Tweibo, Super-Bowl, and Old Media Obsolescence TWIT SINA

How does Twitter make money?
What is Twitter's business model?
They have hundreds of millions of people using their service but how will they monetize that?

These are all reasonable questions to have about a company that is supposedly trading at nose-bleed, bubbly valuations, and has no idea how to generate revenue. The answer is very simple: As of July, 2010, Twitter had 190M users. If you wanted to advertise to those 190M users by having Twitter send each one of them a tweet, how much would it cost?

To put these numbers into perspective, let's compare Twitter's user base to a traditional media event with a similar number of "users", the Super-Bowl. Super-Bowl ads which only reached 90M viewers in 2010 (according to Nielsen) cost an estimated $2.6M per ad in 2010. That's approximately a cost of $28.8 for every person reached by the ad. If we assume that 10M Twitter accounts are spam-bots, that still leaves us with around 180M active users. If Twitter charged the current Super-Bowl ad rate to send 1 AdTweet (or RevTweet = Revenue Generating Tweet) to all of its users, it would have the user base necessary to justify a price of $5.2M per AdTweet, double the cost of 1 Super-Bowl ad. As such, Twitter would only need to send 192 AdTweets per year to be a $1 billion dollar company in terms of annual revenues. That's less than 1 AdTweet per day. No one would have a problem with that. I follow around 200 people, in one hour I see between 140-180 tweets, so 1 adtweet per day would be a tiny fraction of the total.

For the most part, if you are reading this post, you know that what I am about to say is very true. People use Twitter more than crack addicts use crack. I personally use Twitter every single day of the week, 24 hours per day (who doesn't?). In other words, if I'm awake, I'm using Twitter. We are all hopelessly addicted to it and for a very good reason. Twitter has single-handedly become society's #1 source for news. It has made television, radio, and newspapers almost completely obsolete for getting breaking news. By following the right people, you can hear the latest breaking news hours before it gets reported on TV or radio, and 24 hours before it hits the pages of the newspapers. In a sense, active Twitter posters have become society's new news broadcasters sharing videos, pictures, and news with the world. Social Media News is destroying Old Media News.

[Warning]***
This post divulges into wild-eyed speculation beyond this point.
[/Warning]***

Furthermore, it is even possible that in the future either Twitter or Weibo is going to acquire its rival, or they are going to merge. Weibo is exactly like Twitter, 140 characters and all, the only difference is that Sina is headquartered in China and is made for the Chinese speaker. From a business standpoint it would make sense as it would create a massive social media audience to whom you could advertise to. However, pause for a moment and just think of all the implications such a merger would have. A large portion of Chinese citizens already know how to speak English. This platform would allow, for the first time ever, Chinese citizens to talk directly with random or specific US citizens, at virtually no cost, and would allow for finding and meeting new people (networking). Imagine half of your followers being from China. If such a union ever took place, it would not be that hard to see out 75 years into the future a World in which the dominant global language is some mixture of English and Chinese as a direct result of Tweibo.

Disclosure: I currently do not own SINA but I will soon.

You can follow me on Twitter at @elwalvador

Medical Marijuana another reason to be bullish on NetFlix

I was watching the History Channel last night and I found yet another reason to be bullish on NetFlix. The show was on the Booming medical marijuana industry in California. To make a long story short, marijuana is now on par with alcohol in the West Coast. All you need is a doctor's recommendation that you need cannabis to treat a medical condition and just like that you can now buy weed in clean, brightly lit, safe, slick, modern stores. Stores whose appearance rivals the aesthetic designs of Lululemon or Apple.

You can also get it delivered to your house if it's too embarrassing to be seen at such a place. While watching the show my brain was churning trying to figure out: how could I directly play this ragging bull market in weed in the West Coast? And a few ideas came up: Invest in who ever owns the Munchies brand? Maybe.

Or perhaps invest in whoever sells Visine? Yes, but what else?

But then it hit me. What do people do most often when they get stoned? They sit on the couch and watch movies! Duh! Naturally, NetFlix came to mind. NetFlix is a pure play on the growing cannabis market.


Disclosure: I currently do not own any NFLX but I may in the near future.
Follow me on Twitter at @elwalvador

Long, impressive sounding names: Lululemon Starbucks.

