Month: December 2008

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.

… 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.

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.

I was thinking recently that it was only about a year or so ago that I finally decided to apply for business school. Registering (and paying!) for the GMAT was a first big step into making it real.

For those people that are reading this and have yet to take the GMAT, I have just a couple of simple tips for hacking the GMAT.

However, before all that, are you aiming to get into a top-tier school? Get a 700+ and you’ll be setting yourself up for success. You can certainly still get into top schools with significantly poorer scores. In fact, I’ve heard of a student who got into a top school with a GMAT score in the 400’s. (What happened in that case was the GMAT wasn’t at all consistent with the person’s CV/resume and work history. The interview clearly showed that the GMAT was an outlier; the person turned out to be a superstar.)

That said, the higher score you get the easier it is for schools to accept you.

Tip 1 — Challenge yourself

My first and most important tip is to really challenge yourself. If you really want to kick ass on the GMAT, forget 90% of the study books out there. Those are written for people who want to do above average on the GMAT, not kick ass. If you want to get that 700+, only go for the books that are trying to get you the mythical 800. Kaplan GMAT 800

is the book that I used.

Why do this? Well, instead of picking a representative sample of test questions, it only focuses on the really difficult questions. This is what you need to get comfortable with and master if you’re going to hack the GMAT. Forget your other study books; focus on the ones that challenge you.

Tip 2 — Prepare your body and mind

The second and final tip is to be very careful in the days before your exam. Get good sleep, and not just the night before the exam. Make sure your head is in the right place by getting good sleep consistently for a few days before the exam. Whatever you do, don’t be stupid and try cramming so much that you lose sleep the night beforehand.

So that’s it… my tips on how to Hack the GMAT. A good score won’t guarantee you entry, but neither will a bad score necessarily prevent it. But the better you can do, the easier it is for your chosen schools to accept you.