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The value of elemental networks

It’s been about a year since I wondered about the origins of networks and their specialties. I was thinking at the time that there’s a reason why Facebook is not the end of all discussion, full stop, dominant and well positioned as it is to be the only network for everything, at least on the surface. I was thinking at the time that there’s a reason why networks and their uses are different from, say, search – an activity more prone to standardization and universality – and why we use different networks for different reasons even if we mainly use the same search engine for everything. I concluded then that both phenomena have something to do with habit that gets formed at inception, which is difficult to break individually and even more so globally as networks solidify out of intertwined individual habits.

I still think this, a year later, and because it is a year later and evidence keeps pouring in, I now think a little more. It was my recent introduction to Instagram that planted the seed. A friend turned me on to the picture sharing platform the other day. As I played around with it and as it quickly grew on me (I had been a viewer but now also as contributor), it dawned on me that social networks are different from applications – say, search – because networks mirror our mental processes and the variety of our daily existence, while applications are strictly utilitarian. Instagram is about as pure an illustration of what I mean, functioning as it does as an outlet for its users to describe how they see. By the same token, Spotify or other music networks are a reflection of how they hear. To extend this reasoning a bit more broadly, Twitter is an outlet for how we think (sure enough, in snippets), Facebook for what we like, Foursquare for where we go, LinkedIn for what we do.

More than to (hopefully not) state the obvious – and certainly not to diminish the scope of large global platforms – the point of the above is principally to say this: Just as we don’t, strictly speaking, see with our ears or hear with our eyes, we have tended not to intermingle the networks that reflect our assorted states. And unlike our use of functional applications – say, search – which is perhaps more truly attributable to habit, social networks are profound elements of who or what we are. A corollary to this generalization is that a utilitarian application – a search engine, for instance – depending as it might on mere habit in a commoditized environment, will be at risk of being displaced (because habits can be broken), while a network is much less exposed to this risk. It also follows that elemental networks have an ingrained asset-value that functional applications have to perpetually build.

Having jotted down these thoughts, I’m going to post a link on Twitter, which is where my snippets are carried every day. Because this article relates to sector analysis and certain stocks, I’ll take it directly to StockTwits, where the audience shares my analytic interests most of all. Follow me there, if you like, or if you’re curious to see how I see, check out this batch of pictures I loaded up on Instagram. These were taken on a recent trip to Los Angeles, which is a city I love.

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By Dan Ramsden – January 21, 2012

Of interest to entrepreneurs

The big print giveth and the little print taketh away. The big print really drew me in when I saw: “The Business Case For Reading Novels.” And then the little print ruined the moment. The theme is one that has resonated with me since forever, I almost consider myself a champion of the cause. There is even a category for this here, on this very blog, where books and other recommendations is its own section alongside industry, capital markets, and matters of interest to entrepreneurs. Discussions posted in the books section also relate to movies, traveling poets, music, and the such; which is to say, I agree: Novels, and for that matter all the arts, are an invaluable business schooling.

Mainly, I suppose, this is driven by the reality that all enterprise takes place in a market, and markets consist of people. All business is operated by people, and as much as scientists try to explain human activity with formula, there is no formula for people; artists have done a much more masterful job depicting, if not explaining, the slippery subject. And this is where the little print of the cited article becomes, frankly, annoying: Oh I don’t know… some stuff about some portion of the brain that responds to fiction in some scientific way; some condescending reference to Henry James, who was apparently right just by accident, unwittingly, when he put forth that ”a novel is a direct impression of life,” because only now can we confirm this observation scientifically; and worst of all, there is a fiction reading-list selected for business people on the basis of plots about business and its people. This misses the point altogether – I think – of business creativity and business building; of, in a word, entrepreneurship.

