Great Things

Residential Real Estate: How fast will it tip?

I don't think the question is when will real estate tip and become a massive online category but how fast. Brokers have done at great job at restricting access to information and using uncompetitive behaviors to limit the offline-online shift so far but the information is starting to become freely available on the web.

Scoble brought Trulia to my attention yesterday. They have launched a beta for the state of California that provides a great interface for consumers shopping for a home. It does most of what Olivier Travers suggested in his post a few months ago.  Trulia is in the business of delivering highly qualified leads to brokers (and their customers) with a listing. Wow - that is pretty valuable. Isn't that used to be what an agent working on behalf of the buyer did? Hmmmh - why am I paying (indirectly) 3.0% of the purchase price as the buyer of the home to an agent if I found the house. That sounds like a lot for someone who does nothing more than set up appointments and assist in the negotiation. What if I decided to represent myself, found the house, and offered to spit that 3% with the seller.

Trulia is not in the business of putting agents out of business - at least, not yet. Once they have built the demand side of their marketplace to scale, they will become an interesting place for FSBO (for sale by owner) folks to list their properties. Because the one thing that a listing realtor does do right now that creates value to the seller is that they bring you valuable demand by listing your product on the MLS so that other agents can find it. Where else does the other demand come from? The sign out front of the house and the neighborhood fliers. I don't actually think that the print classified ad does anything anymore; at least, that what a local realtor friend tells me.

As a last comment, if you are in the business of lead generation in the real estate space, would you rather be generating sell side or buy side leads for brokers? I think the sell side lead is much more valuable because of the conversion rate. I am guessing 1 in 4 sell side leads become listing for realtors and 1 in 25 buy side leads become buyers of a property. That is probably why HouseValues has a $400MM market cap despite auctioning of their customer names to annoying realtors.

Just build product

Joe Kraus wrote a great post in June (he must be too busy doing it to keep posting) on how it is a great time to be an entrepreneur. Why? The cost to begin (or the cost to enter to quote Porter) is so much smaller than it was ten years ago. Primarily, this is driven by massive decreases in hardware costs, the availability of cheap, high-quality open source software and search engine marketing. I don't have much to contribute to his excellent analysis except for "I agree." So why post? Because I have another nugget for the aspiring entrepreneur:

Just build product!

Yes a blatant rip off of the advertising geniuses for Nike at Wieden Kennedy but good advice nonetheless. I am working with a number of entrepreneurs right now as they build their businesses. Those with a functioning demo (this can just be screen mock-ups) are so, so far ahead of those with just a business plan. Seeing what the product might look like and might do makes it so much more real than words describing what a product might do. It enables a potential customer to give feedback or a future employee to get inspired. So just build product.

Life caching

I read a sometimes interesting, sometimes irritating newsletter called Trendwatching. They refer to the behaviour of capturing and preserving memories as Life Caching. As the cost of storage moves to zero, it is going to become possible for large numbers of people to record their entire lives. Think about the how boring that file in its entirety would be? Think about how interesting that file would be given the right metadata. Searchable by people, place, time, event, etc.

There is a business somewhere in here. The key to building a scaleable business is making the creation of tagged/searchable content so, so easy for the end consumer. It  has to be easier than creating a photo album or not enough people will do it.

Mylifestory.com

Rick Segal wrote an interesting post today about an interesting family application. Basically, he describes a place where families can easily share stories, information, and photos. It is more than a photo sharing app. It is more than a shared blog. It is about preserving a family's memories. I think a smart way to build this product is to create a template for telling one person's life story. By doing this, and making it selectively accessible to other family members and friends, you build a linked family memory through the individual memories. This is especially relevant to me in the context of my new daughter. Wouldn't it be great if she had a searchable archive of photos, videos and text of her first five years on the planet.  Wouldn't it be amazing for her kids to have access to the same information? I certainly would love to browse and explore my parents or my grandparents life story.

I know this is a compelling product from the point of view of the end consumer but I haven't figured out to turn that value into real revenue and profits just yet. I am also afraid of the legions of people out there (including me) who don't do the work of organizing their photos into albums. These are the people who will like using this product but won't ever contribute content to it. And I think the value of the product increases exponentially once you get your entire family using the product.

These guys "get it"

I am a relative newbie to the blog world but I am fascinated by the work of Fred Wilson and Union Square Ventures. I am not a venture capitalist, rather an aspiring entrepreneur, but in all my previous employment experience, information and ideas were power. They were currency to be shared with the right set of people and partners at the right time but the information/ideas were always proprietary. These guys seem to be turning that paradigm on its' head. It is not quite to the point where they are publishing their term sheets but we are getting there.

Fred and his partner Brad invited a lot of really smart people to their office last week to discuss the next evolution of networks, information and the web. Amazingly, they all showed up. Everybody was fumbling a little bit in the dark, trying to make sense of the present and predict the future. They had the vision to hire a stenographer and post the results of the day to their blog. So I spent a good part of my day reading the transcript, trying to make sense of the present and predict a little bit of the future.  I have to admit that I felt like I was there after reading it all.

So hats off to Fred and Brad for having the vision to put the day together, the pull to get the people to show up, and the intellectual courage to share the output from the day with the web. It makes the conversation broader and the dialogue more rich. The story is interesting but the method  has applications at every layer of society. Does the new web give us a chance to get into the boardroom, the school board, or the Oval Office? Will everyone be a participant? I think it is inevitable.

Bittorrent - why so difficult? Or why Apple can save the day...

