the economics of my life

Almost exactly three years ago, when I was but just a small town kid from California trying out life in the big city, I posted to my blog:

…what a great setting: a beautiful, sunny Saturday afternoon in New York City with The Shore providing my real life soundtrack. I’ve literally been sitting here for the last couple of hours relaxing, listening to music with a smile on my face because I can’t get over how much I love New York City.

It’s funny: somehow when you live here you are able to forgive, let go unnoticed even, all the obnoxious horn-honking, uncomfortable 8×8 boxes we call apartments, garbage-lined sidewalks, 8mm+ suits/hipsters/tourists constantly rushing toward their destinations (with no interest in seeming friendly), unbearable humidity, and lack of direct contact to sunlight. Instead, we relax listening to music on sunny Saturday afternoons with smiles on our faces, because we know that never before or ever again will we have as much fun as we are having right now.

Well I’ve decided I’m not quite done with the city just yet. So I’m back!

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It was one and a half years ago that I left New York to join a small start-up I had invested in at my previous firm.  The transition from NYC to a tiny suburb of Sacramento was tough (read as: unbearable), but being involved with MaxPreps was a privilege and an experience that I feel very fortunate to have… well… umm… experienced.

In 2005, while I was at a NYC-based venture capital firm, I developed the thesis that the Internet was not only enabling a dramatic shift in local media, but that shift was going to be largely realized in the coming one to three years. The infrastructure had been in place, but the timing of the market was beginning to feel right. Historically, traditional local media (newspapers and television) owned “the local”. They had built huge brands over the years and had a lock on distribution…but the Internet had/was changing that, especially with regard to the lock on distribution. Readers/users were simply finding their information sources elsewhere.

I wasn’t revolutionary in this belief by any means. Craigslist was already well established and there was a crop of early stage companies in the hyperlocal community space being funded: Judy’s Book, Insider Pages, Yelp, etc. Further, Google and Yahoo! had even begun working on their local strategies. In fact, many verticals once dominated by local media were being attacked by new media: classifieds, weather, traffic, business reviews, etc.

Generally, the model was to leverage the community to provide low-cost content and a centralized database to publish the data in a local manner. The geo-targeted content created a huge value proposition to local advertisers…and by aggregating the hyperlocal communities you also created an audience large enough to attract national advertisers. All of this (including the instant, on-demand information access aspect) at a cost structure that completely disrupted the traditional print and broadcast models.

However, most verticals already had a dominant leader or were crowded with well-funded start-ups. Further, it wasn’t clear to me how to pick a winner; most companies didn’t have any real tech differentiation and there was no clear home-run marketing strategy.

In the process of researching the different verticals, I came across high school sports. It was a large and established market: there are over 20,000 high schools across the country (each with a built-in, passionate fan base) and hs sports are not a trend, but rather a tradition, an institution. Also, it was clear that both local and national advertisers were interested because they had been spending money on local hs sports for years: it is a great way to reach a young demographic that has large spending power, especially in combination with the influence teens have over their parents’ spending. Further, it was a relatively untapped market. There were only a few players that had any real traction in the space and most players were still focused on the pro and college sports markets. Finally, there were obvious exits when you looked at traditional media because they needed properties to grow their younger audiences and/or extend their sports brands down market.

I had found my niche, vertical market.

MaxPreps, even in its infancy, had already attracted a decent sized audience and some major brand advertisers. More appealing was that MaxPreps had a real technology differentiation: they provided a free web-based platform to high school coaches allowing them to quickly and easily input their information (schedules, scores, stats, rosters, etc.). An important aspect of this model was that they didn’t have to try and dramatically change coach behavior…coaches have always kept records of this information, MaxPreps just provided a more efficient way of doing it. The service also provided other value added features (such as content syndication to local media, text-to-mobile messaging to players, etc.) that appealed to coaches and gave them incentive to participate. With over 25% of every high school football coach already inputting data into their system, MaxPreps had already built a large user base of semi-professional content creators/providers. And there was a clear marketing strategy to grow the coach network by acquiring coaches geographically and across new sports (there was actually a known cost per coach acquisition and a direct correlation between an incremental coach and traffic growth). Once you built the network of coaches you owned the market.