I do not even know where to begin, and I won’t. Let me only suggest that entrepreneurship – and most business people are entrepreneurs, whether realizing this or not - and Anthony Trollope don’t actually mix, even if the author wrote a book about a business person once. (Any entrepreneur who has finished the full length of a Trollope novel by choice and enjoyment should consider an alternate career, urgently.) For a book to speak to entrepreneurs it doesn’t need to be about a business person, or a business motive, or a business setting. It only has to be truthful, and real. It only has to be beautiful. It doesn’t even, you know, have to be a book. It could just as easily be some other thing, say, a city.

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By Dan Ramsden – January 16, 2012

The path of big data back to bulk

All invented products are at some point commoditized, and all their value tends to diminution. The wheel was a premium asset at one time, no doubt. The cavemen and women showed it off as a point of pride, and they were envious of the neighbor’s wheel: They talked disparagingly about it, and gave each other meaning glances. And look at the wheel now, we all have at least one, or did at one time or another, and we don’t particularly care. It took a while to get to this point, and there were carriages and cars that came between the first wheel and the modern variation, but those carriages and cars too have lost their glimmer. The novelty at least is not what it once was. There aren’t many invented products I can think of that don’t follow this pattern – perhaps fire, which is to say, energy, but that’s a different story. The subject of this post is big data.

The extent to which this field is truly new or is just now getting more widespread attention is debatable. Although the concept was perhaps around for many years, if not decades in one form or another, perhaps it now more truly “exists” because it has a name: Big Data. (It’s catchy, a little bit like a frat bro’s nickname, at least at the more technical schools.) Regardless of when the field was in actuality born, it’s fair to say that it too, like other invented products before, is undergoing evolution. It is an enormously complex product – much more so than the wheel, at least in some ways – that incorporates issues of science as well as law, art as well as commerce, consumption as well as production. It is a highly specialized field, in which expertise is difficult to come by. I’m not an expert, but working very hard to learn.

An initial conclusion that I draw – reserving the right to change my mind as I learn more about the subject – is that, like other invented products, big data will follow an evolutionary path to commoditization. From up in the clouds, the landscape and its horizon are looking roughly as follows:

Let’s call the starting point creation, which is the collection or accumulation of massive amounts of data in a variety of on- and off-line platforms. The subsequent locale is analysis, an increasingly popular neighborhood of which is visualization. This allows our minds to extract meaning from otherwise impossible jumbles of raw information. Analysis has been with us since the point of creation, but visualization is now coming to its own, and it truly makes a world of difference: Images and symbols often convey a rich message, despite the seeming superficiality.

The next destination along the path is going to be valuation, which is not only an appraisal of product worth, but also a setting of standards. The two disciplines are closely related, and one drives the other as much as vice versa. While data is being collected and visualized, in many cases for the first time, we are still in a state of excitement, as it were, discovering new ways to play with this big data toy we now hold. Some of these ways will have not much more than entertainment value, while others will transcend the razzle-dazzle. As the distinction between the two and the nuances in between fall into place, so too will processes and procedures and standards of measure and accepted practice… And the next step from that – when the mystery and unlimited potential have been revealed and thus narrowed – is price competition: More generally termed, commoditization.

This is not to say that big data will necessarily be bought or sold, although a lot of it will be and already is – directly or indirectly – but its relative merits, its differentiators, are prone to become standard. This follows the theme of all invented products, and it isn’t to say that these turn obsolete. The wheel hasn’t, but the differences between one wheel and another have turned minor. So too, a time may come when differences between one dataset and another will not be a matter of quality as much as quantity. If so, the label Big Data may prove to be more correct than we might currently imagine.

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By Dan Ramsden – January 14, 2012

The circle back to congregation: media’s coming wave

Fragmentation is not necessarily variety, and volume is not necessarily value. A popular music service recently boasted about the signing of 300,000 independent labels, while an influential tech blogger and investor was disparaging his Facebook experience on account of too many friends. Both instances have to do with content devaluation and points of diminishing returns. Is there a point at which fragmentation is so vast and the numbers so big that the totality diminishes? Is there a point at which numbers and volume take away rather than enrich the user experience? The value of the long tail to the vital few was once contemplated here. The reverse, the importance of a substantive core, should also be factored into all such calculations.

