Author Archives: whitefangwang

Twitter – Can Social Media Networks Be Standalone Companies?

Twitter could be considered a success story; a 140 character platform became a phenomenon for a short time, where everyone tweeted and even broke news at its height, and had a successful IPO. But now, even with an active user base of 313 million sending 500 million tweets a day, along with millions of minutes in video, the company no longer has the growth to support its valuation, and the business is still not profitable. In this year, where investors are placing a premium on profitablilty, it became difficult to see how the company could survive.

The company hasn’t been lax about developing new services. Most recently, Twitter signed a deal with the NFL to stream its games live on its platform, and also started to consider changing its iconic 140 characters to a long form publishing platform. However, it hasn’t been able to achieve the same growth due to alternative platforms, including Instagram, Snapchat, and, of course, Facebook.

Twitter is now actively exploring strategic alternatives (i.e. getting acquired), and the companies that are rumored to be in the running are Disney, Alphabet, and Salesforce. Each company has their own different reasons for acquiring Twitter, so it’ll be interesting to see if and/or when the company would be acquired and at what price.

However, there is a question here that hasn’t been asked; are Twitter’s struggles unique, or is it a company model issue? Twitter is not the first, and won’t be the last, to become wildly popular in the social media space, only to struggle for user retention in a few years. MySpace was huge in the 2000s, only to be sold for a fraction of its peak value. LinkedIn suffered a huge drop in value before it was acquired by Microsoft. Facebook is the obvious exception to this; the company has continued to grow in value; it has been able to effectively monetize its users’ information through its proprietary ad network. Instagram and Snapchat are still too early to tell.

The ability to attract users is fundamentally different than the ability to monetize on these users. Silicon Valley is well known for creating amazing business models from solving a specific problem (i.e. Airbnb and renting out your place), but without a healthy acquisitive environment, it’s hard to these companies to turn a profit. Alphabet is probably the best example of a collection of businesses that aren’t profitable; it still makes money primarily from its search and ad services despite investing in a social media network, having the most popular video service in the world, probably the most prolific email services, and the list goes on and on.

Twitter will stop being its own entity one way or another. The question is, which company will go the same way?


Lessons Learned from Video Games (part 1)

As a former video game addict, I look back at my former playing days and realize that I got almost nothing done beyond the bare necessities (school work, music lessons, etc.). And yet, I kept getting this sense of accomplishment the more I played, and it kept driving me to finish. I wish I could say that I had overcome this addiction, but the truth is that my daily responsibilities have made it impossible for me to spend meaningful amounts of time on any video game. I’ve even made a conscious decision not to play Pokemon Go out of fear that it would consume every waking moment that I wasn’t working (and probably even then).

But as I try to find a soundtrack that gives me the extra push to remain focused and finish my tasks, I find myself coming back to video games. There are youtube videos with extended tracks of Maple Story, Metal Gear Solid, etc. (the loop function is also key). Part of it has to do with the song construction; these are pieces that are designed to remain in the background and yet provide a color in the game that’s not distracting from the main action. The other part, at least for me, is being able to visualize having an objective. This objective isn’t specific, it’s more a sense of working towards something.

Video games are designed to entertain the players, and one key factor is to give the player a sense of accomplishment. To do this, the players are barraged with objectives, whether they have in-game achievements, or something to move the storyline along, or maybe fulfilling requirements to get better equipment. When someone starts up a game, the player is always working towards something. Admittedly, there are a few games that encourage a more meandering play style, but the majority always have objectives. Even Minecraft, a Lego like game, the objectives are generally driven by the players themselves; they want to make a house, or the Millennium Falcon.

Some self-help websites recommend writing to-do lists when the day starts, but I think it’s important to go one step beyond and internalize your objectives. It can be serious things, like figuring out how to progress your career or making a decision on purchasing a house. It can be casual things, like eating at 10 dumpling shops in NYC, or seeing a waterfall in a nearby national park. Ideally, these objectives are somewhat productive, but having these objectives alone could be enough to get up and start walking. Inaction is the enemy here; there should be a visualization of walking towards something.

And if you need a little music to get there, I recommend some video game soundtracks.

