I was about to write that this is the worst business/economic analysis I’ve ever read on a startup but then I realized it was written to support the Austrian School’s ideas on the nonexistence of market failures. I still don’t agree but now I get why.
Groupon: Another Market Success – Robert P. Murphy – Mises Daily.
writing a public blog that was available for free to readers was “exceedingly disingenuous if not straight hypocritical given my strong belief in the value of information”
via Is It Time to Stop Blogging and Start an Email Newsletter?.
The price of your information good depends on how much the market is willing to pay for it. I have a strong belief in the value of water but in this country we can typically get it for almost nothing.
Also, it doesn’t help that #peoplearecheap on the internet and won’t pay for anything.
Building on my post on the effectiveness of information platforms like Quora, here’s an economist complaining about all the noise in the economics channel:
In summary, what I’d like to convince the public that economics is far, far, more complicated than most commentators seem to recognize. Because if they did, they could not honestly write the way they now do. Everything “depends”, and this is just the way it is. And learning what “it” depends on, exactly, takes enormous effort. Moreover, just below the surface of all the chatter that appears in blogs and op-ed pages, there is a vibrant, highly competitive, and transparent scientific enterprise hard at work. At this point, the public remains largely unaware of this work. In part, it is because few of the economists engaged in serious science spend any of their time connecting to the outer world (Greg Mankiw and Steve Williamson are two counterexamples that essentially prove the rule), leaving that to a group almost defined by its willingness to make exaggerated claims about economics and overrepresent its ability to determine clear answers.
You don’t hear it because 90% of the economist population doesn’t blog or tweet but many of the respected economists you and I know on Twitter and the blogosphere are not respected by the profession.
The next round in the fight between content and distribution:
In negotiations, the News Corporation is pushing for about $1 a month for each subscriber, potentially setting a precedent for broadcasters that are seeking a new revenue stream to offset advertising declines.
via Fox’s Fight With Time Warner Sheds Light on Cable Fees – NYTimes.com.
Google Plans $750M Buyback To Offset AdMob Dilution
via Google Plans $750M Buyback To Offset AdMob Dilution – Tech Trader Daily – Barrons.com.
At the end of the day, it’s like Google paid cash, but nobody had to pay taxes. This backs up my previous claim:
In a cash deal, Google doesn’t pay any taxes but AdMob shareholders pay a boatload (cap gains) . In a stock exchange deal, nobody pays taxes. In my opinion, this was the biggest driver for motivating a stock deal.
My comment over at Niki’s blog:
As an aside, I don’t know why this being a stock sale is growing to be such a big deal in the media coverage. I’m reading all sorts of different opinions. For example, WSJ VC Dispatch seems to imply that AdMob is disadvantaged that it was a stock deal. But on Business Insider, Blodget says Google gave up some upside by doing a stock deal.
I’m not a tax accountant but here’s all that matters to me. Is Google’s stock price overvalued? If so, then Google will be motivated to use it’s shares to buy companies. And sellers should be motivated to do a cash deal. I believe AOL used their overpriced shares to acquire TimeWarner in the m&a debacle of the century.
Now let’s assume that Google’s share price is fine. The other thing that matter is taxes. In a cash deal, Google doesn’t pay any taxes but AdMob shareholders pay a boatload (cap gains) . In a stock exchange deal, nobody pays taxes. In my opinion, this was the biggest driver for motivating a stock deal.
That’s what Blodget claims. The way Apple accounts for their iPhone revenue is well known because it’s conservative compared to the cash flow the business generates. If the details are true, I’m with Blodget on this one– I won’t be surprised if we see a pop in the stock.
In a report last week, Credit Suisse describes an accounting rule change that may eventually allow Apple to book most iPhone revenue upfront. Doing so would not change the company’s cash flow, so there would be no actual change in the theoretical value of the company or stock.
But the change would cause Wall Street analysts to jack up their earnings estimates, and it would significantly boost the company’s reported earnings. This would make Apple’s stock look much cheaper to unsophisticated investors. It might also, therefore, act as a catalyst for the stock.
via iPhone Accounting Change Could Send Apple Profits And Stock To Moon (AAPL).
Am I the only one who thinks that Felix Salmon and Joe Weisenthal are missing the point here?
via Harvard Business School Teaching Dangerous Nonsense About Leverage.
There’s nothing really hilarious about the statement to me. Take a look into any good finance textbook and there’s never really a good explanation for what the right debt to equity ratio should be.
I’m not sure if Google will raise debt because it’s largely taboo for tech companies to do so but I think it’s a great, albeit academic, question– can and should large IT-based companies raise debt?
If you’re interested in this, go read yourself some Modigliani Miller:
… there are advantages for firms to be levered, since corporations can deduct interest payments. Therefore leverage lowers tax payments. Dividend payments are non-deductible.
LendingClub.com, a peer to peer lending marketplace is helping small time investors make some good returns on loans:
Investors loan money directly in peer-to-peer, or P2P lending, to borrowers through firms such as LendingClub.com, which package the loans and sell them as notes, bypassing banks and credit-card issuers. The industry may grow to more than $100 billion in annual loans in 2012 from about $500 million this year as borrowers seek ways to reduce their costs, said Ed Kountz, a consumer payments analyst at market research firm Forrester Research Inc. in Cambridge, Massachusetts.
Why aren’t these opportunities arbitraged away? The two primary reasons that come up time and time again are (small) scale of opportunity and information assymetry. The article mentions the latter:
Among the risks of P2P loans are insufficient information to determine whether borrowers will repay, said Ken Naehu, who manages more than $2 billion in fixed income at Bel Air Investment Advisors LLC in Los Angeles. He said he can purchase 10-year California state tax-free bonds that yield about 5 percent. S&P rates California the lowest U.S. state, giving their general obligation bonds an A grade, the sixth-highest of 10 investment levels.
via Peer-to-Peer Lending Lures Investors With 12% Return (Update2) – Bloomberg.com.
From this article on Redbox:
In 2005, Redboxes were in 600 locations and rented 24,000 movies a week. Today, they’re in more than 15,600 locations, renting 7.5 million movies weekly, Redbox says, not far below the 10 million-plus weekly rentals claimed by Netflix.
Netflix offers more than 100,000 unique titles. Each Redbox kiosk has slots for 600 discs, but the average number of titles is just 200, accommodating multiple copies of the most popular.
via Digital Domain – Kiosk Power – Redbox’s Video Rentals – NYTimes.com.