Meeting Andy Beal, the company’s founder/CEO, and the rest of the MaxPreps employees only solidified my interest. It was a team of coaches and tech professionals that truly understood their customer, market and technology. I found this to be of great importance because I knew a) the traditional leaders in the space, local newspapers, were not going to move fast enough, and b) even if a new group of savvy Silicon Valley developers, executives and investors ultimately saw the opportunity, they would not understand the market well enough to succeed. MaxPreps had all the right pieces.

Once we made the investment, I was able to observe the company much more closely and I just fell more in love with the team and the vision. Cut to a few months later and, after talking with Andy, I decided to re-locate to Cameron Park (CA) and join the company full-time to help execute on some new initiatives.

A year and a half—and a highly successful exit to CBS—later, I had had one of the best professional experiences in my career. It was my first entry into operations and I was lucky enough to do it with an amazing group of people. I truly am thankful for the opportunity.

However, now I’m ready for my next new adventure. So I’m back in the city ready to listen to music on sunny Saturday afternoons with a smile on my face, knowing that never before or ever again will I have as much fun as I am right now.

From late November through January, I had slowly been building a position in Yahoo!, starting in the mid-20s all the way down to the high teens.  And I was looking forward to continuing buying up shares as it dipped into the mid-teens.  Why?

Here is what I like about the business:

1) Great consumer web services: Yahoo! is the market leader here.  Between its homepage, email, news, finance, sports, maps, messenger, flickr, delicious, go/mobile, etc., Yahoo! has a lot of great properties and still draws the largest audience.  Integration hasn’t been great and they haven’t monetized the properties through advertising as well as you’d hope…but they are still very valuable assets.

2) Great international assets: I didn’t think the market was properly valuing Yahoo! considering its stakes in Yahoo! Japan and Alibaba.

3) Great recent acquisitions: I love the Right Media (online ad exchange), BlueLithium (behavioral targeting ad network) and Zimbra (email) acquisitions.  The first two help solve the core challenge of monetization of its assets through advertising—and Zimbra is another great service, provides some interesting opportunities for integration with Yahoo! Mail, and provides an entry point into the enterprise (and a subscription-based revenue stream to diversify and hedge against the risk of an ad downturn).

However, as a stand-alone business there still needs to be some major restructurings to ultimately realize the full long-term value.  First, cut the fat (much more than the hundreds laid-off in early January) by eliminating non-revenue generating businesses (opposed to broad, blind layoffs across the entire company).  Second, re-create an engineer/developer culture.  Third, once the non-revenue generating products are cut, focus on integration across core products with an emphasis on user experience.  Four, leverage the recent acquisitions and work on accelerating the ad revenue growth across Yahoo! properties, in addition to the publishing partners’ properties.

That said, the announcement by Microsoft provided me a 30% return in less than two months.  As much as I like some of the long-term potential in the business…30% in two months?  Sold at $28.51.

I’m liking CBS more and more each day.  First, they add Dexter to the Showtime line-up.  Then, they buy us.  Next, they decide to run old, ad-supported episodes of Dexter on CBS.  And now, they give us more Michael Cera through the CBS Internet television series ClarkandMichael.com.

I can’t get enough of this guy.  Arrested Development is in my top 3 favorite shows ever (Jason Bateman and Cera’s shticks kill me).  And he just keeps coming out with gem after gem:

Clark and Michael
Juno
Superbad (you may notice Clark [Duke] in there during the last party scene as well)
Darling Darling
Drunk History (Volume 1)
Impossible is the Opposite of Possible (his parody of Aleksey Vayner’s infamous video resume titled “Impossible is Nothing“)
Arrested Development

It’s really become quite the man crush.

A friend of mine at work told me this story that, for some reason, I find very inspiring:

I was at the mall the other day and I saw this mother getting angry with her young son because he kept trying to climb up and ride the rubber covered handrail on the escalator.  Every time the boy started to climb up, the mother would pull him back down.  After several back-and-forths you could tell that the mom was fed up, and she sternly grabbed him and said, “Stop it!”

The boy, who was completely crushed, looked up at his mom with the saddest face and said: “But mom, it’s my biggest dream!”

It was his biggest dream.  My friend’s story ended there, so I don’t know if the boy was ultimately able to live out his dream or not.  But there’s something about his response in the context of the situation that is at the same time cute and inspiring.  He just wanted to ride the handrail, yet he was approaching it with so much passion.  I love it.

