By: Chris at www.CapitalistExploits.at [7]
I'm going to paraphrase a conversation I had recently with a Venture Capitalist whose focus is on the tech industry:
Me: "Eyeballs, that's what founders are telling me. How will this company monetize them?"
VC: "Don't know, they haven't figured that out yet."
Me: "Right. Then how do you come up with your current valuation?"
VC: "That's industry standard."
Me: "Industry standard?"
VC: "Yeah, it's based on what other companies are getting funded at presently."
Me: "Companies are being funded on eyeballs at the moment. So it's based on eyeballs?"VC: "Yeah. Well, they're not there yet. It's projections of eyeballs."
Me: "Right, projections of eyeballs which they don't yet know how they'll monetize?"
VC: "I don't think they need to monetize them."Me: "Really? How does the company make money for shareholders?"
VC: "Exit will be a trade sale."
Me: "Right. Who's going to buy them?"
This went on for a little while. I say a little while because I don't have time to waste on deals I'm not interested in.
No offense meant to my VC colleague. This is endemic right now. When you're a 20-something or maybe early thirties and haven't been through a business cycle, which is typically roughly 7 years, let alone a major secular cycle which is on average 26 years in length, then "eyeballs" seems like a perfectly valid way to value a business into the billions. This is how we can get an app valued at more than one of the fastest growing countries [8] in the world right now.
This goes deeper than stupid ideas turned into stupid companies, run by stupid people selling equity to other stupid people, with the anticipation that even stupider companies, run by even stupider people, will buy out this stupid company. Following me?
The reason I say it goes deeper is because it's a reflection of how our world works now!
Technology has drastically changed how we interact with one another. Twenty years ago I couldn't operate as I do now. I am communicating with you, our lovely readers on a MacBook from a beach resort town in New Zealand. I've had conference calls throughout my day with people in Hong Kong, Beijing, Thailand, Los Angeles and New York. This is a normal day for me. My average day doesn't look distinctly different when I'm in Singapore or anywhere else. Information flows are now near seamless and instant.
At the same time there is a plethora of people fighting for my attention, and the only way I can function is to remain focused. I say this because I don't loathe or love technology. It is a tool, nothing more. This tool is unlike a shovel however, since a shovel can't direct you and use you. You control the shovel and use it for your purposes. Technology is different. If you're not careful you can be used by it or by those who are controlling it.
Remaining focused is how successful people become successful. Focus, determination, perseverance - this is a trait inherent in all the successful people I know. This, in today's world of incredible stimulation from every digital angle, is more challenging than ever.
There is a relentless drive to attract eyeballs since we are now overwhelmed with information from every angle, and for those who don't control this flow of information they simply don't know where to focus attention. Quality information struggles to find it's way into the headlines, as the newspapers have turned into porn outlets for eyeballs. They sell "news porn" now, with no real information to be gleaned. Tiny snippets of sensationalist soundbites flood the newswires.
It works. Let's take an egregious example or two shall we..? Pray tell I ask you what Paris Hilton has done for humanity? Why does she get any airtime? Or that Kardashian chic that has, as far as I can tell, become famous for f**king rappers. She's got to be one of the highest paid hookers in the world. I just Googled it, and according to one source she made $28 million last year. For what?
Paris Hilton, and numerous others like her, are completely outrageous. Intellectual dimwits who, as far as I can tell, are famous for being famous!
That's what people seem to want though. They can't keep from clicking on that link about Miley Cyrus groping Paris Hilton in front of her boyfriend. Yeah, I just found it online to prove my point. This garbage is front page news.
These are completely pointless people doing completely pointless things, but they have this figured out. They're the new kings in an age of instant short-term self-gratification. Every time Paris Hilton drops her knickers dollar bills pour out. It's like freaking alchemy!
Why? because she has eyeballs.
In an article [9] from the Guardian newspaper I found the excerpt below.
In a world of instant gratification and where an alternative website is just a mouse click away website owners need to find ways to firstly grab the attention of a user, and then keep it for long enough to get your message across. If you don't, their cursor will be heading to the back button and on to a competitor in the blink of an eye.
Those who make the most outrageous statements, no matter how flawed their logic or how consistently wrong they may happen to be, acquire the limelight. It's increasingly a world where the idiots, the morons, the hacks, attract eyeballs and eyeballs are the new currency. Social media is where people receive their information now, but in order to get in front of you it's gotta be catchy, funny and short because remember that attention span is vanishingly thin.
This is why a YouTube video, no longer than 3 minutes in length of some stupid animated bear will receive millions of views, while a thoughtful, valuable presentation on TED about a revolutionary cure for spinal injuries receives a fraction of that.
Smarter phones and dumber people. You'll see families, groups of friends, husbands and wives, boyfriends and girlfriends going out to dinner together and they don't even bloody talk to each other. They're stuck to their phones or tablets right through dinner.
According to the National Center for Biotechnology Information, at the U.S. National Library of Medicine, the average attention span of a human being has dropped from 12 seconds in 2000 to 8 seconds in 2013. This is one second less than the attention span of a goldfish.
Here [10] is the link to the entire article if you're interested. Shocking!
In the blogosphere fear sells better than common sense, so we find purveyors of "disaster porn" shouting out from the rooftops to beware of this, and beware of that. Not surprisingly they actually do very well. "News porn", "scare people shitless porn", "financial porn", "comedy porn".
The global advertising market hardly existed in the industrial age. It was a nascent industry. Today it's morphed into a beast of epic proportions, and we now live in a PR driven world. [11]
I'll keep the website and the posters name out of this, however I read a column yesterday which had a really outrageous heading to it... It made one think that the world was coming to an end, and when I read through the post I realised very quickly that the authors knowledge of the facts at hand (he was attempting to discuss a move in the forex markets) were flaky at best. What was being said was so unbelievably normal for anyone that knew even the first thing about economics or financial markets that it would not even have made up more than a minutes conversation with any intelligent person versed in the topic. That didn't stop this guy however, and he'll likely be able to garner more eyeballs selling fear, apocalypse and BS.
The Math
Here is the math as I see it, and it's no different than it was before we had the Internet, smart phones, or even print media way back.
Eyeballs can be monetized. Number of Eyeballs x Conversions = Clients and Clients x Goods Sold = Revenues. Revenues - Opex = Profit.
In this entire equation the most difficult thing to do is to get the eyeballs.
The winners in this game will, as always, be those who are able to focus, because those who are constantly distracted will simply be the product. You and your eyeballs are the target. Use them wisely.
- Chris
"The average TV commercial of sixty seconds has one hundred and twenty half-second clips in it, or one-third of a second. We bombard people with sensation. That substitutes for thinking." - Ray Bradbury