When I saw the music headline described above, the one with 300,000 labels, at first I thought there was a typo, that the subject was in fact artists. (That too would have been quite a number.) But it was actually labels, 300,000 of these, which is a reality so far beyond my comprehension that it may as well be 18 million or infinity, or, in a certain sense, zero. The point here is not only one of individual dilution, but the impact that this has on the value of the whole. The travails of the music industry have been widely remarked upon, and one has to wonder if the mounting piles of product are a solution or a cause. When the tech blogger complains about his Facebook experience, as indicated, it is because the numbers to keep up with are so staggering that he’s reached a point where he can’t be bothered anymore.

The idea around which I’ve been dancing is not so much about curation, which has to do with filtering and delivery of disparate objects into a pool that is manageable for human experience. This is part of it, but doesn’t quite arrive at the essence of where I’m going. Because curation, in its currently understood form (for instance, RSS feeds or Twitter follows), is only an organization of fragmented pieces and the delivery of these to a fragmented user base. The fragmentation is no less pronounced, but is merely transfered from one side of the transaction to the other. Rather, I’m thinking about consolidation. I’m thinking about the social importance of the “water cooler” and the value of personal bonds.

Here is what I mean: At the time I was in high school Emotional Rescue and Tattoo You were being released. We all knew the songs by heart, backwards and forwards, and we cracked jokes about Keith as if he was in our inner circle. We did not have access to 300,000 indie labels, but we bought bootleg recordings of the Stones down in the Village. We did this together, and if some of us still listen to those tracks it may be as much for the lasting quality of the music as the depth of the experience back in the day. A decade or so later, Seinfeld captured our imagination, and I vividly remember the mob scene around a television monitor in LAX, when the final episode aired while I was waiting for a redeye back home. I think we would find philosophy, enjoyment, lessons, or wonderment, in a shoe – not that any of these examples are comparable – if that was our only subject and our only reason to congregate. The congregation is all-important… content misses its mark without it.

Fast-forward to January 2012 – the 300,000 music labels and the millions of artists, the thousands of Facebook friends, the endless Twitter stream and the countless bloggers – and we begin to suspect that, contrary to the accepted belief about openness and flow, the congregation is being undermined. It is a physical impossibility to keep up, and the common ground between one person’s keeping up and another’s is narrower than it might be. The evolution of modern media has taken us from the birth of the Internet to vast content fragmentation and more recently to the curation and sorting of content within this massive universe. The next wave, if history and common sense serve as a guide, will be a return to congregation. Perhaps we are seeing early manifestations of this coming wave in specialized networks and in the comment sections of certain blogs.

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By Dan Ramsden – January 8, 2012

Analog value in digital technology

In an environment dominated by digital, the value of analog shouldn’t be forgotten. In a new economy based on creation and consumption of technical product, the human factor – which is not technical – shouldn’t get lost in the interplay. We think a great deal about big data, which presupposes mass behavior patterns in an almost abstract sense, and sometimes this lulls us into a sense of comfort that is deceptive. We think we know, we think we can predict, but we forget the infinite little possibilities that underlie the numbers. For all the convenience of digital music, the highest bit rate can’t match the sound of the real thing, and the real thing is more nuanced than the most intricate equalizer.

We tend to be reminded of our humanity more in our failures than our successes, and the greatest technical successes happen when humanity is remembered. The success of a leading technology entrepreneur and investor was largely determined when his fiancé lost her engagement ring in a movie theater. The succes of another began with the study of penmanship and its artistic meanings. By the same token, when complex products fail it might be for the simplest reasons. A software project depended on coordination of teams; a promotional campaign was run at the wrong time of day. Human behavior, human motives and decisions – not access to tools – were at the core.

