Get yourself on Twitter!

One of the biggest stories in the tech world in 2008 has been Twitter. I was at first quite down on Twitter, but have since changed my mind. It’s a mix of a social network (like Facebook/MySpace) and a communications tool (like email/texting).

The best way to describe it is through this short YouTube video:

Now go sign up for Twitter and then follow me.

I was against Twitter at the beginning because of Kathy Sierra’s influence. Her post (circa 2006) pointed out that if you’re trying to achieve “flow” in your work Twitter can be quite detrimental as friends’ updates will always be interrupting you.

But I’ve found that when I need to I can just turn off the Twitter application. When I don’t need to achieve that flow it’s interesting to listen in to what friends and others are discussing. If you’ve got a lot of followers, then they can serve as quite a good group to “crowdsource” questions to! (I’ve seen people asking for advice on office space, restaurants, and more.)

In the end, I highly encourage you at least try it out. If you’re on Facebook you can link any Twitter updates you send to your Facebook status, so you only have to type your “status” once and have it link everywhere. Nice…

A short personal note

My apologies for the lack of posting recently… LondonAnnie and I moved!

We’re just down the road a bit from our old place. For the same rent we’ve got a much bigger flat that even has a view of the river. It’s a 2 bedroom, which means it will be much easier for family and friends to stay with us, too. (Hint!) It’s not for the superstitious… we’re #13 on our road in SW13.

Unfortunately, moving around the holidays means that our internet won’t get hooked up until sometime in January, and none of our neighbors has an unlocked wireless signal. Unless I can get Netshare up and running on my iPhone soon, don’t expect much posting from me until after my exams in January.

But Merry Christmas, Happy Holidays, and Happy New Year to everyone. I hope 2009 is even better than 2008 for you all.

Signs of a very weak economy, how Clare College is taking advantage

This article in the New York Times shows exactly how weak the economy has become:

In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return.

The news sent a sobering signal: in these troubled economic times, when people have lost vast amounts on stocks, bonds and real estate, making an investment that offers security but no gain is tantamount to coming out ahead.

[…]

Investors accepted the zero percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.

In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.

How Clare College is taking advantage of the economy

Clare College is the second-oldest College at Cambridge, having been founded nearly 700 years ago. One of the benefits of this kind of longevity is that banks are more able and willing to make loans to you.

From the student newspaper about a month ago (sorry, no link):

Clare College has borrowed £15 million to invest in the stock market. The unprecedented inflation-linked loan is due to be repaid in 2048 and the College expects to make a profit of around £36 million.

[…]

This is the first time Clare has borrowed to invest in its 700-year history. Hearn acknowledged that it was a potentially dangerous strategy, but said the forty-year time frame brought security.

“Most Colleges have a very long-term perspective, which gives them an advantage over city funds which often have a short term focus.”

Wow…

Both of these stories are just unprecedented. The economy truly is upside-down.

Big news, film (trading) fans!

Microphone.jpg

Are you a successful trader on the Hollywood Stock Exchange (aka HSX)?

Well, now you could potentially turn that expertise into cold, hard cash. Cantor Fitzgerald, the company that owns HSX, has announced a real-money equivalent, the Cantor Exchange. On it you’ll be able to trade “Movie Box Office Contracts.”

It was officially announced Monday, December 8th through press releases on the new CantorExchange website. To quote from the press releases:

Cantor Fitzgerald, L.P., a leading global financial services firm, announced today that it has filed an application with the Commodity Futures Trading Commission (“CFTC”) to launch the Cantor Exchange. Cantor Exchange intends to list Domestic Box Office Receipt contracts as the exchange’s first traded product.

[…]

Subject to final regulatory approval of the Cantor Exchange application, Domestic Box Office Receipt contracts will offer film finance professionals and traders a new opportunity to hedge and speculate on the theatrical performance (ticket sales) of major film titles. Domestic Box Office Receipt contracts will be a next generation financial management tool that allows film professionals to hedge risk and provides speculative opportunities to other market participants based on the first four weeks of a film’s box office performance.

The first Domestic Box Office Receipt contract is expected to be listed on the Cantor Exchange in the first quarter of 2009, subject to final approval of the Cantor Exchange application by the CFTC.

