Shazam helps redefine the consumer engagement market with a little help from Carlos Slim

July 11, 2013

Shazam Logo
New technology firm Shazam is still working out how to convert its potential into profit. Billionaire Carlos Slim is its latest backer

Leaders we deserve have picked early-signals of market leaders before. We have also picked market losers as well. Undeterred however, I offer Shazam for the attention of our subscribers.

The news story this week [July 2013] is that the Mexican billionaire Carlos Slim is putting $40 million into the UK-based firm.

Background to Shazam

Background to Shazam can be found in a LA Times article summarized below [strictly speaking, Andrew Fisher is currently Chairman of Shazam, having handed over the role of CEO to Rich Riley ]

Shazam, the mobile app that instantly recognizes songs and TV commercials, has announced a $40-million round of funding led by Mexican billionaire Carlos Slim. The app, which users turn on when they hear a song that they want to identify, said the funding is being headed up by Slim’s company, America Movil, one of the world’s largest wireless communication firms. Shazam Chief Executive Rich Riley called the investment a milestone.

“It’s a great continuation of the incredible momentum that we have,” he said.

Though Shazam is not profitable, the company said it has generated revenue of $300 million in the past 12 months from song purchases. When users purchase a song from iTunes or other digital stores after tagging it on Shazam, the company gets a cut of the sale.

“We intentionally operate at a slight loss so we can focus on continuing to grow our user base, deepen the experience and accelerate our revenue growth,” Riley said.

Additionally, Shazam said it has worked on more than 300 TV ad campaigns. The London-based company began using its software to tag TV commercials a few years back, and it charges companies it works with six-figure fees to include the Shazam logo on their ads, letting users know that they can expand the commercial through their smartphones. The company last received funding, for $32 million, in September. Since then, Shazam said it has more than tripled its active user base to 70 million.
“Shazam is defining a new category of media engagement which combines the power of mobile with traditional broadcast media and advertising to create compelling value-added experiences for consumers, content providers and brands,” Slim said in statement.

Points of leadership interest in Shazam

Shazam shows the hallmarks of other new-technology companies. Andrew Fisher is a serial innovator and entrepreneur. He is technologically-savvy but not a geek whose interest in technology holds him back from financially shrewd actions. He has attracted Rich Riley as CEO so that Fisher can focus on the new investment required for growth. The last statement above indicates his strategic thinking and the need to re-define what is the emerging market of consumer engagement.

Health warning

All pioneering ventures are vulnerable. This one may succeed, perhaps as an acquisition for its technology, or as a stand-alone global corporation. LWD does not recommend investment opportunities. Its posts are primarily intended as materials of interest to business students and researchers.


Sir Richard Branson in drag. How an entrepreneur wins even if he loses

May 13, 2013

Richard Branson Air Hostess

Richard Branson is an entrepreneur who prefers to gamble when he wins whatever the result

A wager is reported between owners of two competing airlines, Richard Branson, owner of Virgin Airways and Tony Fernandes of Air Asia.

Charity Bet

The charity bet was over the performances not of airlines but of two Formula One racing teams. Did I mention that the two were sufficiently wealthy to own their own racing teams? The owner of the team performing worse would dress as an air hostess and serve passengers on his rival airline. Yes, serve actual travelers with actual refreshments dressed as what the Press called a trolley dolly.

Branson frocks up

Branson’s airline lost. A suitably frocked- up Sir Richard paid his debt. [Reported May 2013]. It was very much a mile high dare..

Who loses wins

So here’s the thing. The story revealed the ‘loser’ of the bet camping up his role on Asia airlines. The publicity was not invaluable but far from damaging for the company. Sir Richard ‘lost’ by doing what he most enjoys, being the centre of attention. Go figure. There must be a leadership message in the story somewhere.

Postscript

LWD subscribers in England may remember another recent gamble by Mr Fernandes. His football team, Queen’s Park Rangers, was relegated from the football Premiership. The gamble of switching manager with ten games to go did not pay off.


