Demand Media’s Bizarre Price Fluctuations
After-hours on Tuesday, Demand Media’s stock spiked up 17% before settling slightly down for the day. On Wednesday morning the shares hit $10.75, but closed at $8.45, again down slightly for the day. This, after a very positive quarter. One reason is the combination of their lock-up expiring and the recent market volatility: plenty of people have a big chunk of their net worth tied up in Demand, and seeing that evaporate fast would tempt anyone to sell into rallies.
Groupon Updates IPO Filing
Groupon has filed an amended S-1, in which they updated their results for the latest quarter, and finally killed the dreaded ACSOI accounting measure. Yipit does the usual heavy lifting to demonstrate that, at least in the relevant market they report, Groupon is showing less revenue per user, though they’re still growing their user count. It’s hard to predict where things will even out.
The best part is that Groupon’s net profit margin is improving—they’re still losing money, just not as fast. A big reason for this is that their marketing expenditure as a percentage of sales has dropped from 32% in Q1 to 19% in Q2. In other words, people using ACSOI would have a more accurate, conservative view of Groupon’s financial situation, since they’d be able to factor out drops in marketing spend as a factor in short-term profits.
(Our Groupon prospectus writeup elaborates on our views of their accounting methods and other common critiques. The business itself is worthy of scrutiny, of course.)
Rise of the Meta-Startup
Startups grow faster when they can outsource boring problems. That’s one reason for the growth of 37Signals, the company behind Basecamp, Highrise, and other task-, project-, and content-management solutions, or behind Heroku, the Ruby (and more!) app hosting platform. One subtler reason that these companies are taking off is that prolific angels a) know what problems lots of startups face, b) know that they can turn a meta-startup profitable by introducing it to a few other investees, and crucially c) have a general interest in reducing the barriers to entry for starting startups.
Which is why YCombinator-backed ZeroCater, which helps offices order lunch for employees, raised money from such a long list of prolific early-stage investors. Even if the company breaks even, they’ll all turn a profit.
Why Time Warner and Aol Don’t Fit
Peter Yared recommends, hopefully tongue-in-cheek, that Aol and Time Warner merge again because of Aol’s superior content distribution. There are a few factual errors (Aol’s short-term growth is due to acquisitions, not organic growth). But the bigger problem is philosophical: Time makes content, and AOL manufactures it. There’s room for both, but not at the same company. Aol is far more metrics-driven, and less of a traditional journalistic enterprise. To the extent that old and new journalism collides, it’s more likely to take the form of syndication deals (like Business Insider articles on SFGate.com, or Demand Media content on USAToday).
Matt Drudge’s Traffic Firehose Continues to Drive Traffic
The Drudge Report delivers more traffic than Twitter and Facebook combined, at least within the Outbrain publisher network, which reported the data. This doesn’t necessarily mean that Drudge is as important as those sites, though: a Facebook or Twitter click is more interesting than Facebook or Twitter, both of which are high-engagement properties. A Drudgereport click is the default outcome from a Drudgereport visit.
VC LPs Embrace Due Diligence
The great VC overhang is gradually working itself out: after a decade of basically zero returns, investors in VC funds are getting pickier about the funds they invest in and the terms on which they hand over cash. One surprising note: “One firm has started giving limited partners files with its portfolio companies’ financial information, a rarity.”
That’s admirably transparent, but in the age of secondary markets for private company stock, is it prudent?
In other VC news, Dan Primack has a roundup of VCs’ pithy, contradictory thoughts on how the recent market volatility will affect funding.
Conductor’s New Social Data Tool
Enterprise SEO software provider Conductor has released an updated version of their platform incorporating social sharing data in near real-time. SEOMoz has released similar data, but with a far longer lag time; for SEO strategies that involve responding to social media activity in real-time, Conductor looks like a compelling option.
Technology M&A Activity Soared in Q2
According to an Ernst & Young report well-summarized by TechCrunch, tech M&A in the second quarter totalled around $52bn. Skype was one of the only consumer-facing web companies among the larger acquisitions. In fact, at $8bn, it was the largest.
Bad Study Captures Bad Data on Search Result Click-Throughs
For the past few years, Google has consistently reported that search quality, as they measure it, is rising: people are more likely to click on results, less likely to return to do similar searches, and more likely to tend to click on higher-ranked searches first. So it’s bizarre that Search Engine Watch is reporting on a study claiming that the #1 organic result gets an 18% click-through rate, when older estimates tended to put it at 25-40%. This report is either measuring a very skewed sample or reporting the data differently. Either way, not worth reporting as a valid study.
Carbonite Insists on Pricing IPO
Online storage company Carbonite has gone ahead with an IPO despite the “market conditions” cited by numerous firms that have withdrawn their offerings. They’re raising far less than intended, which begs the question: why go public now, rather than waiting a couple months?
ComScore Reports Flat Search Engine Market Share
They must massage the data better than their inconsistent LinkedIn pageview numbers. ComScore has reported basically flat marketshare for all major search engines, with query volume up 10% year over year.