Thursday, April 30, 2009
Quality of (re)search - it's all about the Metadata
Your average search engine user has the patience of a toddler – they expect to leverage one or a few keywords to get the answer they are expecting and they’ll only try once or twice before giving up. If the results are bad, they’re not likely to try again – you’ve lost a user, or customer.
This is a hard problem to solve when the user is a senior professional looking for business information about a competitor – or the market trend behind a stock’s movement.
FirstRain is all about only the highest quality, high precision results for professional users and a critical piece of our system behind our results is our rich Metadata library. To put it simply, Metadata is data about data; for us, it’s the information architecture that captures what the documents in our system are about – and they can be about any number of concepts drawn from the thousands we’ve modeled. They can be literal (this is about Apple Computer) or they can be crossed by any number of building blocks (this is about layoffs at Motorola in Illinois).
The base layer of FirstRain is the categorization engine that identifies and tags what an article is about – a company, a market trend, an event. Since these tags determine what users see when doing research in our system (and remember – no patience with poor results), the rules that go into identifying them need to be spot on. For example, it’s necessary to ensure a new video game launch from a company like Electronic Arts is tagged appropriately, but a blog about how to reach new levels in one of their games is ignored. A single web document may have any number of tags reflecting the content in it. The article about Electronic Arts could also mention other relevant information about competitors and partners, as well as trends like video game sales; and it’s important to identify and tag each appropriate facet.
But just tagging the data to the right topics is only half the magic. Imagine what you can do if you can also analyze the frequencies of the Metadata. Keep in mind we have millions of documents in FirstRain, each containing numerous tags telling us what it’s about and where it’s from. Go back to the Electronic Arts example: FirstRain can identify the number of times EA is mentioned in conjunction with any related topic, such as new products, or any other company. We highlight spikes in these counts for our users and so show up emerging trends in number of mentions above or below their competition. These counts can give great insight into what a company is doing, or is about to do.
By treating the Metadata as a database in itself, and analyzing it for spikes and patterns we can identify emerging trends for users that they simply could not see from even the highest quality individual search results.
Friday, April 24, 2009
Investor Relations, the Web and Blogs - it's an opportunity
It's clear to me that many companies are missing powerful opportunities to communicate richer information with their investors through their web sites because rules around new media are new - and I think it's a wasted opportunity. I had the opportunity to sit on a NIRI panel in New York last week to discuss new technologies and how they can help investor relations professionals (NIRI is National Investor Relations Institute) and through the questions I received during and after the panel the lack of confidence around the issue really surprised me.
The problem starts with the SEC who haven't been a big help in this area so far. The SEC first provided guidance on the electronic delivery of documents in 2000 and then gave an update August 2008 - yes an 8 year gap at a time when the technology, and investors use of technology, exploded in sophistication. But now the SEC has provided guidance and it's straightforward (you can read the Commission Guidance on the Use of Company Web Sites - it's readable).
In simple terms - provided that the company makes sure investors know that information is being published on company web pages - and that the company web site is a recognized channel of distribution - then the information is considered public for Reg-FD purposes. In fact the SEC "recognize[s] the enormous potential of the Internet to promote the goals of the federal securities laws." It's the ultimate information-level-playing-field since 99% of investors will have access to the internet.
Nowadays many company CEOs have blogs but few have been as courageous as Jonathan Schwartz of Sun Microsystems who pioneered meaningful communication with his market through his blog. Most public company CEOs err on the side of caution and their web sites are marketing brochures not disclosures, probably at the urging of their general counsels. They don't really engage the market - consider the CEO of Thomson Reuters - Tom Glocer's blog where he posts about once a month and "shy's away from subjects too close to the business of Thomson Reuters, in part to avoid 20 pages of risk factors in each post"
I understand the conservatism, but are CEOs and the IR heads missing an opportunity to engage their shareholders in meaningful discussion about the progress of the business and the decisions being made? When communications are limited to earnings calls, press releases, presentations at (closed) conferences run by the banks and private meetings the discussion is bound to be either un-nutritutious to the retail shareholder with lots of questions, or boring at best. Even with some CEOs who have tried to embrace Twitter they can turn into "flat out commercials" as Business Week posted about Ford's CEO yesterday. The best Twitter CEO user I've seen is Tony Hsieh from Zappos who puts company culture first and uses Twitter as a way to communicate with employees and customers alike - and is a comedian too.
