Monthly Archives: April 2009

Definition of Pandemic

At this point we have all heard about the swine flu that’s starting to emerge around the world.  However, one label that has been thrown around without much thought is “pandemic”.   It’s an interesting development in our Twitter world where the signal to noise ratio has increased by orders of magnitude, and we tend to sensationalize and exaggerate (it’s like the old telephone game, except multiplied).  Information spreads, and it’s hard to know what’s accurate, but people continue to spread it.  Don’t get me wrong, I love Twitter, but if one were to go search twitter for any variation of swine flu, they would be terribly misguided and most likely freaked out.  Anyways, here’s the WHO definition for an influenza pandemic:

An influenza pandemic occurs when a new influenza virus appears against which the human population has no immunity, resulting in epidemics worldwide with enormous numbers of deaths and illness. With the increase in global transport, as well as urbanization and overcrowded conditions, epidemics due the new influenza virus are likely to quickly take hold around the world.

Fortunately, we have not reached this stage yet (last count 20 official deaths according to the CDC, 149 according to Mexican officials, though it’s unclear why there’s such a large discrepancy).  It’s important that we keep some perspective.  Here’s a helpful illustration by WHO that gives some clarity as to where this rates:

My question is this – if we did not have tools like Twitter and Facebook, would the flu news spread like it did?  And if not, would that necessarily be a bad thing?  Or is it a good thing that we all know?  On one side, folks are probably doing things like washing their hands that they should always be doing.  The counter-argument is that misguided information often leads to normal folks to become hypochondriacs and burdening our health care system with unnecessary visits.

I love the way twitter has spread the flow of information, but in my opinion, there’s a a big problem with how we  separate the wheat from the chaff, and I think that if a startup can attack accordingly, there’s a huge opportunity.

UPDATE:  Just saw an extremely relevant XKCD cartoon, which would be funnier if not so true.

Amazon continues to impress

Amazon releases their earnings this Thursday, and while most of you probably heard about the controversy regarding Amazon (#amazonfail) last week, what you may have overlooked in all the hubbub was the astonishing 300,000 Kindle 2′s sold in the less than two months since it’s release.  That’s over a $100M in revenue from a single item.  Amazon is expecting to sell 800,000 overall for 2009 – over $280M in revenue.  Absolutely incredible.  Oh and don’t forget the Kindle leads to higher margin book sales through wireless delivery.  So it got me thinking, if there was a executive of the year award (I blame the NBA – it’s award season there), Jeff Bezos would have to be considered one of the frontrunners, right?  Just for kicks, here’s a revenue comparision against their biggest competitor EBay (I guess I have to continue with my proclivity towards graphs):

Amazon vs Ebay Revenue

And stock performance (take with a huge grain of salt, very different companies, and BBuy is signifcantly bigger than the rest with their $40B+ revenue) over the past 6 years compared to Best Buy, Circuit City, Barnes & Noble, Ebay, and the S&P:

Amazon Stock Comparision

 

And while their commerce side is continuing to grow, their transformative cloud offerings, AWS, could dominate their revenue within 5-10 years.  AWS is currently recognized in the “Other” category on their quarterly reports (last figured at $131M in Q4 2008).    Anyways, who knows what will happen Thursday, but Bezos has definitely impressed me.

Online news sources – please start charging me

It’s not often you hear someone ask to be charged for something they currently get for free.  But I’m asking.  The reason is simple – advertising alone cannot sustain quality news publications.  I look at two of the more successful online-only news publications – Politico and Huffington Post, and both are supported by private investors.  That doesn’t scale long-term.  The WSJ, on the opposite end of the spectrum, has something north of 1M subscribers, each paying north of $100/year – that’s $100 million a year.  