Drugs, the silk road, and new money-laundering systems

April 16, 2013

BitcoinThe market in illegal drugs continues to keep a step ahead of efforts to control it. New technology is already being applied to complement or replace older practices of money laundering

In researching the rise of new technology banking, I came across the rapidly-growing Bit Coin system. It struck me as interesting to those engaged in nefarious operations such as drug trafficking. I was not surprised to learn that the idea had already occurred to others.

According to its own website

Bitcoin is a digital currency, a protocol, and a software that enables instant peer to peer transactions, worldwide payments, low or zero processing fees, and much more.
Bitcoin uses peer to peer technology to operate with no central authority; managing transactions and issuing Bitcoins are carried out collectively by the network. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment systems.

How does Bitcoin work?

The International Business Times offers a nice explanation of how bitcoin works

April 16-17th

Paul Krugman in the International Herald tribute writes of The fallacy of bitbugism. Further insights were provided in a BBC review.


Goal Control wins first battle for football’s goal-line technology leadership

April 3, 2013

Goal ControlGoal Control is an unexpected winner which has emerged in the battle for Football’s goal-line technology

The German company Goal Control won the battle for installing goal line technology in football over the earlier favourite Hawkeye.
The decision was announced yesterday [April 3rd 2013] by Football’s international governing body FIFA.

According to the Guardian:

The British-based company Hawk-Eye has been frustrated in its attempt to supply goalline technology at the Confederations Cup in Brazil this summer, and most likely at next year’s World Cup, after Fifa surprisingly awarded the contract to the German company, GoalControl.

Its system, GoalControl-4D, uses 14 high-speed cameras located around the pitch and directed at both goals and was selected by world football’s governing body ahead of three other Fifa-licensed technology providers, including Hawk-Eye. While losing out on the contract represents a blow to the British firm, it still aspires to provide goalline technology to the English domestic game and is one of four companies still in talks with the Premier League and the Football Association over the potential introduction of a camera-based system as early as next season. It will compete again with GoalControl, GoalRef and CAIROS for the honour to provide a system for the 20 Premier League grounds and Wembley.

Bouncing back

Hawk-Eye has expressed its disappointment at losing out on the contract. “Sport teaches us many lessons, including accepting defeat graciously and having confidence in your ability to bounce back strongly,” it said in a statement. “Hawk-Eye wishes Fifa and the appointed goalline technology supplier every success at the Fifa Confederations Cup 2013.”

Declaring an interest

Regular subscribers to LWD will recall that we identified HawkEye as a fine example of a high technology company with an entrepreneurial leader. We also speculated on its future after being taken over by Sony. Students studying the case pointed to the football market as a promising future development for the new company.

What happens next?

The statement by Hawkeye is heartedly upbeat. Meanwhile, we will now dig more deeply to learn more of the story of the late-entry by Goal Control which claimed victory in the first battle over goal line technology. The company website is less than helpful in this respect.

Update

The Herald sun of Australia noted that

FIFA, through its rule-making panel known as IFAB, approved goal-line technology last July, when Hawk-Eye and GoalRef passed the rigorous testing process. Those systems were tested at the Club World Cup in Japan last December, before Cairos and GoalControl had even been licensed.


Why business students like the Alibaba case and Jack Ma

March 23, 2013

Jack Ma wikipediaWhen Asian business students are asked to write about leadership, one of their favourite topics is the Chinese telecommunications giant Alibaba, and its dynamic leader Jack Ma

This is hardly surprising. The company has grown through the vision and enterprise of its founder. Already a host of corporate stories are developing around him and his giant baby, recently valued at 35 billion dollars.

The Jack Ma story

Jack Ma fits the profile of the creative entrepreneur. His decisions are imaginative. He describes his leadership journey in vivid anecdotes which suggests that he has a well-developed transformational style. An English teacher and graduate of Hangzhou, Mr Ma became a skilled web site builder, one of the first in China.

When he was thinking about going international he looked for a corporate name that worked in Chinese but which also had global connotations. Once when in America, someone mentioned the story of Ali-Baba to him, and he thought he had found what he was looking for. He tested his idea quickly and locally, as found there was surprising recognition of the story from the Arabian Knights, and the magic password Open Sesame which opened up a cave full of treasures.. Yes, my company could be remembered for opening up a place full of treasures, he thought. Ali-Baba had brought prosperity to his village.