The Seventh Sense – Review and Thoughts

The Seventh Sense, written by Joshua Cooper Ramo, is an urgent reminder to conform and adapt to the latest societal trend taking place: the age of networks. Power, which once resided solely in institutions, has manifested in networks, creating events thought previously impossible without a leading entity, like the Arab Spring or Occupy Wall Street. Without a clear strategy, it’s impossible to predict and control how networks will influence people as more connections to more networks every day. Networks, however, are not solely technologically based, but technology has accelerated the power of networks. I highly recommend reading this book slowly and thoroughly; the theses presented aren’t derived from numbers and statistics, but from philosophy.

To be clear, Ramo doesn’t give a solution to any specific problem with networks. The book is written in an anecdotal manner; stories are introduced in the beginning of the chapter, lessons are extrapolated, and a final point is made at the end. The issue that Ramo addresses is the way people approach networks, much like how the “Sixth Sense” is the “historical sense” defined by Nietzsche (the ability to quickly guess the rank order of the valuations that a people, a society, an individual has lived by). There are 6 main points listed by 2/3rds of the book:

1. Networks distribute power in ways that are new in human history (i.e. connection changes the nature of an object)
2. Networks are made up of many complicated pieces, but in their essence they are complex
3. They possess historic amounts of power at their cores
4. There is a new caste who dominate and control many of the systems we depend on
5. Topologies – new and invisible set of landscapes (Physical world can be reshaped by the virtual)
6. Networks were created for the compression of time (and, derivatively, distance)

Ramo spends a lot of time on these 6 points because they seem disjointed and unclear as standalone points. For example, there is a distinct difference between “complicated” and “complex” (namely, something that is complicated is still predictable). Only after these points are internalized are we supposed to feel an urgency to understand networks and act.

The last third of the book focuses on how the power consolidated around networks is, in many ways, very restrictive. While it seems like networks contribute to an increasingly diversified lifestyle, where access to information and data is convenient, the truth is more complicated. In some ways, networks have corralled us into gated communities (for lack of a better analogy). As sinister as it sounds, these gated areas weren’t designed necessarily for exclusion. Being within the gated, there is trust in every interaction, which leads to faster transfer of information, reasonable security, and other benefits. A good example: the ease of two iPhones interacting rather than an iPhone and a Google phone. Herein lies the power of exclusion, and subsequently, the ability to influence using networks.

After reading the book, it’s hard to internalize what is being said. Throughout history, we were taught how power consolidated around a clear entity, an institution or a leader, and how influence is limited to how far each entity can reach. On the other hand, networks are platforms that seemingly are led by ideas and philosophies rather than a necessary end-goal, with power that is both consolidated and distributed. Suffice to say, this is the type of thinking Ramo is trying to change.


I would be remiss to not mention an article that recently came out on the Economist titled “Reweaving the Web.” It discusses new startups that are attempting to break away from the centralized Internet (i.e. Google, Facebook, Microsoft, Amazon) and have information stored all over rather than a centralized location or entity. This trend is influenced by Bitcoin, which showed the possibility of a de-centralized currency. Whether this trend will continue to gather steam is unclear, but it’s worth having in mind when reading The Seventh Sense.

Millennial Employees and Big Banks

Investment banks are having a harder time keeping junior employees. In the past, it was due to the allure and compensation of private equity and hedge funds, but now it also includes startups and nonprofits. Try as they might, banks won’t be able to hold on to the Millennial generation as easily as past generations. But, it’s not a bad thing, and it’ll keep the people that are willing and able to continue their banking careers.

For all intents and purposes, the investment banking world is one driven by relationships. If the prop trading and investing businesses are excluded, it’s not a stretch to compare bankers with salespeople. Bankers spend the majority of their time marketing their bank’s capabilities to their clients. Managing directors will reach out to corporate executives and/or PE fund managers to encourage transactions that will potentially utilize the bank’s resources. This could be an acquisition that uses cash (from a line of credit offered by the bank), stock (that the bank had previously helped produce with an IPO), and debt (from a new debt raise led by the bank). Capital markets help consolidate and use financing relationships in syndications to raise new debt or equity. The list goes on and on.

As with any relationship, bankers tend theirs very carefully. This is their sole revenue driver, and a lost relationship is not only lost potential fees but also a chance for someone else to pick those fees up. Credibility and trust is valued at a premium. And nothing destroys a relationship faster than a banker who seems careless. This is why it takes forever for a junior banker to even be communicating with a client in a meaningful manner. The amount of time it takes to destroy a relationship is infinitely shorter than it takes to make one, and it could be as simple as a wrong number or a misprinted page.

