Sorrell on the Social Bubble

Nice interview with Martin Sorrell in the FT over the weekend where he argues that the valuations of online media companies defy economic sense. I heartily agree - Facebook in particularly seems to have attracted a "bubble mentality" amongst investors who should know better. The $50B valuation is ludicrous - my own estimates, based on past performance of the successful dotcoms, the addressable market for social media and what we know about Facebook's financial performance suggests an upper bound of $13B for the company.

Time will tell whether this is bourne out by the market when (or if) Facebook finally IPOs. I personally feel that comparing them to Google is folly because of the position they occupy in the value chain and the proven strength of the Google team both historically and at present. We shall see.

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Impacts of a handset leasing model on mobile telcos

Following yesterday's post, here's some related thinking on the impacts on operators of handset leasing. Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. It may therefore be the case that the scenario described would lead operators to a more profitable structural model than exists today. Oil companies are consistently and acceptably profitable, despite being (literally in some cases) the ‘dumb pipe’ that operators are so desperate to avoid becoming. One of the reasons for the oil majors sustained profitability is clear focus on their role in the value chain – to supply the fuel that enables transportation, relying primarily on location, then brand and finally product innovation to compete. BP or Shell do not need to subsidise the purchase of a car in order to drive consumption of fuel because consumers are ‘hooked’ on it (it gets them from place to place) and there are many credible car manufacturers an...

Differences between Industrial and Digital businesses

Since I'm stuck on a Eurostar crawling through western France I thought I'd use the downtime to share this table I've made on the differences between Industrial and Digital companies across the main business functions. A strange insight into how my mind works... but hopeful a useful summary!

Value drivers for telecoms retail

I've been doing a really large number of driver trees recently - we've taken to using them on every project to get really into the guts of value creation for businesses and thus decide where to focus initiative development (How To Win, if you're keeping score). Anyhow, I had to pause for thought recently to work out how to represent the subscription aspect of telecoms retail for a client. Since it took me a minute, I thought I'd share... its lack of elegance suggests that its not quite right, although it was enough to demonstrate that there was a certain lack of coverage in the initiatives that my client was pursuing and thus spark a debate. Enjoy.

Versatile Amphibian

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