He listed the new name slightly differently, noticing that it was also effective when written in Chinese characters.

A sprawling conglomerate

Alibaba, founded in 1999, was to grow into the largest private corporation in China. It was described by Bloomberg Business Week as a sprawling conglomerate of web-based companies. The largest elements are Taobao and the Alibaba group. The former is a Chinese version of E-Bay and was to become market leader in e-commerce in China

Its Business relationship with Yahoo has been controversial. Alibaba grew and prospered under its founder-leader, Yahoo struggled to compete in its more global business.

Time to quit says Jack Ma

Recently, the founder has decided to hand over the leadership to a senior executive Jonathan Lu in advance of an anticipated initial public share offering which is being predicted to match that of Facebook [or more, as Facebook's shares have dipped this year]. The South China Post stated:

The announcement came a few days after Alibaba, which Ma founded in 1999, announced a sweeping restructuring that will divide the group into 25 business units under the direction of two committees, one for strategy and the other for operations. In an e-mail sent to Alibaba’s more than 24,000 employees worldwide on January 15, Ma said he decided to relinquish his position as chief executive because the company had people who “are better equipped to manage and lead an internet ecosystem like ours”.

Ma described how he realised years ago that he was not suited to be a traditional chief executive of a big firm. He said that “at 48 I am no longer ‘young’ for the internet business”. What he aims to be is “a good partner to more capable colleagues”, which he intends to accomplish by continuing his role as executive chairman.

Ma described the restructuring as “the most difficult reorganisation” in Alibaba’s history. But it is a bet to stay competitive in the mainland’s fast-growing e-commerce market. JP Morgan has estimated this market to be worth US$436 billion in 2015. The move fuelled speculation that Ma was laying the groundwork for Alibaba’s initial public offering, which the company has denied.

What happens next?

Predictions are generally favourable. I agree with The Economist [March 23rd 2013] which noted that while the future is promising “…there is nothing inevitable about Alibaba’s future fortunes”. I urge students of leadership to do a little ‘map testing’ before accepting that newspaper’s casual SWOT analysis: [1] that Alibaba could overreach itself; that [2] it would face the risk that ‘foreign governments will clamp down’ and [3] face an internal threat because ” The Communist Party is bound to be jealous of an outfit that has so much data on Chinese citizens.”

I’m afraid that piece of analysis would have not obtained a particular high grade, if it had been supplied in a student assignment on Alibaba’s prospects.


American Giant and the greatest Hoodie ever made

March 14, 2013

American Giant HoodieAmerican Giant was founded by entrepreneur Bayard Winthrop on a simple idea, to create the greatest Hoodie ever made. The product was so successful it almost bust the company in its start-up year

This is how the story hit the headlines this week [Match 2013]:

After only eight months in business, everything at online fashion company American Giant was going according to plan last year. The San Francisco-based business was enjoying “slow but steady growth”, says founder Bayard Winthrop. Then American Giant got the type of positive publicity many companies can only dream off. Orders rocketed, and the firm was sent into emergency mode. “Four days later we had nothing left,” says Mr Winthrop. “We were down to the sticks in our warehouse.”

Since it is an online-only retailer, customers cannot try on the clothing before buying. And reliant upon word-of-mouth marketing, Mr Winthrop estimated it would take two years for American Giant to really take off. Then the online magazine Slate ran an article that named American Giant’s hooded sweatshirt “the greatest Hoodie ever made”. It triggered half a million dollars of new orders in less than two days, clearing out American Giant’s inventory.

The nature of web-based success

We have become accustomed to the unpredictable explosion of growth as a business idea goes viral. Typically, a simple concept captures the imagination and attracts the attention of millions of people often in the time cycle of twenty four hours as the news spreads around the world.

The precise ingredients for success remain unclear. A few years ago Facebook and then Twitter burst on the scene. Twitter had two factors going for it. It’s brilliant idea was easy to explain: Anything worth saying can be captured in 140 characters or less. The second element was the speed of take up of the idea which becomes part of its success. In other words Twitter became famous for becoming famous.