This is another story of late adoption. I decided to get my act together to understand BitTorrent about two months ago. Why? A really excellent Fortune article by Daniel Roth pretty much sums it when he says that ~20% of web traffic is driven by BitTorrent right now. Probably worth understanding. The first thing to note is that Bram Cohen has come up with a  very clever programming solution to sharing massive files. What value does it have for consumers? "Free" media that they can watch when they want it and where they want it. The problem is that the solution does not deliver that right now. I have been fiddling with this stuff for two months trying to get it to work. Last night, I was finally able to watch something that I had downloaded! Why did it take my two months to figure out! I am not a totally techno idiot - some of my none technical friends might even consider me adept technically.  To make a long story short, this is way too hard for the average consumer. What does the consumer want?
- High quality media. Audio and video that work after you have spend six hours downloading something.
- Spyware free media. I don't know about you but I am often terrified when I click on the BitTorrent file sitting on my desktop that my entire machine is about to blow up.
- Portable media. I want to watch media in my TV room, not my computer room. Home networking is a pain in the butt. Let me burn the DVD easily.
- One consistent format. Why do I need Real Player, Windows Media Player and five other open source media players to make this work?

Enter Apple. Enter the big content producers. I believe that in the long run, people will pay for their movies, TV shows, books and music and download themn. Why? Because operating in the grey world of P2P file sharing is too hard for the average consumer. Calling it "free" is a misnomer if you have to spend 20 hours to get a low quality free movie. Apple can deliver through I-Tunes high quality, trusted media that frees the consumer from Tivo, the cable companies and having to go the theater.

I really think it is time for me to buy a Mac.

Career Assessment

I spent the day yesterday doing a pre-hire assessment with an HR consultant. A company that I am interviewing with asked me to spend a day doing this and I was very skeptical of the value created for them and me. My inital impression was "Total waste of time!". How wrong I was.

The process is pretty simple.  Before going, you fill out a couple of online surveys where you give your opinion of what motivates you and what you like to do in the workplace. The day in the office begins with three hours of standardized tests that evaulate your intellectual horsepower: critical thinking, logical reasoning, verbal skills, etc. If you have even taken the SAT, GMAT, LSAT or GRE, you will be familiar with the format. This part of the day is pretty boring but it is an important component of the overall evaluation. After lunch, you spend a couple of hours in an interview with a HR consultant telling them about your work experience and your life.

The output from the day is where the value is created. For the last hour of the day, I got candid feedback on my strengths and weaknesses and on how other people perceive me. Criticism has never been easy for me but it is always valuable to get a sense of how others perceive you. Long story short is that I need to work at being a better listener and seeking to understand. Arrogance and
defensiveness are two career stoppers apparently!

I have always been suspicious of the HR function despite its incredible importance to the success of an organization. I am not sure why this is - perhaps it is an operating guy's perception of staff people. So what is the moral of the story? Taking time out of your schedule to get to know yourself better, your strengths and weaknesses, is never a waste of time. On the contrary, it can be something that makes you are much more productive leader and also a better person.

More shorts

ABC, CBS, NBC - what value does the network create in the new media world? TV viewing hours are on the decline and if consumers had to give up TV or the web, most would choose TV to give up because ultimately they get all the benefits of TV through the web. In the old days, the network provided distribution and marketing power for content producers. The question is whether content producers still need marketing and distribution. The answer of course is yes but do the networks get paid too much for that right now. I think so. These companies have managed to survive by charging higher and higher rates to reach smaller and smaller audiences. Not a sustainable model - especially when the advertisers figure out that they can reach their audiences for a fraction of the cost (and get feedback on how well the ads worked) by visiting Google.

Defined benefit pension plans. First, the airlines and now General Motors and the rest of the automotive industry. Long story short is that the unions have extracted promises from corporations that they are not going to keep. Oopsie! Who is going to be left holding the bag? Either retirees or the government (read young taxpayers). My bet is on the government because Bush and his followers will all elect to borrow money to pay for pensions and healthcare instead of working on solving the problems. Advice for young folks today - save for your own retirement because companies and the government are not going to provide it.

I will stop being negative for a while and focus on some long ideas.

Things to short (or not so 'great' businesses)

A friend of mine and I were sitting in a cigar bar in Aspen in 1997 and he looked over at me and said: "I wish I could short cigars." At the time, cigar consumption had increased 50% over the past five years. I can't find the data on what has happened over the last eight years but I would bet his short would be a good one. Thankfully, I haven't been in a cigar bar since. Well that simple comment is the inspiration for my post today. So what are the things that I would short today and why:
- any business where a large component of the revenue comes from offline classified advertising. So pure play newspaper companies like Knight Ridder would be a good short. Why? Because the online classified experience, via Craigslist and LiveDeal, is a richer, deeper and much cheaper (free!) product.
- yellow pages businesses. Big private equity shops have been  buying yellow pages businesses from the phone companies in the last three years. Why? Isn't all that advertising going to migrate to the web? Are the existing incumbents well-positioned to win in that space? I don't think so.
- airline GDS (global distribution businesses) systems like Sabre and Worldspan. Why? 1. The large majority of travel will be booked online in ten years. 2. Travel agencies are going out of business and being replaced by large travel distribution companies. 3. Software is being written, by companies like G2 Switchworks,   to consolidate fare information and to enable direct fulfillment on airline websites where the cost is much, much cheaper than the GDS.
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Great restaurant: Lee

Susur Lee opened up a tapas style place, Lee, next door to his high-end eatery, Susur. Pam and I had a great meal there last night. Particularly recommend the coconut soup and the coleslaw. Reminds us of our favorite Seattle restaurtant, Lark.