Naspers made a strategic investment in OLX

The cat is out of the bag. We had not planned on disclosing the investment, but given the sheer number of people aware of the transaction (all of our employees and the LPs of our VCs) it was bound to happen. Someone tipped off Techcrunch that Naspers had invested in OLX and my partner Alec Oxenford and I confirmed the deal.

We are excited about Naspers’ involvement which will allow us to grow even faster than before.

We can’t wait to see where we can take OLX and how fast we can get there!

You can read the Techcrunch article at:
http://techcrunch.com/2010/08/26/naspers-makes-strategic-investment-in-craigslist-competitor-olx/

Apple: Short Term Winner, Long Term Loser

There is no denying Apple has had an incredible run.

Steve Jobs’ return and the Mac’s resurgence

After a number of strategic and execution mistakes, the company almost went bankrupt in 1996. It was greatly helped in 1997 when Steve Jobs returned as CEO and announced that Microsoft invested $150 million and made a five-year commitment to develop Office for the Mac. Steve Jobs slashed Apple’s 15 product lines to just 4 categories: desktop and notebook Macs for consumers and professionals. Jobs halted the Macintosh licensing program. In 1998, he hired Tim Cook as COO. Cook had worked at Compaq and IBM and was tasked to “clean up the atrocious state of Apple’s manufacturing, distribution and supply apparatus”. He hired Taiwanese contract assemblers to manufacture Mac products. He revamped Apple’s distribution system from smaller outlets to national chains and also launched a website to offer direct sales for the first time. Apple’s inventory fell from months to a few days! In 1998, the company posted a $309 million profit, reversing the 1997 $1 billion loss allowing Steve Jobs to increase R&D spending.

Under Tim Cook operations are now smoothly oiled. According to Fortune Magazine “Apple routinely pulls off the miraculous: unveiling revolutionary products that have been kept completely secret until they appear in stores all over the world. The iPhone, the iPod, any number of iMacs and MacBooks – the consistently seamless orchestration of Apple’s product introduction and delivery is nothing short of remarkable. … In 2006 Apple transitioned its entire computer line to running on processors made by Intel. … Cook’s team … made sure there was nary a blip in sales.”

The transition to Intel CPUs allowed Apple to build chips that were faster and less power hungry, essential now that notebooks account for the vast majority of Mac sales. This also allowed Macs to run Windows applications if the user so chose, thus offsetting one of the longstanding disadvantage to choosing a Mac – the relative lack of Macintosh software.

The move into direct retail distribution also proved revolutionary. The first Apple retail store opened in McLean, Virginia in 2001. The Apple retail experience gave many consumers their first exposure to the Macintosh product line. By 2009, Apple estimated that half of all retail Mac sales were to “new to Mac” customers. The retail division with more than 280 stores in 10 countries grew to account 16% of Apple’s total revenue. The company also entered into a partnership with Best Buy, the world’s largest electronics retailer.

Moving Beyond the Macintosh

While it was essential for Apple to fix its Mac business, it’s the new product lines that really put Apple on its explosive growth path. Apple introduced the iPod in 2001. With its sleek design, simple user interface and large storage, it put other MP3 players to shame. Apple had the foresight of allowing the iPod to work with both Macs and Windows machines. The distance only grew wider when Apple introduced the iTunes Music Store starting in April 2003 which was the first legal site that allowed music downloads on a pay-per-song basis. With its large catalogue and ease of use, it allowed Apple to capture the MP3 market. By 2010, Apple was estimated to have around 70% of the US MP3 player market.

In 2007, Apple introduced the iPhone. While the product was revolutionary in many ways, it was not a huge success. Apple actually only sold 6 million of the first iPhone because it was sold for $499 without a subsidy and AT&T gave a revenue share back to Apple. In 2008, when Apple released the second iPhone which ran on the faster 3G network, it smartly revamped its pricing model. AT&T provided a subsidy in exchange for dropping the revenue share agreement. Consumers could now buy an iPhone for $199. With the 3G model, iPhone revenues exploded to $13 billion by the end of 2009. When the 3GS went on sale in June 2009, the subsidized 8Gb iPhone price dropped to $99.

The recent very successful launch of the iPad further extends Apple beyond its Mac roots and diversifies its revenue base.

Near Term Winner

Apple is currently on top of the world. It has the highest market cap of any tech company, recently surpassing Microsoft’s and dwarfing Google’s. It also seems perfectly positioned for the future given its strength in smartphones.