The New Darwinism of the Web

In the New Darwinism of the Web, there is room for only one species at the top of the food chain. This not a new idea, but it certainly applies in web-based markets, where dominance by one ‘species’ is common.

Which brings us back to American Giant

The story is a sure-fire candidate for study as a Business School case. If it isn’t already, [March 2013] it’s because case writers can’t be as agile as their business heroes.

The greatest Hoodie in the world

The idea of producing the greatest Hoodie in the world has another old-fashioned virtue, the wow factor, which is often accompanied by the famous words “Why didn’t I think of that?”

Not such a simple idea

Part of the answer to the question is that the monstrously successful business idea has to be ‘financialized’. Sometimes deliberately with foresight, sometimes by ‘stumbling upon it, the entrepreneur had to see not just what such a product might look like, but how the idea could be protected and commercialized.

A leadership challenge

If you haven’t come across the history of American Giant, here’s my challenge. If you had the idea of “the greatest Hoodie in the world” how would you turn it into a world-beater.

I’ll offer a few ideas, but you will need to keep a look out for them in future amendments to this post. And I’ll welcome suggestions from LWD subscribers.

To be continued…


Face to face in Moscow: Facebook’s founder meets Prime Minister Dmitry Medvedev

October 2, 2012

Facebook’s founder Mark Zuckerberg met Russian Prime Minister Dmitry Medvedev in Moscow to discuss intellectual property issues.

Zuckerberg was beginning his quest for new global markets, as the leader of the newly floated Facebook organization [May 2012]

The Voice of Russia reported:

On Monday [1st October 2012] Dmitry Medvedev and Facebook founder Mark Zuckerberg had an informal meeting at the Prime Minister`s residence outside Moscow.

Since Mr Medvedev has his personal video blog, not to mention accounts on Facebook, Twitter and LiveJournal, his meeting with Zuckerberg, whose social networking site already has over 995 million users, has become a hot topic for the media.

Mr Medvedev was reported as saying

“The social networking sites have become extremely popular worldwide. And Facebook`s contribution to this is obvious. If I am not mistaken, some 10 million Russians are on Facebook. Of course, it is not that much compared to the US, where there are about 30 million Facebook users. Still, these figures are impressive. We also have our national social networking sites such as Odnoklassniki (Classmates) and VKontakte (Staying in touch). Besides, everybody is using Twitter. This is a kind of a different reality. And you personally have contributed to this”

Mr. Medvedev and Mr Zuckerberg discussed copyright protection on the web.

“As a lawyer myself I am very interested in this issue. I used to do research on it in the past. I believe that if an object of intellectual property is not listed on the web as requiring special protection it could be used freely” Mr. Medvedev said.

Friends or not?

When the meeting was over, Mark Zuckerberg presented Dmitry Medvedev with a T-shirt printed with the address of Medvedev`s Facebook page. The Voice of Russia report did not say whether Dmitry and Mark had friended each other, and if so, when.

The IP challenge

The conversation ever-so-politely introduced the challenges of intellectual property rights facing Facebook and other Western organizations as they seek to work globally.

The bonds that tie

It occurred to me that for all the differences in culture, America and Russia have been parts of the world which have seen the rise of self-made entrepreneurs cum billionaires. In that sense Zuckerman has a head start over the more traditional Fortune 100 CEOs in doing business there.

Acknowledgement

Image from biz Russia. IP rights as indicated by Mr. Medvedev


The ancient business of money-lending as updated by Wonga

May 13, 2012

Wonga has been accused of being the latest success in the history of exploiting poverty through money-lending. Errol Damelin, Wonga’s founder, sees it differently

Wonga is another Google

Mr Damelin sees his company having a similar business model to firms like Google, Amazon, PayPal and Netflix:

“Wonga is a platform for the future of financial services, the digital revolution has not yet begun in financial services . .. Wonga is on a multi-year and multi-decade journey to build the future of financial services, using data and technology to make objective and unprejudiced decisions.