Certain action movies are worthwhile to see beyond the entertainment value, because these sometimes impart lessons about business. Action movies are certainly closer to the subject than, say, romantic comedies, or at least should be. The latest installment in the series is Mission Impossible, in which a small team with access to the most sophisticated gadgetry that modern engineering has to offer, succeeds in its mission – I don’t think I’m giving anything away here, does anyone going into the theater actually think Tom Cruise will fail? – on account of a well-timed kiss. Aspects of leadership, chemistry, planning, and communication are also interesting to observe – during the fifteen minutes or so of non-action sequences – without which the technical execution that dominates the plot would have (in theory) been a discombobulated mess.

These musings are hopefully as interesting to others as they are to me, because, in my case at least, these serve as a reminder of basic principles in enterprise and investing that, at least for me, require a conscious effort to remember. The way to judge the merits of technology and innovation, of startups as well as mature businesses, is not only on the basis of technology (and innovation). These qualities may in fact be the least important aspects, in the last analysis. Neither Twitter nor Facebook nor Groupon nor Zynga nor Amazon – nor, truth be told, Apple – are based on major technical breakthroughs, but all these have touched on human fundamentals. The next major breakthrough, which may not be in the consumer area, will likely follow the same precept.

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By Dan Ramsden – January 2, 2012

At the intersection of media and finance, true disintermediation ahead

Disintermediation is in the eye of the beholder. Although the subject – especially in finance – seems to some like a foregone conclusion, it should not be, and is only so in relation to norms that are in flux, redefinition, or various stages of antiquity. I feel as though the year ahead will give rise to disruptive changes in the market, and these will not all be about economic events and central banks. Information technology, the regulatory environment, and consumer trends are finally at a point where true disintermediation might actually occur, and this may present the first true innovation in finance since, well, arguably, Bloomberg, whose founder (maybe not by coincidence) has been busy placing the finance capital of the world on the map of leading-edge technology.

When market watchers have referred to disintermediation in finance, usually this has been to describe themes of abbreviation and access. For example, an issuer “going direct” to a venture fund or other capital source is as much a disintermediation, in this way of seeing things, as an individual placing trades online and without assistance from a “full-service” broker. These themes (and others of a similar ilk) are real and have become pervasive, made possible by a transference of expertise beyond the core of a select few. But just as Groupon has disintermediated the ad network by going to the consumer with an offer directly, these themes are not so much about disintermediation per se, as a transference of the account to a different go-between.

To wit: venture funds, private equity funds, hedge funds, are all intermediaries also. More precisely their managers are; and “going directly” to these is in a sense like driving head-on to a new agent. The fund manager’s decision authority is significant, to be sure, but when LPs (capital sources) pull back or push forward, we are reminded about who ultimately calls the shots – as we were, for instance, around the time of Sequoia’s RIP slides. (That the “principal’s” economic formula – a management fee and a commission (we refer to it as “carried interest”) – mirrors a standard compensation package in the same agency model that such funds had allegedly disintermediated, this also gives us reason to question the allegation. It is at most false, or at least a misnomer: There hasn’t been an elimination of the middleman, but rather a replacement.)

But the story gets even more interesting, in fact, noting that the money intermediated by banking and shadow banking go-betweens, as described, is sourced from capital pools that are themselves intermediated. Insurance companies, family offices, pension funds, (other banks), are all variations on a similar motif. So rather than disintermediation, which suggests fragmented democratization, one might even make a case that in actuality we have experienced quite the opposite phenomenon: a concentration and growth of intermediation and its participants. (Among other things this might also explain the homogenous market patterns that many analysts in this past year have puzzled over.)

When Bloomberg introduced its information terminal some 30 years ago, this was a major disruption to information management in finance, and it paved the way for a more fragmented market with higher individual participation and an equalized playing field that, arguably, resulted in greater efficiency. The elements are falling into place for similar trends to occur now, possibly serving to fragment and democratize a financial market that has become excessively concentrated. Social networks are enabling the sharing of information like never before, while the Internet is giving rise to higher-quality information access all the time. Online transactional platforms – and related security and electronic payment solutions – are spreading rapidly, and mobile communication is increasing the immediacy of information and individual reactions concurrently.