There are ways to use new technology to help CEOs and company management engage their shareholders without breaching the many controls of the SEC. The August 2008 guidance "encourages" the use of company sponsored blogs and electronic shareholder forums - while of course making it clear that communications through these forums are subject to the same antifraud provisions of the federal securities laws.
So back to the NIRI opportunity. The train is coming down the tracks one way or another. Blogs written by product consumers (customers), industry observers and employees are growing every day - we know because we track and tag them for our customers. At a minimum the IR team needs to know what's being said about the company and what investors are seeing so they can get ahead of sentiment and respond to questions from shareholders.
But that is only the first step. The bigger opportunity is to set up well regulated, interactive, on-line communication with shareholders and greatly improve the shareholders understanding of the company strategy, culture and market. Obviously confidential subjects like M&A and deal negotiations don't belong in these forums because the discussion itself can queer the deal, but aside from critically confidential negotiations and employee confidentiality, so much about what a company is doing and why can only help understanding.
Many things drive investors views of companies - but understanding is at the heart of investor confidence. I think this is a terrific opportunity for companies to embrace the new communication mechanisms and have better investor relations, especially retail investor relations, as a result.
Monday, April 20, 2009
FirstRain selected by Newssift of the Financial Times Group
Last month's announcement by Newssift (part of the Financial Times Group) of its meaning-based vertical search engine was an important new way to look at search for business professionals – you can quickly see how it’s different if you try it at www.newssift.com.
Wednesday, April 15, 2009
Technology, not War, is the solution to publishing
The global publishing giants have declared war on the new technology generation of content distributors - but they have lost sight of what consumers value and how they want to get to the value. It's time to separate content creators from distributors. It's time for a new business model which requires technology understanding and leadership to develop - and one that new generation search applications like Google News and Digg for the consumer, or FirstRain for the professional investor, can sign up for to get the right news to the right people at the right price for them.
Local publications like The Boston Globe are teetering on the edge of bankruptcy, others such as The Seattle Post-Intelligencer are moving exclusively online after 146 years in print and global giants like the Associated Press and Wall Street Journal are trying to fight back. But the reality is this is too little, too late and effectively going to war with your customers is a fatal strategy as Arianna Huffington posted a few days ago.
Face it – the consumers of news have changed – dramatically. We no longer read multiple news sources on the hope that we’ll find something interesting, most of the younger of us don’t take a daily physical newspaper and as services like Facebook, Digg and Twitter have shown, we expect the most interesting news to find us. It’s not that we believe news should be free – clearly there is discovery, research and production cost, but it should be allowed to roam freely across the many channels the web enables and still maintain proper attribution.
Our customers at FirstRain have shown us over the past three years that the authoritative news is no longer only found in the WSJ, FT et al. Instead it’s media like the DailyKos, Gizmodo, Consumerist, and In the Pipeline that are increasing the size of the news market pie and creating a huge demand for such obscure, on-the-edge news. In addition, the value of each piece of news varies by who’s reading it and what they plan to do with it. What a college student reads about Apple, Inc. on an obscure blog may be informative and help him plan on his next iPhone purchase, but to a portfolio manager at a Hedge Fund, that same information may be the bit of news he’s been looking for to insert into his model and make a multimillion-dollar trading decision. In both cases the news has value but the value, the search technology to find and rank the news and the delivery model is different in each case.
The critical issue still stands though - original investigative reporting is a public service that we, as a society, cannot do without. Journalists are our educators and our whistleblowers , our eyes and ears on the ground.
