Sunday, August 14, 2005

Shorts and longs

I have decided to start peppering my blog with occasional "shorts" and "longs" as defined in the stock market sense. For those less familiar with equity trading, to "go long" means to buy something (typically shares of stock) -- essentially betting that it will go up in value. A short sale is just the opposite: the sale of something you don't own -- a bet that it will go down in value allowing you to buy it back for less than you got when you sold it.

So I plan to use "short" to describe new ideas/businesses/phenomena that I do not believe in or that I think will be roadkill in the history books. And of course I'll say I'm "long" things that strike me as having, quite appropriately, great long term potential.

A recent investment in Quadriserve, by my colleague Rob Stavis, inspired this first post of shorts and longs. The inspiration is two fold. First, to sell something short, you need to borrow it from someone, and Quadriserve's business is about helping investors, typically hedge funds, borrow the stocks they want to short. Second, Quadriserve epitomizes what I call "eBay for" ideas, and I'm very bullish on "eBay for" businesses.

Longs (actually just one long in this post)
  • "eBay for" businesses -- these are marketplaces which make money by providing a forum for buyers and sellers to come together. As marketplaces, these businesses don't need to worry about things like inventory and working capital. As a result, they often have highly attractive economic models. Gerson Lehrman Group (eBay for information), StubHub (eBay for event tickets) and ComputerRepair (eBay for onsite technology services) are three successful "ebay for" businesses. Hopefully Quadriserve will join this esteemed group.
  • I am on the lookout to go long other "ebay for" businesses -- especially those run by entrepreneurs with smart plans to build liquidity, which is always the hardest part. Once they achieve critical mass, it's nearly impossible for a competitor to overthrow them.

Shorts

  • Video blogs -- I don't doubt we will see lots of video blogging hit the web, but I'd short a business based on the idea that this will be a moneymaker. I think people really value high production quality, and I don't think that's coming any time soon from amateurs. It's easier (and a lot cheaper) to write reasonably well than it is to make decent videos.
  • During lunch last week, John Hiller, the CEO of Xanga, a top blogging site and one of the 30 most visited web sites in the world, pointed out to me that blogging isn't really about publishing; it's about conversation. Sure, there are blogs like Gizmodo and Blogspotting that actually are "publications" in a traditional sense. But the vast majority of Xanga and MySpace blogs are basically conversations among friends or colleagues. One person's blog entry is often a response or reference to another. The community and conversational aspects are big drivers of the blog phenomenon, and that's much harder to achieve with video. I have a hard time seeing how you'd respond to a video with another video.

    All that said, I do think people will want to share their videos (of their kids, trips, etc) much like they privately share their photos on sites like Shutterfly. And I do enjoy an occasional trip to Stupidvideos, but I'd still short video blogging.

  • The French economy -- I just returned from a brief vacation including a short stop in France. On a beautiful Sunday in Paris, everything was closed. Not a single shop to visit. Only the cheesiest tourist trap restaurants were open. When the entire country takes off for the month of August, it's no wonder they've got 10% unemployment.

I intend to add to this list of shorts and longs with future posts, though I admit it makes me nervous to make a public record of them. Someone will undoubtedly rub my nose in any bad calls I make. So I ask that if you think I'm off base with any of these, tell me now before it's obvious.


    2 comments:

    Anonymous said...

    Podcasts is to Video Blogs and not blogs.

    Hayslizzle said...

    http://vcaction.blogspot.com/2005/08/vc-shortslongs.html