For these and many other reasons, I feel as though the time may be ripe for finance disruption to occur, and because capital markets are driven by information, I feel that digital media will play a central role in the disruption. Just as Bloomberg began as an information technology and evolved into an integrated media organization, so too the broader distinction between finance and media is likely to fade in years ahead. And just as media has become fragmented and democratized and made universally accessible with new technologies, perhaps so too will financial markets. If so, we can look forward to a truer diminution of market intermediation, and this should facilitate efficiency for both issuers and investors in equal parts.

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By Dan Ramsden – December 31, 2011

Gravity & Grace

It being holiday season it is natural to think about spiritual subjects, including entrepreneurship and investments. And because we’re entrepreneurs and investors, it’s natural that we should think about the spirituality of Simone Weil, who suffered from insomnia and migraines in the battle trenches. In particular, the subject that I’ve been thinking about a great deal in this past week has been that of weight and weightlessness. Weil wrote about the subject in a book that bears the title of this article (in tribute), but the weight and weightlessness I am thinking about is of a different variety, sort of.

If we think about the businesses we build, or the investments we make, as summarized by the equity value that these reflect, then we can similarly consider these businesses and investments in the context of two underlying components: the asset and the optionality. The asset is the core, the substance, the day-in and day-out; optionality is the unknown future, which may or may not be determined by the asset. The asset is heavy and it weighs the business down with legacy, with definition, with obligations, with having to complete what one started and playing out a market function; to say nothing of infrastructure and perhaps financial leverage and other things that one can actually wrap one’s arms around and squeeze.

Optionality, on the other hand, is in the air. It is a set of possibilities (as opposed to the impossibilities that can also define an asset, as presented). Optionality has limits, it cannot be all possibilities because then it would be nothing at all. But it is the sum of all possible futures that a business or an investment may hold, and it is a substantial ingredient of equity value. We like to say that volatility enhances option value, and we say this because the more strongly the winds of change blow the more these toss possibilities about. Some options end up settling at great heights. Of course, when possibilities settle, this makes them no longer options but assets… which isn’t a bad thing necessarily, but the weightlessness dissipates then, because with assets come responsibilities, and so on, as mentioned.

It’s inevitable that potential should eventually convert to actuality (including failed actuality, if that makes sense), and that is moreover a good thing. No businesses could survive as pure possibility (although Twitter did make that last for a while, in a sense) and eventually equity value must substantiate itself with an actual underlying asset. But the dichotomy between asset and option, between weight and weightlessness, actuality and possibility, becomes conflicted in an environment of rapid evolution: One builds a business, based on a technology or market trend, and then the environment changes. The asset built may or may not be valuable after the change, and what then? At what price?

For investors, maybe this is another way of saying, know when to exit. And that’s no ground-breaking revelation. For entrepreneurs, perhaps the moral of the tale is that adapting to a fast-paced and continuously changing environment should consist of balancing assets and options. Pure optionality is never a good long-term recipe in business, as stated, but neither is locking into a rigid definition, especially not nowadays. Even the biggest and most successful operations in media at the present time – Google, Apple, Facebook and Amazon – are working hard to keep their options open and not get trapped inside one sphere.

It isn’t easy for such enormous asset-bases to stay nimble, and this is where the little ones have an edge. Knowing how to manage the value of weightlessness may, in the end, prove to be the equalizer, the leveler of the playing field between startups and incumbents, made possible by a unique environment of rapid change, inordinate volatility, and entrepreneurs who know how to capitalize on these things more than ever.

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By Dan Ramsden – December 24, 2011

Adapting to volatility and disruption

It’s one thing to note that change happens fast, it’s quite another to act on it. It is against our nature, if truth were to be told, to adapt to new circumstances. Some are better at this than others, but it’s a practiced trade, and nobody cares to do so abruptly. Or very few. Migrations and metamorphoses, the breaking of molds, take time, a bit of effort, and a great deal of courage. We know what we’ve known, we see what we once saw, and the lessons we learn are more often reinforcements than novelties, if truth were to be told.