The news industry needs to find a recovery path through innovation and collaboration. As Scott Karp points out in his article in Publishing 2.0, this is a technology issue that is outside the comfort zone of traditional publishers. Here are three steps the AP and its 1,500 U.S. daily newspaper members and the Newspaper Association of America (NAA) need to consider in creating a viable business model for themselves and their customers:
* Protect the original content creators: Grant original content producers the opportunity to file as nonprofits under the same laws and protections offered to the Public broadcasting companies as supported by Senator Benjamin Cardin, of MD.
* Track the content: Work with aggregators like Google News, Yahoo, MSN, as well as NYT, WSJ, and the like on developing a new HTML standard that can be inserted into the original news articles to enable the tracking of news throughout its lifecycle.
* Develop a fee-sharing business model: Work with content distributors on an appropriate fee-sharing model to enable the distribution of originally published news through the various niche channels as diverse as Google News, Bloomberg, FirstRain, and even a locally-published community paper.
These options would give content producers multiple channels to sell through, and the ability to charge a real market price based on each distributor’s reach and depth, while at the same time providing an opportunity for smaller players writing original content to distribute their content through major channels for added revenue, outside of Google Adwords.
Then the AP and NAA would create a competitive environment and a generation of startups through which news is distributed to consumers and business professionals. And better yet, this would drive the separation of content creation from distribution – and set up a long term sustainable business model which is what the publishing industry so badly needs.
Monday, April 13, 2009
The inability to unplug
What is it that makes us stay so connected during vacation? Is it just that we have responsibilities that continue whether we are in the office or not, or is it a deeper level of co-dependency?
I took a few days off two weeks ago and found myself stressed if I could not stay connected and this caused me to examine what was going on with me and my teammates when we take time off.
I break the reasons to stay connected into three buckets
1. You have real work to do. This particularly happens to R&D. There's a major project under way (we have a fantastically exciting one coming up right now), you are responsible for a critical piece of design or implementation and the team can't wait for you. In this case we'll work at night or early in the morning on our vacations because the work is just too important to slip a day.
2. You need to keep other people moving along. This happens to sales. You've got business moving through the pipe, you want to keep the user evaluations going and if you're working paperwork for an order you want to keep your buyers on their toes and not delay the order. You may think me a hard driver, but when my sales guys take a vacation I ask them to stay connected with their pipeline and to keep their orders moving along. Since this affects their commission I rarely get any push back.
I also find myself in this mode for major projects. By staying on top of progress, reviewing documents, asking questions, I can keep the company's major activities running remotely.
This category is much more apparent in a small company than in a large company. When I ran a large business at Cadence I had a number of very senior people working for me (including YY who is with me at FirstRain) who kept everything moving without me, and the ship was so large, with so much inertia, nothing major would go wrong if I took a couple of weeks off. I remember taking 3 weeks one summer and telling the CEO I wouldn't be checking in but I was confident everything would be OK, and it was.
In a small company checking out completely is much more risky because everything is moving so fast and you don't have mass and inertia on your side. There just are major decisions every couple of days - strategy, design or deal related - which we make quickly by talking to each other frequently as the parameters of the decision make themselves visible to us.
So then that leads to the third reason
3. Peace of mind. This is probably the one that holds me to my iPhone/PC more than anything else when I am on vacation. I have hundreds of balls in the air at any one time with customers, partners, distributors, board members, projects and people and if I am out of contact and unable to practise #2 above I get incredibly stressed. Sad I know. On our college trip 2 weeks ago my husband and daughter dropped me at a Starbucks in Pomona for 2 hours so I could work and chill out.
I love what I do. No question. But I would like to learn the art of vacationing while running a small, rapidly moving company. I'm taking a week in Rome this summer with a friend who calls me on my b.s. We'll see how much of my stress she'll take before she ditches me in a Roman internet cafe.
Friday, April 10, 2009
The downside of Twitter
We recently brought up FirstRain on Twitter and have been writing tweets about new functionality and interesting research we've found through our system. But when I was sent this YouTube link- while it made me laugh - it did continue the doubt in my mind of whether Twitter is ever going to be of real use.
