My daily traffic all of sudden up up to over 2,000 uniques a day yesterday. This is ridiculous. . . 5-10x of what I usually get, especially since I blog at most once a week now. . . (yap, I’m getting a little bored of spouting my opinion on any random thing).

Of course this is due to the new PageRank update . . . mostly to penalize companies that sell links or does reciprocal linking. My PageRank stayed the same, but a lot of top publishers got their pagerank demoted. For example, the Washington Post. Thus comparatively, I just got more “authoritative” overnight!

( I wonder what this is doing to glam.com ’s link scheme and if their investors are now a little worried )

Anyways, the point of this post is that by no mean am I more important than Washington Post . . . and if Google’s PageRank starts diverging from the reality of the offline world (thinking that I am as important as Washington Post), its relevance will slowly but surely disappear as well. I applaud its efforts to fight search engine spam, but it seemed to me a little reactive, short sighted, not mentioning vindictive to go to this length - burning the forest just to punish off a few sick trees.

Its probably obvious now that Google believes it is the ultimate arbiter of relevance online AND offline . . . and thus regardless of what I might think. . . overnight. . . Washington Post is (or is about to be) as important and relevant as little ole me.

The horror . . .

15 years ago when Microsoft, IBM, and the like ruled the earth, product management was mostly a “technical” function. Technical not in the sense of function (ie coding), but in the sense of its scope. Today, Product Managers have become the heart and soul of many technology companies . . . extending its tentacles through out the entire organization, owning P/L’s, running strategy session, and generally holding court for the rest of the company. Ask any person at a technology company, if you have an idea or concept, who do you grab first? Your favorite PM, ideally with an offer of coffee or lunch!

Things have changed rather quickly. And it all started with Hotmail and eventually culminated with social networks (friendster -> myspace -> facebook).

So what happened? Back in the day (the days of pascal, assembly language, and C w/o the “+” ) software delivery and marketing was distinct disciplines. You talked to the customer, you asked them what they want, you build what they want, and you throw it over the wall to the marketing and the sales guy. Brochures and presentation are produced (sometimes even a prototype), and off goes the sales person knocking down doors trying to make a sale. For the shrink wrap guys (MSFT), it was a little different but still the same old. The marketing guy figure out the print and TV ads, while a partner/sales guy try to get your box on the shelves of ComputerLand and bundled with the latest PS/2 (no, not playstation 2).

The Internet came along and changed EVERYTHING. Instantaneous distribution, usage, installation, and ACQUISITION. Word of Mouth changed to the Spread of the HyperLink. The wall between acquisition (which used to be a pure marketing/sales) function and product definition / management crashed down. . . But no one quite noticed (too busy searching for porn? ) until Hotmail came along and BUILT ACQUISITION DIRECTLY into the product. Hotmail didnt need a sales guy, it didnt need ComputerLand, it didnt anything but a group of developers and a very smart Product Manager (who understood marketing, sales, and acquisitions).

Friendster came along and added fuel to the fire. It added Vanity & Peer Pressure into the “product as an acquisition channel” equation. Potential Hotmail users simply noticed the link and signed up. Potential Friendster users were FORCED to signed up by their friends. Back in the days of Jobs & Woz, they wold call it the transition from simple word of mouth to evangelism. Your existing customers were REQUIRED to advocate your company/solution as part of getting the most out of their own investment in the product.

The geeks who knew how to productize the acquisition channel, skipped the rest of the company and reached directly into the minds of the customer . . . and became superstars for helping to build internet empires.

Today when I look at a new company or product idea, this is the first thing I looked for. Whether the company has productize (or the opportunity to productize) the customer acquisition channel. Whether the founders (or PM’s) understand the customer conversion funnel (from awareness to close), and built FUNCTIONALITIES to address each of the steps in order to drive potential customers towards usage, conversion, and retention. Its not always as simple as Hotmail or a social network; not all business models, fit so nicely into this framework. But all along the way, there are many many opportunities to use product features to shepherd potential customers towards an desired conversion event.

The shrink wrap machines are sitting pretty idle these days . . .

eBay took an “impairment” charge for the Skype acquisition today of $900M . . . its totally hilarious how people that do not really understand accounting & finance are interpreting this action.

First of all, here is a technical definition of impairment charge. In short, when Company A buys Company B. Any amount of the purchase price above what the book value of Company B is put onto the balance sheet as goodwill. That goodwill is charged as a deduction from earnings every quarter for up to 40 years (something like that).

By reducing $900M from the goodwill of the Skype transaction, eBay is taking that one time hit this current quarter while decreasing its future goodwill amortization amount in earnings.

Couple important back of the envelope calculation first. . .

Skype was bought for $2.6B in 2006. The earn out ended up being $530M. Not taking into consideration time value of money, the total acquisition cost was around $3.1B.

Skype is doing about $90M a quarter. Conservative projection would be that Skype is on track to about $500M in revenue for the forward 4 quarters. Given that these are probably high margin revenue (p2p means no hardware cost), I would give the company a conservative revenue multiple of 10x. (aQuantive was bought for 7.6x revenue multiple - a much lower margin business). The resulting number would be that Skype is probably worth around $5B TODAY.

Ok, so eBay probably overpaid for Skype 2 years ago. But today Skype is certainly worth more than that acquisition price. So the question than becomes, why is eBay taking $900M impairment charge?

hmm . . . thus goes the intrigue . . . . if you guys noticed, eBay stock price started down after the news, but actually went up afterwards. For the fundamental investor, the explanation would be that Skype as a failure is already priced into the stock price. I, on the other hand, believe in the power of market manipulation investor relations . . . i.e. eBay got on the phone with institutional investors after the announcement and detailed the rationale of the write down and the going forward financial strategy for the company. The mutual funds must have liked what they heard and bought up the stock.

I don’t want to insinuate anything but write downs are a well-known financial engineering instrument. . . it has absolutely nothing to do with admiting failure or not on an acquisition. The “when” is much more important than the “why”.

I’ll say this. eBay WILL exceed earning estimates for the next 2 quarters. Either they are so confident of the future to take this hit today OR . . . . . . (click here for research)