But the banks themselves aren’t fully innocent of blame. Ownership of work is something that’s emphasized in banking. What senior bankers don’t understand is that the junior bankers want to take ownership of their work. The problem is that they don’t understand the weight of their work, and this is an important distinction. The Millennial generation doesn’t like doing things just because “that’s the way it’s always done.” But if there’s a candid conversation, or a lively debate, Millennials can be handled without kid gloves. For example, to Steven Wu in the article, I would say: “As silly as it seems, fixing logos does help with pitches. Why else is there an entire industry devoted to making things look nice?” (i.e. marketing. And I know, marketing friends, that’s only 10% of the business, but back to my point)

The truth, however, is that startups are fundamentally different businesses that encourage conversations up and down the hierarchy. While relationships plays a role, if the product isn’t good, then no one will use it. This is why companies encourage iteration, new ideas, and general R&D attitudes. And people can see how they affect the entire process, and how they’ve contributed to the success or failure. And failure, to a certain extent, is fixable (look at all those updates on your phone).

Finance, and especially banking, is not for everyone. Intelligence is just one factor in hiring, but it’s the most visible one during the recruiting process. This trend to keep and cultivate bankers is a good one, but it’s not new. Banks have always been attractive hiring grounds for anyone ranging from corporates to funds. The best that organizations can do is make it clear that they are invested in their employees. Everything else can only be derived from crystal ball gazing.

TL;DR: Banking isn’t for everyone. And new employees are always too young to understand the consequences of their work.

Book Review: America’s Bitter Pill

“‘In hindsight,’ [Obama] told me, ‘there should have been one central person in charge, a CEO of the Marketplace.'”
This sentence summarizes the debacle of implementing kynect, the online marketplace that would showcase the glory of the Affordable Care Act (or Obamacare). It is incredibly difficult to provide a comprehensive view of all the issues pre- and post-implementation of the act, and while Steven Brill makes a valiant effort, the key story line gets lost in the stats and politics of Washington.
When I began this book, I hoped to get a holistic view of the ACA: what were the existing solutions, what it attempted to change, and what was ultimately implemented. Brill, in his attempt to show that everyone had the best intentions in the beginning, writes about almost every key provision that was added, discussed, or even suggested in passing, no doubt to show everyone had the best of intentions. In truth, the book’s focus should have been on what conditions the administration could control, and what went wrong.
The ACA had 2 major issues that slowed its momentum to a crawl: the online marketplace, and the promise of keeping your existing policy. Without the momentum, it had to fend off attacks from its critics and, subsequently, a large portion of citizens (despite benefiting a number of them). The online marketplace was tasked to a pre-approved government contractor and had something like 13 offices supervising its creation without a leader. Obama promised people could keep their existing policy (if they liked it) on June 2009, and NBC accurately rebutting the promise on October 2013.
It reads like 5 business cases rolled into 1: without a focus on execution, the rollout was doomed to fail. CGI (the chosen contractor), despite all its reports that it was on schedule, had miserably failed to put together a workable product (though, in all fairness, not entirely its fault). The administration’s spin city was out in full force, but had paid no attention to what was actually written (the grandfather clause was not the only discrepancy). The lack of expertise as well as fear of communicating upward left everyone in a state of shock when it was finally time to produce the finished service.
The book is written in a very linear fashion; the payoff doesn’t come until you’ve read 4/5ths of the book, when kynect is finally implemented. In the meantime, Brill spends every chapter cramming in intended acts, unintended consequences, perceived damage control, and human stories; all the while, the opponents circle, like sharks around a tightrope walker. Interesting facts and stories, which merit their own books, become part of a deluge of information for information’s sake. Perhaps the book itself is a statement of health insurance in this country.

Ad-Blocking Software and Revenue Loss



The economics of the online business is difficult to comprehend, as it should follow the rules of basic rules of economics but in reality is actually something far more complicated. The disagreement I wanted to highlight today is the idea that ad-blocking software will cost publishers an estimated $21.8 billion in 2015.