The Twouble With Twitters
Wednesday, April 8, 2009
Change in focus from alpha to beta predicted
Today was a big day for the independent research industry - Investorside hosted its Fifth Annual Independent Research Conference where everyone who’s anyone in independent research got together at Bloomberg’s flashy headquarters to discuss the industry.
The keynote speaker was Suzanne Duncan from the IBM Institute for Business Value who shared findings on their financial community research over the last 18 months.
According to their research, this economic crisis was much more intense than prior crises over the last 100 years because of the high growth of integration and instrumentation over the last two decades – ie. it’s the technology. The bad news is the sophistication we now have is expected to result in more frequent and deeper crises in the future, particularly in the banking sector. (It’s real - check out the amazing article in New York magazine about the guy who wrote the software that caused the crisis when it outstripped the human’s ability to understand the implications of the instruments)
If this isn’t alarming enough, she outlined problems that have been brewing in the financial world for a while - prior to this current crisis. For example, the critical brand promise of client focus, agility and stability has been broken for some time. There’s been a growing trust gap between providers and clients because of the disconnect between the value providers thought they were delivering and what they were actually delivering. The sell-side thought acting as a one-stop shop was what clients wanted but what they really wanted was unbiased, high quality research, client service excellence and convenience.
IBM's research conclusion is that there will be consolidation in areas with too much capacity (e.g. investment banking, asset management, wealth management) and a shift towards specialization in their core competencies. The implications in the investment world are that investors will move away from alpha seekers and towards beta – i.e. shift their mindset from outperform to diversification.
What does this all mean for alternative research providers such as FirstRain? If the research is right then as our clients move away from alpha and towards beta they will need unbiased, high quality research to help them allocate and weight their portfolios. They’ll switch their attention from traditional one-stop shops to specialized research companies who will help them uncover topics and trends - and so help them hone in on well-educated decisions. (Although frankly I think there will still be plenty of alpha seekers on the buy side – all the smarts and testosterone have not gone, they’ve just been driven underground for a while.)
But the continuing weakness of the banks and the sell side, and the need for quality research will play right to our search application and technology strength – and also to the pure-play specialized research shops. Trusted, high quality and relevant research on the companies and trends they care about, and in our case fast and efficient too.
Tuesday, April 7, 2009
Cloud pioneers continue to predict the end of software
When I first came to FirstRain I knew nothing about On Demand or SaaS systems and so I set out to learn as much as a I could as fast as I could -- and I was lucky enough to be introduced to Timothy Chou over coffee (the wonders of the Silicon Valley network) who gave me a rapid primer in the wisdom of the on demand software model.
Timothy is well known in the on demand software world. He built Oracle online, long before on demand was fashionable, and he wrote a terrific book called The End of Software which I read cover to cover many times. He makes a very compelling argument not only for the improved user experience but also of the profound difference in cost model for both customer and supplier in an on demand, or SaaS model.
Now he's written a new book called Cloud which comes out on April 15 - you can guess what that's about. He wrote a guest post as a cloud computing pioneer on deal architect today that is a precis of his position and interestingly enough he still believes the biggest barrier to all software moving into the cloud model is not technology - it's people and their resistance to change.
I made the decision at FirstRain in mid 2005 to go 100% on demand and never install software, so clearly I am a believer, but, as Timothy's post says "Never underestimate the power of the white corpuscles.... Will all business software move to being delivered as a service? The only debate is about the rate of change."
Monday, April 6, 2009
Why can't Netsuite and Salesforce update their CRM to invoice us correctly?
We are delighted users of both Salesforce (for our CRM) and Netsuite (for our financial systems) - but we are very amused that neither firm seems to be able to use their own systems to get our invoicing right.
We moved offices, less than a mile, in May of last year (2008). And this is where the story starts.