I’m not sure why some of the newspapers continue to stay free.  Nando started in the early 90s as one of the first online publications and they were free.   But they closed shop in 2003.  Let’s look at the NYTimes as an example – they get 15 million uniques per month.  According to comScore (via Alley Insider) they had 173 million unique page views / month in October 2008.  Assuming some growth and round numbers, let’s say they get 200 million / month.  At a generous $20 CPM rate, that’s $4 million / month, or $48 million a year.  That’s not a lot of money.  They would only need to convert 480,000 uniques into paid subscribers (3.2%) to get to that total via subscriptions.  

And that actually assumes they would completely charge for the site.  Check out the WSJ Online, it’s actually pretty solid even as a free website.  They do a great job with mixing paid/unpaid content, and they use advertising as well.   In fact, check out the comparisions for the two websites:

Anyways, NYTimes and other online news publications, if it means you will continue to improve and grow as an organization, please start charging me.

US Auto Market Trends

I’m not an expert in the car industry.  However, with all this talk of government bailout money and the Big 3 (actually big three is wrong, should be more like the Floundering 2), it has me thinking about what we taxpayers are investing in.   We keep hearing sales numbers are at record lows, but I never see anything that goes back more than 15 years (Quick aside – I hate when news outlets fail to give us context for “historic” events like this.   Reminds me of baseball, when announcers and statisticians give us inane facts like first guy to steal his 20th base on a prime numbered day.  Why should I care?  Give me context!).  So I compiled some data myself, using  freely available info from the Bureau of Economic Analysis (under the US Department of Commerce) national income and product accounts (NIPA).  The following is a chart indicating total unit sales of autos and trucks since 1948, in millions of units:

 

Vehicle Sales and CPI

Vehicle Sales and Price Index

 

And here’s the same data but split into domestic and  foreign sales:

 

Domestic and Foreign Vehicle Sales

Domestic and Foreign Vehicle Sales

 

I also mapped the motor vehicle price index in the first chart to give a perspective on the relative cost.  Quick caveat – price indices (especially those related to something as evolving as vehicles) do not perfectly account for quality improvements, but it at least gives some perspective.  

What does this all mean?  The number of autos sold has been steadily decreasing since the 1980s. Domestic autos are doing terribly, steadily decreasing since the 1970s.  What masked this problem was the emergence of trucks as an alternative in the 80s (ironically this came soon AFTER the oil crisis in the 70s), but truck sales dropped significantly with the huge spike in gas prices last year.  Essentially US manufacturers bet the house (and now our money) on truck sales and had nothing to hedge if fuel prices rose.  Long-term truck sales are in question; I highly doubt they return to the late 90s/early 2000s “great truck rush” (my term) level due to the relative price of gas and the overall global  environmental movement.  

The overall market has capped out (not increasing), both in units sold, and in relative price.  So why are we talking about pouring more money to revitalize the automakers?  There’s a macroeffect going on here, and more money is not going to solve it.  I understand there are huge political (and economic) ramifications to letting any of these automakers fail, but my hope is that the Obama team will require wholesale structural changes on many levels.  

The only way to grow in such a market is to have a revolutionary technology advantage (i.e. an electric car, which again they’re probably behind on, though the Chevy Volt seems interesting), not an incremental advantage.  Selling a car with 10% better mileage will not change these trends, (don’t forget that US automakers are already behind the auto technology curve from their years of indulgence with trucks).  And the current executives there have not demonstrated any foresight whatsoever, so I have no faith in their ability to execute in this market.  These new products don’t need to fill a large market immediately  - they just need to grow enough to prevent some of the bleeding, and hopefully it will dominate (much like trucks in the 80s/90s).  I hope that a vast majority of the money we invest goes directly into technology innovation, and that everything else either be maintained at a basic level or completely abandoned.   Sure it’s a risk, but I’d rather us spend our money risking on technology rather than seeing it slowly disappear in the sinking market.  It would be like a startup but with very strong and established manufacturing and distribution at their disposal. 

Quick note – The US Department of Transportation estimates the average vehicle lifespan to be 13 years, or 145,000 miles (I wish I could track this historically).  I wonder if increased lifespans contribute significantly to the decreases.