Ever since my brother introduced me to it, TED has been one of my favorite sites.  There are great talks given on a wide range of topics, and I’d encourage everyone to spend some time looking around on the site.  Here is one of my favorites—not sure if this is because of my fear of death or because it was the first talk I happened to watch on the site:

…kind of.  He was actually referenced and quoted on The Economist blogs—where journalists from The Economist Newspaper, Economist.com and the Economist Intelligence Unit post their thoughts and observations—yesterday in a post titled “Which inequalities matter, and what do we know about them?“:

In an excellent post on all this, UC Davis economics grad student Will Ambrosini leaves us with this important thought:

“Often times, popular discussions of this topic have an air of back filling and data mining. People have some policy they want to implement and then they go squeeze data until it supports their policy. Call me naive, but I think policy should be guided by the science not the other way around.”

A truly excellent idea!

You can read my brother’s full post here.

When I was living in New York, I started following a few NYC-based tech/new media bloggers. Two of them were both out of an early stage venture capital fund called Union Square Ventures: Fred Wilson, who writes from the perspective of a successful early stage investor (and bold explorer of music), and Charlie O’Donnell, who writes from the perspective of a young entrepreneur in NYC.

I have since moved out of the city, but I still follow their blogs fairly regularly. Interestingly, across the two blogs, there have been several recent posts that have peaked my interest. One I’ll cover in a separate post, and two that relate to heavy Internet users.

Over at Union Square, they have coined the term “net-native”, defined as “people who were ‘born on the Internet’, natives of the Internet”. In a somewhat related post, Charlie O’Donnell gives us his thoughts on the value of blogging and concludes that everyone should blog because “there are a few things about blogging that I just can’t see people going without”. I’d suggest reading the full post as he provides a pretty good outline of the advantages of blogging, including that it is “a way to sharpen your thinking by forcing yourself to make sense of streams of disconnected thoughts”.  Of all his points, I agree with this one the most as it is true whether you have an audience of 0 or 10mm.  Even if your audience is 0, the simple fact that your posts are in the public arena and COULD be seen by others, you force yourself to put more thought into your ideas…which is a good thing.

Anyway, the reason these two posts struck me is this: I haven’t really blogged in over a year. Which made me wonder: Am I a net-native?

Asking myself the question kind of depressed me. I’ve always viewed myself as a new media junkie, an early adopter, bleeding edge even. Heck, some of my earliest memories are of playing Sierra Online (oh, how I miss the good ol’ days of King’s Quest, Space Quest, Police Quest, and Quest for Glory)…which is pretty impressive for a kid born in the 80’s.

Then in the mid-90’s, when I was in my mid-teens, came the webrings and online web/graphic design circles…1995’s equivalent to today’s Tumblr: a bunch of new media hipsters linking to each other and trying to impress with their pioneering creativity. I guess that too would classify as my first blogging experience, through my “portfolio,” which included my experimental designs, bio, personal photos, links to other portfolio sites, and posts giving any updates I had made.

It was also at this time that I was all over IRC and ICQ (I didn’t even know this guy was still around). And while I was never a huge gamer, I was logged into Diablo quite a bit. I spent most of my time in the chat channel, talking with the other members of, I’m sad to admit, my guild (X-Lords!).

But while I was looking back on those days I realized: of course I’m a net-native…because the things that don’t stand out in my head when I look back are email, AIM, winamp and “school research.”  Why?  Because those were just part of my life from as far back as I can remember. I was born on the Internet…and I’ve grown up on it as well; I know nothing else.  The gaming, web design, online communities and early messaging platforms simply stick out in my head because I am just old enough to still have been classified as a computer nerd and, as my friends in high school would always remind me, it was those applications that made me so.

In fact, at 27, I think I was born in the last few years where one can actually be “net-native”. Those that are a few years younger than me had the luxury of letting us kill the notion of the “computer nerd” so they could embrace the Internet fully in their lives without worry of negative social repercussions. And those a few years older than me can’t be “net-native” because they weren’t born here. It was their generation that invented the Internet, and many of them could classify as early adopters…but they are legal immigrants at best. I’ll even give them “net-izenship”, but they are not native to our virtual land.

Now back to the point that took me on this stroll down memory lane: I haven’t blogged in over a year.  Why?  To be honest, I’m not sure.  I blogged quite a bit while I was living in NY, but it suddenly stopped once I moved to California a little over a year ago.  Did I burn out?  Am I too busy?  Did I have nothing interesting on my mind?

Like I said, I don’t know the answer.  But I think Charlie’s post inspired me to start blogging…again.