With Salesforce we updated our new address online with them in June. Because we pay annually, we expected our invoice in January but it was sent to the old office. Once our rep contacted us we explained that we needed to make changes to our contract to change the number of users and get the locations right so we only pay online sales tax in New York, not in California. Seems simple right?
Well after several conversations they still can't get our invoice right. Today, my controller was called by the Salesforce collections department wanting to know why we hadn't paid our January invoice and I listened to Eugene (over my cube wall) as he patiently explained that we had moved, that we had changed our configuration, and he patiently gave them the new address.... again.
Netsuite is just as amusing. But in this case we want to buy more and we still have issues! We upgraded our Netsuite system in late summer last year to add some modules, told them about our new address and yet... they were still sending quotes (made a correction here - my Netsuite sales team asked me to update this to quotes not invoices , my mistake) to our last controller (who left 2 years ago) at the old address!
And now we've asked for a proposal for more functionality, but 2 weeks after the demo and our asking for the proposal we've still not heard from them. I guess they must have too much business? (Update: The proposal came right after this post).
I realise we are a small customer but come on guys - you've built your businesses on SMB (small and medium sized businesses) - and we'd like to pay you. Can you tie your CRM systems to your accounting systems so we can help you out?
Note:
Both Salesforce and Netsuite are SaaS vendors (Software as a Service - like us) which means we access their systems through a web browser, we can use them anywhere, and total cost of ownership is lower than buying an installed system. And as I said we really like their systems so this post is a gentle poke, not a major criticism.
Postscript: The Netsuite sales team got very proactive after this post - scheduled a call with me, made sure I understood what had gone wrong and why and reassured me it won't happen again. Silence from Salesforce. Wonder if their PR guys read blogs the way the Netsuite guys do?
Friday, April 3, 2009
The next crisis is commercial real estate and maybe life insurance?
The commercial real estate crisis has been looming for months and it looks as though it's being held back by a finger in the dam.
It starts with the low mall occupancy rates. We're already seeing store closings like Circuit City and if you walk around any but the most successful malls you'll see closed storefronts aplenty. This trend is now flowing into the firms which own the malls, for example the current poster child General Growth.
General Growth has a mountain of debt and would, under normal circumstances, have filed for bankruptcy by now. From the Wall Street Journal: "Creditors so far have been willing to let deadlines pass because they believe there is little to be gained and much to be lost through a bankruptcy. General Growth's mall operations are stable and many bondholders hope for a greater recovery outside of bankruptcy court.
"This is really rare," said Kevin Starke, an analyst at CRT Capital Group LLC, a research company that tracks distressed securities. "It is corporate-bond limbo like I've never seen before."
So how long can this hold out last? How long until the finger (not forcing debtors into bankruptcy) is pulled out of the dam? There is definitely a difference of opinion on whether the problem is the business of the malls themselves, or just too much debt burden - read some point, counterpoint from the UK on this here.
And worse - what will the fallout be beyond commercial real estate? We have many clients using FirstRain in the REIT (Real Estate Investment Trust) research process and as I used FirstRain to understand more about the commercial real estate market my interest was caught by the connection between life insurance and commercial real estate outlined by the Jutia Group. This Crisis is Just Starting to Hit the Headlines where the author predicts the fall:
Take MetLife for example. MetLife has $36 billion worth of direct exposure to commercial real estate… and less than $19 billion of tangible equity. A 25% drop in the value of its commercial real estate holdings would cut tangible equity in half. That would crush the stock.
MetLife isn’t alone. I’ve got my eye on 13 North American insurance companies. And all of them will take large writedowns due to commercial real estate and variable annuity exposures. At least one of them will fail over the next year.
I wish I were wrong about this. And I have nothing against any of the companies involved. Many are well run and, until now, had decent track records as good investors.
But they simply can’t get out of the way. They’re like giant hotels sitting on a sunny tropical shore… with an enormous tsunami headed straight for them.
Right now, it’s time to go short on the biggest U.S. life insurance stocks.Definitely a trend to watch.