Adobe’s and PageFair’s methodology is a little complicated, but essentially it took eMarketer’s digital revenue for each country and divided it by (1 – the ad blocking rate it estimates). This implies, in 2015, an 11.3% of total potential digital ad revenue will be lost due to ad blocks (or 3.6% of total potential ad revenue). It’s safe to say that these are meaningful numbers, especially when looking solely at digital ads. In context, this represents roughly 1/3 of Google’s total revenue (FY 2014).

When I was perusing my Buzzfeed this morning (it’s the weekend), I saw the following article, which believes the $21.8 billion number is overstated:


The crux of Alex’s argument is that the total potential digital ad revenue would actually be smaller due to the pressures of supply and demand. If the ads had run, there would have been more ad supply, demand would stay the same, and therefore the actual revenue will not reach the projected potential revenue. Basic economics.

Except there’s an issue with that, and it’s due to how publishers charge for digital space. Every ad campaign is charged in some form of “cost per impression,” whether it’s cost per thousand (CPM), pay per click (PPC), or any other form of impression. Advertisers still have poor visibility to digital advertising, but they can’t afford to ignore it as people continue to consume more media on computers, tablets, and phones. Instead, value is mainly in terms of how many people see or click on the advertisement. This is the fragile compromise advertisers and publishers have reached over many years.

My hypothesis is that as supply increases, demand increases as well, leaving prices about the same. Supply in this case is eyeballs or impressions, and demand is advertisers. As long revenue brought in is x% more than advertising money spent, advertisers will continue to buy space online. Because there is no consistent rule published on ad spending conversion (is it exponential?; Is it an inverse relationship at a certain point?; etc.), demand will grow with supply.

Of course, this is all hypothetical, and it would have been nice to see the study with a discount on total potential revenue for a conservative estimate. But even with a 25% discount, the estimated ad revenue lost is $16.35 billion, or 8.7% of total potential digital ad revenue. A meaningful number.

P.S. For 2015, I’m assuming $170.9 billion in digital ad revenue, and $577.8 billion in total ad revenue per WSJ’s numbers, which are derived from eMarketer. Assuming $21.8 billion of ad revenue is lost, potential digital ad revenue is the lost revenue + projected digital ad revenue, or $170.9b + $21.8b = $192.7b.

Implications: From Horseless to Driverless (to Homeless?)


The Economist ran a whole series named “The World If” in their latest week issue. The section went from the practical (why China is interested in creating a canal in Central America) to the unthinkable scenarios (if an asteroid heads for Earth). One article that was included is a topic that has been discussed ever since Uber claimed it was working towards driverless cars: if autonomous vehicles rule the world.

I think there has been a good amount of research on commentary about the subject, and I briefly want to go over the scenario. Essentially, with Google’s driverless car doing well in the real world (in all 15 accidents involving the Google car, it wasn’t the offender), the idea of autonomous cars becoming the norm is no longer science fiction. Research has suggested that autonomous cars will save time, money, and, most importantly, lives.

However, driverless cars spell the doom for existing industries that rely on the car as it is today. The most affected is, of course, the taxi service industry. With Uber already displacing the existing establishments in place, this new innovation will effectively kill taxis as we know it. In addition, the cars and transportation industries will be affected, with car manufacturers forced to upgrade their factories and with truck drivers no longer needed. The emerging markets will also suffer to a certain degree as even mining operations become even more automated.

Clearly, society is moving towards less ownership and more “as a service” model. For the average person, not keeping a car and yet still have it available whenever needed saves on overhead, maintenance, and general headaches with owning a vehicle. But does this mean the same thing for other aspects of our lives? Namely, real estate?

Perhaps this is a question that doesn’t need to be asked. We spend the majority of our lives in physical structures that we either have some type of ownership or membership (i.e. home, work). More often than not, people would prefer to cut down the amount of time they spend in the car. But Airbnb has become a very attractive model; despite being only a middleman, it has the same value as Hilton Hotels. Is it too much of a stretch to think that homes could be used “as a service” like automated cars?

In the near- to mid-term future, real estate should be fine. Personally, I believe that real estate value will grow, but that’s besides the point. The idea of home ownership is still something that is deeply ingrained in not only the American psyche but around the world. People still speak of their “ancestral lands,” and it is still seen as part of having a balance, stable life. Though car ownership and home ownership can be put in the same sentence, they have very different usages: a car will get us to where we need to go, but home is still a destination.