We have built the world’s first, completely straight-through processing system for credit, so when somebody comes to Wonga as an individual, or as a business-owner, and applies for a cash advance, the whole process is completely automated”

Responsible lending

The Wonga website explains its code of contact and its approach to responsible lending

Our service is designed to put you in control of your cash flow, for those occasional times when an unexpected expense catches you by surprise. Unlike most lenders, we enable you to choose exactly how much money you want to borrow – down to the last pound – and for exactly how many days. We don’t force you to borrow a fixed sum you might not need, nor do you accrue interest for longer than necessary. The amount you apply for and the length of the loan naturally affect the cost of repayment too, so you can make adjustments until you’re happy with all elements of your application.

Our technology enables us to assess applications in seconds and helps to ensure we only lend to people whom we believe are able to repay us – we simply aren’t interested in lending to anyone who isn’t. Because we carry out a credit check as part of the application process, you may also see an improvement to your credit history when you repay an online cash advance from Wonga. That’s because we inform our credit bureau partner of your trustworthy behaviour with any timely repayment.
We urge you to think carefully before applying for a Wonga loan, because we expect it to be repaid when you promise to. We describe the potential consequences of failing to do so, [and] offer tips for anyone already struggling with debt.

Applying for any form of credit isn’t a decision to be taken lightly. Please remember that if your Wonga application is approved, it becomes a two-way street and you’ll need to keep a serious promise. We want our relationship to be a happy and trusting one, so we lay out the facts as clearly as possible. Only you can decide whether to apply or not, however, so please only do so if you’re confident you’ll have the funds to comfortably make repayment on your chosen date.

The Business Model

The interest rates are explosively high. And yet, there remains a dilemma. A corporate spokesperson explains the rates in terms of someone deciding to take a black cab for convenience, even if it is expensive.

The Guardian newspaper explored Wonga’s business model.

Last week, [May 2012] the Office of Fair Trading launched a review of the payday lending sector in response to concerns that “some payday lenders are taking advantage of people in financial difficulty” and not meeting “guidance on irresponsible lending”. The OFT said it aimed to drive out companies that are not fit to hold consumer credit licences.

Wonga does not expect to be one of the companies driven out of the market, and the company’s advertising strategy tries to set Wonga aside from the myriad of evocatively named rival online companies that offer money if you Google payday loans.

Note to students of leadership

Wonga is a word found in English vernacular, where it (roughly) means money. Wonga sponsors Blackpool football club. Its business model repays a close study. Breaking news: The Economist examines Wonga’s business.

See also growing media attention to the underlying problems of people needing pay day bridging loans


Bloodshed in Bahrain: Bernie Eccleston is not quite the Rupert Murdoch of Global Sport

April 22, 2012

The Formula one race in Bahrain has once again brought its chairman Bernie Eccleston into the limelight. We look briefly at his entrepreneurial credentials

The British president and CEO of Formula One Management and Formula One Administration is generally regarded as most powerful influence in Formula 1 racing. He retains dominance into his 80s. He has also attracted controversy over alleged illegal political influence.

Former Motor racing competitor.

Forbes addresses the perennially interesting question ‘how did he get as rich as he is?’ revealing a well-beaten path to success for entrepreneurs. Much has been written about entrepreneurs compensating for early-life experiences, and of being motivated to overcome turning possible disadvantageous factors. Factors include a hobby (motor bikes) which turned into a profit (motor bike parts) and later through a personal network in motor cycling and racing where street-smarts prevailed.

A diminutive former car salesman

A diminutive former car salesman, Bernie Ecclestone raced into the billionaire ranks in 2005 after selling stakes in Formula One Group for $2.5 billion. After failing to qualify as a Formula One race driver, he bought a team and brokered a complex series of contracts and TV deals for other F1 teams, taking over most rights in 1997, and turning F1 into a lucrative global franchise. He then began selling the sport’s commercial rights to TV broadcasters, which eventually brought him billions.

Attracted publicity

Ecclestone has attracted publicity for financial support of Labour party for alleged influence for his business interests. Also for friendship and business relationship with another controversial figure Max Moseley, and for lifestyle and provocative statements considered anti-feminist and anti-semitic.