If you’re willing to sit through the video’s cheesy music on the site, you’ll find out that traders can get started with $50 in their account. It appears they’re pitching the buy-side (generally) for fans looking to share in the up-side and pitching the sell-side (generally) for investors and others looking to hedge their investment.

Each contract starts with a week-long auction to determine the starting price. Every 24 hours the exchange will publish the overall market price that would be achieved based on all the buy and sell orders entered. Before going to continuous trading, all buy/sell orders will be cleared at the single best market price.

Summary

I think this is great news, as it starts to push the boundaries of acceptance of futures (aka “prediction”) markets. I wish Alex and the rest of the team there all the best luck in the approval process and look forward to trading a bit there myself!

It should be interesting to hear what the mainstream press thinks of this development.

I’m late to the party here…

… because Vampire Weekend started getting huge in the beginning of 2008. While I heard their music then, I recently listened to a few songs again and got really hooked all of a sudden. Their album is a really interesting, unique, solid piece of work. (Pop with African hooks and beats to use broad descriptive strokes.)

Here’s one of their hits: A-Punk

Oh, and they name-checked “Mystic Seaport” in one of their songs! I used to live in Mystic, just down the road from the Seaport, but never actually managed to get there.

Estimating 37signals revenue and general profitability

One of the all-time most popular posts on my blog is my original post where I showed how I modelled the revenue and revenue growth of 37signals. It showed a business that has made quite a bit of money in the past few years; I originally estimated revenue of $3.5million in 2007 and over $5million in 2008.

Well, it’s been nearly a year since I put up that post and based off of feedback I’ve received personally and comments on the post I decided to refine this model. My new estimates are that 37signals had revenue of over $4million in 2007 and over $8million in 2008.

Breaking down 37signals revenue by product

These are my estimates of 2008 revenue, in descending order. (Please read the initial post for more detail on how I created the model.)

  • Basecamp: $4.9million
  • Highrise: $1.9million
  • Backpack: $0.6million
  • Job/Gig Boards: $500k
  • Conferences, workshops, etc: $180k
  • Campfire: $133k
  • The Deck: $60k
  • Getting Real: $45k

Analysis

Basecamp is the 37signals product champion, and a key revenue generator. Highrise seems to be quickly gaining momentum, but facing tougher competition from entrenched CRM products. My figures for Backpack are likely a bit low after their recent multi-user update; I think that sales there have significantly increased. Campfire seems to be a minor product. The ranking of Basecamp/Highrise/Backpack is likely right, as it mirrors how they are promoted in 37signals marketing materials.

The other significant revenue source for them is the Job and Gig Boards, which I estimate to be $500k/year. The rest are fairly minor in the grand scheme of things.

Estimates on 37signals costs

37signals seems to be very generous with their 12 employees. (You can be when you’re generating over $600k in revenue per employee!) I’m guessing that between salary, perks, office space (where appropriate), payroll services, equipment, etc. that they average $150k in costs per person. I’m biasing this guess towards an overestimate, so as to be conservative in estimating profits. This is by far the biggest cost at $1.8million per year.

The other biggest cost they have is in servers/storage/etc. In April, their total costs with Amazon S3 were just $2k/month. Being conservative, I’ll guess they’re at $3k/month now, or ~$30k/year.

I believe they use Rackspace for servers. I can’t find any reliable information on Rackspace prices. But I’m going to guess that 37signals pays $30k/month with Rackspace. (If anyone has better numbers or a baseline for this, please let me know and I’ll update this post!) This is a yearly cost of $360k per year.

Guesstimate of 37signals profit

If 37signals is able to make $8million per year, with costs of just over $2million per year, it is a very good business to be in. If my figures are anywhere near correct, they make $6million in profit per year.

I titled this a guesstimate because there are just too many potential sources of error in this analysis. If any readers have any guidance, please leave a comment below or e-mail me directly.

Do you want to challenge my (revenue) assumptions?

You can download the spreadsheet I used by clicking on the icon below.

Summary

I hope this post is useful to you. Again, if you have any better information or want to challenge my revenue or costs model, please comment below or contact me directly.

While not the biggest business, 37signals does seem to be quite a profitable one.