This is an unfortunate condition. While the past does influence the present significantly, the present is its own quirky beast. Markets – and nowhere is this seen more clearly – evolve but also change, thematically and practically, mechanically, and in relation to economies. In technology also – to use this as another (related) example – new modes and applications grow out of seeds that were once planted and consumers that were conditioned, but the outgrowths are entirely new bodies. Computing and the Internet were born out of what were once telephone switches and the typewriter, but iTunes nonetheless redefined consumption and set the stage for the eventual iPhone. Google changed advertising and set the stage for the eventual Groupon.

Phone switches and old IBMs seem such ancient artifacts now, so distant, and in varying degrees so do newspapers, radio, feature phones, and pop-up ads, to some. One day, maybe sooner than expected, the smartphone as we now know it will be memorabilia, (“You mean you had to type on this thing? Eww.”). Maybe capital markets, too, will be so fast and electronic that even to place a trade will seem ridiculous, (or more ridiculous in any case). None of which outcomes in any way negate the importance of history and the basis established by prior learning: on the contrary, and therein lie both opportunity and challenge in such a quick and volatile environment…

… because, as previously noted, it is not in our nature to escape comfort zones, our willingness to forego the typewriter in favor of a mousepad notwithstanding. Those things are superficial, almost mindless, but where effort is required, new fields of study, new appreciation for new modes, new expert networks, then the transition is much less smooth. Then we still tend to cling to pasts and outdated definitions, and we more naturally contextualize new subjects on the surface of set ways than revisit old subjects in the context of new developments.

In those instances, however, where rigid temporal molds are broken, where habit is replaced with anticipation, where comfortable terrain is left behind in favor of exploring, these are the instances where the greatest and longest-term value can be realized. We must strive for a synthesis of historical sense and flexibility, for a modernity rooted in the classics, and if we get there – but that is no easy task – then our option value (which grows with volatility) will truly be optimized.

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By Dan Ramsden – December 18, 2011

From consumption to production and the end of bubbles

This is the time of year when predictions begin to circulate. For some, it’s always that time of year, especially when value is captured by what happens next rather than what happened last. Arbitrarily, perhaps, the new calendar year prompts the musings to begin in earnest. We step from one plank to another, or we think we do, although these steps are more correctly progressions along a continuum that – despite budget realities – is not so cleanly fenced in by calendars. Psychology, nevertheless, does have its impact on markets and economies, and if we think this is the time of year for predicting, then it is indeed that time, and if we think that pasts and futures meet head-on around new years, who is to say they don’t, the universe notwithstanding.

Respecting custom, therefore, while also cognizant of the continuum, the forecast I would put forth is mainly one of psychology. There is a four-year stretch in our past that will mark its approximate anniversary around this time, and that’s a sufficiently long period to influence the way we are likely to behave into the foreseeable future. A recent study has undertaken to illustrate the differences in management styles between generations, depending on the economic era in which these were rooted, and the same is no doubt true more broadly than in the enterprise per se. I would argue that events in the last four years have been sufficiently profound to plant deep roots from which some substantial biologies will blossom.

I would argue that, scenes of disarray on Black Friday notwithstanding, we could begin to see a shift from consumerism to production, and from value transference to value creation. At some level, there is no difference between stocks and homes and consumer trinkets and angel rounds when these acquisitions cause bubbles to happen; and bubbles are the result of value transference outpacing value creation. When we speak of perceived value exceeding fundamental value, this is a bubble, and when this pops, perception reverts to fundamentals. In markets these days, and elsewhere, the organized effort has been about propping up financial value, buying time for fundamentals to catch up. Fundamentals are about creation, and I expect this to start catching up.

We see these trends already underway in the entrepreneurial community, where making and innovation are the central forces. That the ascent of entrepreneurship and its assortment of makers and innovators has paralleled other economic phenomena – employment disruption, the popping of bubbles, consumption shifts – is not a coincidence, and I expect that in the year ahead these trends will only intensify. By the same token, however, the funding that has underpinned this wave will become more selective and even cautious, and this is not a bad thing. Distinctions will be drawn between true innovation and merely refashioned apps, between lasting value and temporary splash, and between fashionable investing and purposeful capital.

