Monday, March 31, 2008
There were some great specific insights and data points from Covario last week on a study they've done across their client base on how search engine optimization (SEO) techniques affect search rankings (Covario names Intel, Procter & Gamble and Hewlett Packard among its customers). The SEO vs. search engine struggle, where each industry spends significant resources trying to defeat/stymie the efforts of the other, is a telling example of challenges to using the web as a research database.
The study looked at how its clients were affecting in search engine rankings based on variations in
- keyword use and placement
- number and quality of inbound links
Their conclusions are that Google is
- 15X more sensitive than Yahoo to technical issues
- 25% less sensitive to content
- 50% more sensitive to inbound link quality
There is so little data on how the different strategies play against each other that this is a breath of fresh air. In FirstRain's business we've invested significantly in being able to "see past" technical and structural distortions at the macro (syndication, splogs) and micro (technologies, dynamic content, advertising) levels.
This study is a reminder that for consumer search, the leap to consider only the value of the content is still years away - although with search-driven research we have had to address these problems head-on.
Thursday, March 27, 2008
One of my theories on how to be a good CEO is to keep things simple. I focus on four areas of the company, and I have no more than three priorities at any one time. This makes sure I deal with the critical issues, both strategic and tactical, and put great people, process and delegation in place to run the operations of the business.
I was reminded of the four areas when I put together a presentation on how to use intelligence for a CEO recently. I believe the important areas for a CEO are:
For Strategy, search-driven research (this is web-driven market research like FirstRain) impacts how the CEO and his/her team understand their market. It's important to track
- market structure and trends
- fundamental drivers
- customers supply and demand chain
- partners and competition
- geographic changes in demand
in order to gather intelligence to support strategic decisions and validate or invalidate a strategy decision. We've seen customers drive FirstRain results to the CEO for strategic issues - macro economic, company and market trends showing first in the web - as well as within marketing for tactical competitive analysis of product lines.
For Customers, having a powerful intelligence system enables the executive team to stay on top of everything driving major customers: trends in their markets, deal win and loss, management turnover, supplier issues etc. and to be current on what senior management from the customer has been saying to investors and to the press. We have customers who use FirstRain to research everything impacting their major accounts so that the CEO and sales executives are continuously up to date on what matters to their customers.
Investors are the source of capital for both public and private companies and it's critical not to surprise them. Achieving this means not only keeping them up to date, but also being very well prepared when you meet with them. Prepared to engage on discussions about your competitors, the market, customer trends and at the same time, if you are public, being careful not to breach Reg-FD. Having prepared for many earnings calls myself, I know how powerful it is to be able to do earnings call prep with a system and not hearsay.
Finally, for Culture, the intelligence system is your feet. There is simply no substitute for walking around and talking with you employees. But for the first three, search-driven research is a powerful tool to keep the CEO and executive team on top of the strategic areas that drive the business.
Wednesday, March 26, 2008
Fascinating paper just published - The Impact of Blog Recommendations on Security Prices and Trading Volumes.
The conclusion is that some blogs can and do move the market. A few telling points, as summarized by the CXO Advisory group:
The long (short) recommendations of bloggers appear consistent with contrarian (momentum) strategies.
Blog buy and sell recommendations on average exhibit some value, with considerable variation among blogs.
Cumulative abnormal returns for long (short) recommendations over the 20 trading days following blog publication are positive and significant (negative but not significant).
Recommended buys (sells) generate an average abnormal return of +0.4% (-1.8%) in the two trading days immediately following publication, with 54% (66%) of the two-day returns positive (negative).
The recommendations of the best (worst) performing blog generate an average cumulative abnormal two-day return of +10% (-7.4%), based on eight (just two) recommendations.
Blog readers appear to react more strongly to:
Recommendations from bloggers with graduate degrees in finance or economics.
Bloggers mostly echo information already available in the media, but market reactions suggest some uniqueness of information/analysis and/or distribution channel.
The absence of price reversals in the twenty days following publication support the hypothesis that blogs offer genuine information.
Now consider how the FirstRain customer base uses blogs (our financial services customers are 50% hedge funds, 50% institutions). We cover all types of information from the web but blogs are always a talking point as we set up a customer configuration.
- 10% of our customers are aggressively focused on mining ideas and questions out of industry or geography specific blogs
- 30% of our customers identify blogs as a key component of the valuable data and perspective on the web
- 50% of our customers are suspicious of blogs - concerned that they are not valuable but watching them to learn
- 10% of our customers ask us not to include blog results
As blogs continue to grow and change, and as traditional publishing continues to decline in the face of fast-paced web publishing, savvy investors are learning how to use the new media.
Tuesday, March 25, 2008
Yes, it's cheesy, but.... The FirstRain California team went bowling last week to blow off steam from the intense pace of technology development we're in - and my team won! No, there was no corruption involved but it turned out that I had two ringers from IT on my team. And YY (my COO) won a T-shirt for a special strike.
Monday, March 24, 2008
There's a rich article on this issue in this month's Portfolio.com - called Sexism.
