, a secular increase in internet advertising spend explains part of the trend. More fundamental in this growth, though, is the increase in the number of daily users from 0.6B to 1.2B, and the time each user spends on Facebook properties. More time, individually and as a group, means more opportunity to serve up advertising. And, very importantly, optimizing what ads to serve up and how (hello AI). In that same period, average revenue per user grew from $5 to $16.

In essence, the platform and the value that it provides is a simple function: # users x time per user. A startup has to do a great job maximizing the amount of time users spend on its properties. But, to achieve a compelling financial model, it will inevitably need a large number of users. Snap ended 2015 with 107M daily users, and averaged $0.6 per user. By 2016, number of users had risen to 158M, and average revenue per user to $2.7.

Facebook’s strategy is focused on pushing these two numbers up, and the bulk of the $25B it has spent since 2012 to acquire companies was directed at Instagram and Whatsapp. It also made an unsuccessful run at Snap. That failure led to Facebook mimicking Snap by offering camera-related features on its platforms. Instagram Stories alone has reached 200 million active users. Which exceeds Snap’s total active users, showcasing the power of platforms. Facebook now has 1.2B daily users that spend an hour a day on its combined properties. A digital river of information that Facebook gleefully monetizes.

Not every startup can be Snap, and achieving meaningful volume may require leveraging existing platforms. For which the platforms will get a meaningful cut. The other lever that startups have, is to maximize the amount of time users spend on them. Some of the most popular categories of applications are:

Social media and browsing: Facebook – an hour a day for each user
Video: Netflix – 2 hours; YouTube – 1 hour
Gaming: as a category, 2 hours a day
Music: Pandora – 1 hour

The killer app would be one that combines all, or a significant subset of these applications into one unified platform.

Sources: “The new face of Facebook” The Economist; “Google Strategy Teardown” CBInsights; “Amazon Strategy Teardown” CBInsights; Blackfire Research

May 23, 2017

The Tech

Rohit Verma

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Music Review: The New Pornographers, “Whiteout Conditions”

Canadian indie rock band, The New Pornographers, recently released their seventh studio album, “Whiteout Conditions.” Featuring powerful harmonies and bubbling synths that playfully mask lyrics of depression, “Whiteout Conditions” is a perfect sonic homage to the 80’s, with a twist of overwhelming, Twenty-First Century-fueled anxiety. Standouts include the album’s title track, an especially upbeat tune where Carl Newman recounts a particularly oppressive spell of depression that threw him for a loop, and “We’ve Been Here Before,” about a newly reunited couple falling into the same traps of their previously failed relationship, sung in eerie harmony.

May 19, 2017

Featured Music Friday

Blackfire Research

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Throwback Thursday: Backstreet Boys, “Millennium”

On this day in 1999, iconic 90’s boy band, the Backstreet Boys, released their third, and most successful, studio album, “Millennium,” which featured the singles “Larger than Life,” “Show Me the Meaning of Being Lonely,” and “I Want It That Way.” “I Want It That Way” eventually became the Orlando based group’s biggest hit to date. On the day of the album’s release, the group appeared on MTV’s Total Request Live (RIP) in front of hundreds of screaming fans. “Millennium” became the best selling album of 1999, selling 9,445,732 albums. Of those albums, nearly 500,000 in the US were sold on the first day alone. Although the boy band craze of the 90’s died with the Beanie Baby, the Backstreet Boys are still making music and are set to release their ninth studio album this year. On top of that, the group recently began a four month Las Vegas residency at Planet Hollywood called “Backstreet Boys: Larger Than Life.”

May 18, 2017

This Day in Music History

FireCat

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Radiohead: Soaring melodies and analog noise at the Greek Theatre in Berkeley

For Radiohead’s second night in the picturesque Greek Theatre, we were blessed with a beautiful and balmy evening in Berkeley. The opening act, Dudu Tassa & The Kuwaitis, an Israeli cross-cultural project came on at 6:30pm sharp and played an entertaining set. As with most things Radiohead, it was a tasteful, off-the-wall choice for a supporting act.

But by 7:30pm, the anticipation for Thom Yorke and the rest of the band was tremendous. Joining Yorke was the usual touring lineup of Ed O’Brien, Jonny and Colin Greenwood, Phil Selway, and guest drummer Clive Deamer. They opened with three songs from their latest album, “A Moon Shaped Pool:” “Daydreaming,” “Desert Island Disk”, and “Ful Stop.” Radiohead’s live sets are always a fluid, unpredictable trip through their full discography. Of the 25 song set, only 6 came from their latest album. High points in the set were a powerful rendition of “Airbag” from “OK Computer,” which is celebrating the 20th anniversary of its release this year, and “There There,” from “Hail to the Thief.”

A six piece band with bass, two drummers, and three guitarists conjures images of prog rock at its worst, but the way Radiohead deploys its musicians is what makes them unique, and for a band with three guitarists, their sound is very un-guitar like. Jonny Greenwood tortures and twists his guitar into the sounds that you hear on their post-“Kid A” albums, and Ed O’Brien is continuously adjusting the speed/duration of his sampled and looped guitar chords to create noises like those in the outro of “Climbing Up The Walls.” Together with the two drummers (Portishead drummer Clive Deamer doubling up with Phil Selway), the overall performance is amazingly “analog,” Yes, there is clearly midi sync between the drum beats and the delay loops, but no sequencing or pre-recorded noises that I could detect. It was real-time performance art and not the “off-line programming” that many EDM acts specialize in.

But the most memorable moment of the night might well be Yorke’s “save” of the delicate song “Give up the Ghost”. While laying down the backing loops, Yorke looked across to Jonny Greenwood and punctuated the vocal track with the expletive “Aaaw Sheeeit” – which then looped around every 8 bars for the rest of the performance. Apart from a fit of giggles, he played through to the end of the song to the delighted whoops and cheers of the audience. What a pro. Watch the video here:

Overall, it was an evening full of outstanding creativity, musicianship and showmanship, covering the spectrum from grungy indie guitar rock through EDM, and even Krautrock. If you ever have the chance to see Radiohead perform live, I highly recommend it, no matter your taste in musical genres.

May 16, 2017

For Your Entertainment

Fretmelt

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Music Review: Father John Misty, “Pure Comedy”

On April 7, singer-songwriter and former drummer for “Fleet Foxes,” Josh Tillman, who began singing as his Father John Misty persona in 2012, released his third studio album, “Pure Comedy,” a sprawling, 75-minute exploration of capitalism, pop culture, technology, humanity, politics, cynicism, revolution, and everything in between. “Pure Comedy” is both beautiful and tortuous, exemplified by the album’s mainstay, “Leaving LA,” a 13-minute, autobiographical narrative that, at times, is both haughty and humble. Today’s political climate (and climate change) provides the cynical Misty with a generous amount of source material, so much so, that much of the beautiful orchestral arrangement of the album gets swallowed by the lyrics, or simply feels out of place. That’s not to say Misty’s melodies fall flat entirely, but the most successful songs on the album are the few where the songwriter’s poeticism engages with the swells of his supporting orchestra, such as on the album’s self-titled opener, “Pure Comedy,” the utopian “Things It Would Have Been Helpful to Know Before the Revolution,” and the sarcastic “Ballad of the Dying Man.” Misty’s doomsday aesthetic, although challenging to the listener, resonates auspiciously in 2017. As Pitchfork Staff writer, Jazz Monroe wrote in his review of the album: “Josh Tillman…excels at tormenting those unlucky souls who enjoy his music.”

May 12, 2017

Featured Music Friday

FireCat

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