Another Rupert Murdoch?

He accepts (maybe enjoys?) a public image as an all-powerful Rupert Murdoch figure figuring in controversial news stories. He may be less than enthusiastic over media accounts of the life styles of his well-endowed daughters. [I just realised the unintended second meaning to that statement: Ed]

The Bahrain Grand Prix

Last year, the FI race in Bahrain was cancelled after an upsurge in violence. This year a decision was made to reinstate the race [scheduled for 22nd April, 2012] Even more international pressure was put on the FI administration. There was an upsurge in violence which made the decision to go ahead look like a humanitarian and public relations disaster.
Despite claims by F1 chief Bernie Ecclestone and regime officials that the race was safe and the threat of violence “hyped”, the build-up to the contest has been marked by increasingly large anti-government demonstrations that have been put down with teargas, birdshot and stun grenades.

On Friday, [April 21st 2012] activists began what they described as the first of “three days of rage” against Bahrain’s rulers. There were reports last night that police firing teargas canisters were confronting protesters hurling petrol bombs.

The ruling al-Khalifa family has depicted the race — which is expected to draw an audience of about 100 million — as a “force for good” and an event that will unite Bahrain. At least 50 people have died in the unrest since February 2011 in the longest-running street battles of the Arab Spring. Bahrain’s Shia majority is seeking to break the near-monopoly on power by the ruling Sunni dynasty, which has close ties to the west and Saudi Arabia.

To be continued


Is Denis O’Brien Ireland’s Rupert Murdoch?

April 20, 2012

The Irish entrepreneur and billionaire Denis O’Brien has a business career with similarities to that of Rupert Murdoch. He is currently believed to have been involved in moves to control Ireland’s Independent News & Media organization

I was struck by the account in this week’s Irish Times [April 20th 2012] of the boardroom changes in Ireland’s Independent News & Media organization [INM]. The story was presented as a clash between INN’s owners within a business empire founded by Tony O’ Reilly, and the business interests of the next-generation Irish entrepreneur Denis O’Brien who has become a major shareholder at INN.

With speculation mounting that dissident shareholder Denis O’Brien was planning to topple him, Independent News & Media’s chief executive Gavin O’Reilly raised the white flag and trudged off the battlefield.

O’Reilly was a marked man from the moment Leslie Buckley, O’Brien’s closest business associate, was dumped from the INM board last year.
The fact that INM’s operational performance has worsened over the past year also played a role in O’Reilly’s demise. No dividend has been paid since the crash. It was once considered the safest [investment] in town. Nothing O’Reilly said or did was able to arrest the slide. It is interesting to note that since its AGM last June, chairman Brian Hillery and the chief executive [Gavin O’Reilly ] have now both left.

O’Reilly’s exit means that for the first time since 1973 no member of Anthony O’Reilly’s family will be controlling INM’s affairs. What all of this means in relation to O’Brien’s plans for his INM stake remains to be seen. Many close to INM believe he has no intention of moving to acquire the company. There are substantial issues around his media ownership here, given his interests in six radio licences. Last night, Taoiseach Enda Kenny said the [Irish] Government would “have a reflection on this in terms of cross-ownership of media”.

He may have gotten rid of O’Reilly but O’Brien has failed to gain control of the company, which many commentators presumed was his plan. Then again, perhaps that is the way he wants it. For now, at least.

Denis and Rupert

The career and leadership style of Denis O’Brien has some similarities with that of Rupert Murdoch. However, such comparisons risk over-simplifying complex issues, and need to be taken with a conceptual health warning.

Mr O’ Brien became a Portuguese resident thus avoiding paying taxes in Ireland.

A Government investigation [The Moriarty tribunal] examined his actions in the move which gave him his greatest financial boost. According to The Irish Times [3rd March, 2011] it found “beyond doubt” that [the then minister for transport, energy and communications] Mr Lowry gave “substantive information to Denis O’Brien, of significant value and assistance to him in securing the [mobile] licence”.

Update [Dec 11th 2012]

This week the IMM group’s financial position was assessed as week, and the company in need of drastic restructuring.


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