Some fascinating statistics
- the gap between men and women's pay improved over the last 25 years, but it slipped back in 2006 and women's pay is still only 78.7% of men's
- only 14.8% of Fortune 500 board seats are held by women and it's been flat for 3 years
- the number of female corporate officers at the Fortune 500 companies has dropped in each of the past 3 years
- combine this with the stats on Silicon Valley boards where the valley is already substantially behind the rest of the country - we've a long way to go
And alongside an article about Wall Street's most powerful woman - Erin Callan who is CFO at Lehman - and who the reporter speculates "might not rise higher".
However, there is one corner of the financial services industry where women are surging ahead and that is as Chief Investment Officers of endowments and private foundations - as reported by the New York Times last Friday.
- women now run 10 of the largest 50 foundations and endowments, up from 4 ten years ago, including the Ford Foundation, the MacArthur Foundation and the Gordan and Betty Moore Foundation.
This issue will improve in jobs that are measurable - like money management - faster than in the more subjective positions. There the prejudice of women's style in the workplace - see my post on this irritating issue - will continue.
Tuesday, March 18, 2008
Today's Wall Street Journal reports that Frank Quattrone is back - he's launching a tech-focused banking and advisory boutique called Qatalyst Group with a couple of former CSFB collegues.
I'm happy to see him back. Frank personally played a key role in helping me get Simplex through our IPO in May 2001. This was a terrible time in the market, there were no tech IPOs, no one wanted to be first and Frank believed in me and my company enough to take the risk with us and take us on the road. It was a nailbiter for the first 10 days and then the market figured out what we had, the orders started coming in and by the time we were done we priced above our range and had the best first day performance of 2001. I can still see the room, Frank, Larry Sonsini from WSGR, my CFO Luis Buhler and myself around a small table in a small conference room talking it through, and Frank saying he'd do it (and my wash of relief that we'd raise much needed capital for our growth).
Frank's signature is smarts - assembling strong banking teams, being very well networked with the power players in the valley, and picking winning companies. Building a new firm from scratch is tough but if it can be done he'll do it.
Monday, March 10, 2008
As the pundits ponder a recession and the IPO market continues to be soft, there are a flurry of articles about whether people want to work in a startup or not and if they do, what's the environment like.
The Wall Street Journal posits that there is a flight to safety going on in Silicon Valley with startup employees "throwing in the towel" and looking for a "safe harbor". I am sure the reporter Pui-Wing Tam did the homework, but I don't see this behavior at all. The valley is as optimistic as ever. People are inspired by the ever increasing pace of new technology from both big (Apple and Google) and small (FirstRain, Quintura, Digg et al) companies. The development platforms are more efficient than ever, venture capital is healthy at the moment and funding good ideas and so the quality opportunities abound.
At the same time the Journal also notes that Tech Execs are Still Willing to Stick with Startups. Sarah Needleman gives a couple of reasons:
- many silicon valley startups are financially sound
- there's the potential of a significant payout
- tech execs are often more entrepreneurial than in execs in other markets
- silicon valley execs may have a cushion from prior successes
These are all good reasons but I think they miss the two fundamentals - certainly none of these reasons lead me back to running a startup.
I think most of us are driven by the fun and satisfaction of growing little companies. While they can be tough on your environment and your private life (see the controversial posting from Jason at Mahalo at how to run a sweatshop - more on my opinions on this later this week), they can also be thrilling, creative and rewarding in a way that is hard to find in a large company. There is nothing like the feeling of cracking a market and building a company together with a small team of smart, driven people.
And the second fundamental issue I think all these articles miss is that being a CEO or senior exec of a public company comes with significant baggage and personal risk these days. Sarbannes Oxley has made the reporting processes, while more transparent, a significant time and money sink for companies, as well as introducing real personal liability for the CEO and CFO. I made this choice when coming back into the workforce. Not only did I know I love the process of building teams and companies, I also knew I didn't want to go straight back into the public eye and the emotional rollercoaster of a volatile tech stock. It's a different job running a public company than running a private company. Both interesting and challenging, but different and I have a number of friends who, like me, choose to rotate in and out of the public eye.
Wednesday, March 5, 2008
Spencer Stuart (the recruiting firm) publishes a Silicon Valley Board Index every year, tracking the trends of Silicon Valley boards vs. the S&P500 averages - based on an index of 100 Silicon Valley companies (the SV100). This is a helpful report to see what's changing in the valley, but also how far ahead/behind the S&P500 averages we are.
Notable changes in 2007
- boards are more independent. An average of 83% independent directors in 2007 vs. 75% in 2003; this is consistent with the S&P500 average of 81%.
- Silicon Valley boards have made little progress in the representation of women. 48% of boards in 2007 have a female director, up from 41% in 2003; this is in stark contrast to the S&P500 average of 91%. Yup, this doesn't surprise me.
- nearly all boards have a finance expert, up from 11% in 2003. This is just plain smart in today's governance and Sarbox world
- directors are spending more time on board work adding an average of one more meeting per year vs 2003, although audit committees meet an average of four times more per year than in 2003. Yup - I can really relate to this one - I am on two committees (chair of compensation and on governance) - at Rambus.
- director compensation is also increasing. The average cash retainer is now $35,600 up from $25,000 in 2003. This is in contrast to an S&P500 average of $68,600 but as Spencer Stuart says "size matters when it comes to director's retainers".
- changes from 2006 - boards in the region added 82 new independent directors, the youngest was 29, the oldest was 76 and 12 were women.