In the small, private, and early-stage segment of financial markets, empirical evidence is hard to come by, but we can look at stand-ins by proxy for proof that the described theme is already underway. In more mature and voluminous public markets, the analogous phenomenon that describes a transition from fluff to substance, if you will, is going to be seen in a growing preference for income-generating investments and perhaps even a climb up the capital structure to the more senior and secured tranches. Part of this pattern, already happening, is prodded along by diminished risk appetite, but that is only one part. The other is a recognition: After a prolonged period of excess, retrenchment is only reversion to the mean.

For every action there is an equal and opposite reaction, or so the saying goes. When we predict, when we project out into an unknown future, we tend to think in terms of straight arrows and linear outgrowths. The tendency to think rigidly in this way is maybe the same that drives us to mark off certain calendar dates and consider new years as beginnings. In actuality, these are continuations and, to the extent that there is any abrupt change in the pattern, more like pendular swings than new directions. In the year ahead, I look for signs of both, the continuation of certain trajectories already formed, and a market reaction to historical motifs a long time in the making.

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By Dan Ramsden – December 11, 2011

The confluence of media and money flows

This isn’t about public relations, earnings season, or the management of market expectations in Europe – at least not directly – although there is that too. This is about mechanics and industry themes. This is about combinations and migrations.

Confluence within media has been discussed in our space before, as has the increasing overlap between media and commerce. In the former case, we bear witness every day to the shifts and extensions that take social media, information media, entertainment media, and now transactional media, several steps closer to one another, if not to outright identity. Defining the sphere in which Google or Facebook or Apple belongs is no easy task, and the subject seems perpetually more nuanced and vague. By the same token, the blending of commerce and media is brought to our attention through the emergence of Groupon, and on Cyber Monday, and by Foursquare (or is that social media?), and in the IPO roadshow of that large virtual goods merchant called Zynga. Whether Amazon and eBay are web pioneers or retailers is really anyone’s call, and in the end the answer may come down to office politics and figuring out which analyst or banking team to cover the particular target.

As these definitions have gotten jumbled and technologies correspondingly expansive, the distinction between online and offline commerce also is starting to be wiped out. Services have been introduced by eBay, Amazon, and now Google, to pull into cyberspace all manner of bricks and mortar traditions among the local merchant establishment. Apps have been rolled out to enable distant comparison shopping by consumers without having to leave the local premises. But by far the most interesting new developments in this environment have had to do with payments, processing, record keeping, finance, and the assortment of other subcomponents that collectively make up money flows. These too are now Internet solutions, and here also we begin to see the confluence of disparate segments.

Combining credit card information with barcode scanning with payment processing and receipt organization, all within the confines of a smartphone interface, this is only scratching the surface. The next big move has got to be the actual analysis of risk and the efficient channeling of funds to their most optimally priced uses. We already see such new platforms emerge – in both consumer finance and institutional capital markets – as venture capital, technology companies, and banking institutions team up to support the innovation in tandem. Held together by data and its increasingly sophisticated applications, three major segments heretofore distinct are thus blending (or, maybe not far-fetched to suggest, merging): media, commerce, finance.

The flow has always resembled this combination, if only sequentially: media, commerce, finance. There is to begin with an ad, or a promotion, which is to say, an offer to sell, that is the essence of media (when one stops to consider). The offer is followed by the commercial interaction, supported in its turn by the financial mechanics of payment and collection. The three ingredients have always served and even defined one another, but the codependency is now staring to morph into something more profound. Codependency may become an understated way to describe the association, and although it is too soon to make predictions or finalize terms, words like combination and migration – in short, confluence – quite naturally come to mind. As this occurs, consequences may be too broad and wonderful to cover with any adequacy in a post like this.

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By Dan Ramsden – December 10, 2011