When you order a Mocha Latte Double Frappuccino Espresso at StarBucks, what the hell does that even mean? It doesn't matter. It is sooo much fun ordering a simple cup of coffee using a complicated mess of words, one of which makes you sound Italian, that it hardly even matters what the coffee tastes like. You could almost make the case that SBUX is charging you for the right to use the words Venti and Frappuccino inside their stores. Additionally, a long, magnificent name like that does more than just make you feel good about being able to remember the whole thing, let alone say it. It literally imbues the coffee with magical god like powers. Because suddenly, you are not just buying "an ordinary" cup of coffee, no, no, no! You are buying a Venti Mocha Latté Double Frappuccino Espresso and you know that the coffee has to be made out of the finest ingredients on earth because you just spent enough money on it to send 10 African Children to school for 5 years.

And this is the very same demand creation strategy that is being employed by the lovely ladies over at Lululemon. As any Lulu “educator” will tell you, you are not just buying ordinary yoga pants, far from it. You are buying Anti-Camel Toe, Tata-Taming, Wunder Under Crops made out of Luon, with the Multi-color Unicorn Tears print on it, embedded with SilverScent anti-stink technology! The name makes it very, very, crystal clear: These are the most amazing, extraordinary, spectacular yoga pants that woman has ever created. In fact, these are the best damn freaking yoga pants in the entire Universe! And obviously they are made out of the highest-tech, most cutting edge fabrics, as evidenced by the equally magnificent price tag.

I think the success of Starbucks is largely, if not entirely, attributable to its ability to make their customers believe that they are buying so much more than just coffee. And I also believe that Lululemon is doing the exact same thing and will have the same level of success that Starbucks had (has). In fact, I know they are doing the same thing. Lululemon's CEO, Christine Day, was an executive at Starbucks for 20 years before coming to Lululemon. This among other things is why I believe so strongly in owning Lulu.

Disclosure: I am massively, ragingly, long Lululemon stock.

Webvan, ahead of its time.

The idea of having your customers order their groceries online, buying their food for them, and delivering it to their homes was a horrible business model back in 1999 when Webvan tried it and failed miserably in 2001 going bankrupt.

However, with the advent of mobile-web and smartphones, that can do virtually anything, Webvan's idea could very well be a profitable business model in the post iPhone world.

In 2001 I had never traded a single stock in my life so I don't know much about how Webvan operated but I do know that back then the idea of carrying around a pocket-sized phone that had a blazingly fast wireless internet connection (relative to 56k dial-ups) and had a big enough screen where you could actually see full-color high res pictures (and you could magnify them) was an idea that nobody except, maybe, Steve Jobs had in his head (but probably not since the iPhone debut in 2007).

Back in those early days the internet was very immature and not fully developed. So if you wanted to order your groceries online you basically just typed-up your grocery list in a Webvan text-box and then prayed that he would get you the right brand or flavor that you wanted. For example if you just wrote down that you wanted Total WholeGrain cereal the Webvan employee would shit his pants when he got to the cereal isle when seeing that there are fully 5 different versions of that cereal (Honey Almond Flax, Blueberry Pomegranate, Cinnamon Crunch, Raisin Brand, & Cranberry Crunch). He would have no F-ing clue which one you wanted and would either get you the wrong kind or not buy anything at all. Either of which would piss you off and rightfully so.

With today's internet though, the cloud, and smartphones instead of just writing down a vague, ambiguous grocery list of the foods you want, you could browse through pictures and select the specific brand you want. With pictures there is no ambiguity of what you want and the Webvan employee would be equipped with an iPad or iPhone and have a picture of the exact item you want. If it's not there he could even Tweet you to find out if you would like him to get you another similar brand or not get anything at all. You could even personalize the experience by taking the customer with you on a shopping trip and take pictures of them holding the brands they like. Then the next time they are putting together their grocery list, they could click on a picture of themselves holding the brand!

This simply wasn't doable back in 1999 but I think it is doable now. Maybe that's why Jeff Bezos bought Webvan in 2009 (for probably nothing) and now Amazon owns them (Check Wikipedia).