Apple is now essentially a mobile company. As of the last quarter, Mac sales accounted for $4.4 billion of revenues (with 31% growth year to year), iPod sales for $1.5 billion (4% growth), iPhone sales for $5.3 billion (74% growth) and iPad sales $2.1 billion out of a total of $15.7 billion. Apple is arguably in the perfect business. US smartphone penetration just crossed the 20% mark and global smartphone penetration is around 10%. Undoubtedly at some point in the next 5 years the majority of phones will be smartphones and eventually almost all phones will be. Market growth alone should buoy Apple.

Moreover, Apple still has two low hanging fruits to massively increase its iPhone revenues:

  1. Expanding the number of carriers that carry the iPhone in countries it has released the iPhone.
  2. Releasing the iPhone in more countries.

However, Apple and Steve Jobs seem to be repeating a number of strategic mistakes that seem destined to relegate it to a niche player.

Long Term Loser

In 1984, when Apple introduced the Mac in 1984, it was revolutionary. It was elegant, simple to use, had the first mass market mouse and graphical interface and became a huge success. Apple seemed destined for greatness. However, Steve Jobs’ vertical integration driven by his desire to only have beautiful machines and software limited both innovation and the availability of software. On the DOS, then Windows side, the constant competition between PC makers, processor makers, and software developers, while less elegant and functional at the beginning, given enough time led to a plethora of offerings and innovation that not only copied many of the Mac’s best features but extended them. The competition also drove prices much below Mac prices. The combination of faster PCs with more software at lower prices eventually completely marginalized the Macintosh.

Steve Jobs seems to be repeating the same mistake all over again. The elegant integration between the iPhone, iTunes and the App Store is definitely a current source of comparative advantage. It is easier to offer a better user experience at the beginning when you limit the form factor and completely control the hardware and software. The iPhone 4 is clearly the best smartphone on the market. The apps in the Apple App Store are clearly the best apps on the market.

However, Apple’s insistence on having a single form factor, on being a premium player at a premium price point (to carriers at least), and its arbitrary decisions with regards to what apps make it in the App Store will eventually make Apple a niche player. Even if Apple keeps innovating and has the best phone on the market, it won’t matter.

Android, with its relative openness, seems to be playing the role Windows played for the Mac. We are already seeing a plethora of Android phones which cover all segments of the market – from the very low end to the very high end. There are phones with keyboards or without, Amoled screens, huge screens, small screens… There is already seems to be an Android phone for every taste and the choice is only going to get larger. In only one year Android’s smartphone market share catapulted from 1.8% to 17.2% overtaking Apple’s iPhone which grew from 13% to 14.2% of the market. Moreover Android is now activating more phones in the all-important US market, despite the iPhone 4’s recent launch.

It’s unclear to what extent the number apps offered is relevant. Regardless of the answer, it won’t play in Apple’s favor. It could be that the top 30 apps are all that matter (e.g.; Maps, Facebook, Email and a few games), in which case the current better quality of Apple apps will eventually be matched by the apps on Android. Alternatively, and arguably worse for Apple, if it’s the diversity of apps that matters, the relative openness of Android will mean that there will eventually be many more apps for Android phones than for Apple given its desire to only have “pretty” and “elegant” apps. This will only get worse as Android’s market share will increasingly exceed Apple’s and many developers will first build for Android and the guarantee of appearing in the Android App Store versus taking a risk with Apple’s fickle App Store approval process. More developers are already developing for Android than the iPhone and the number of Android apps is rapidly approaching the number of iPhone apps.

Furthermore, with the iPhone Apple has taken vertical integration one step further. It acquired PA Semi for $278 million in April 2008 and Intrinsity in 2010 and now designs its own chips. Both the iPad and the iPhone 4 run on the A4 chip it designed. This means that in addition to competing with Google, all the handset manufacturers in the world and many app makers, it now has to compete with the likes of ARM! It’s extremely hard to be world class in so many product categories and arguably Apple has just made its job of having the best smartphone on the market that much harder. In a few years it might end up with underpowered phones relative to the Android phones very much like the Macs used to be underpowered (and overly power hungry) before Apple made the switch to Intel!

None of this will matter in the short run. Globally increasing smart phone sales and extending sales to new carriers will buoy growth for some time to come, especially since Apple still has a better phone and better apps. However, this growth will bely the fact that Apple is losing market share rapidly to Android. Fast forward 5 to 10 years and it’s not hard to imagine seeing Apple with a small (but probably very profitable) share of the smartphone market. It will be a niche player in the market it revolutionized and could have dominated. History seems bound to repeat itself!

Kick-Ass is great!

I just rented Kick-Ass on Zune HD and had a blast! The movie much more violent than I expected; yet, somehow the violence was extremely funny. Choe Moretz who plays Hit-Girl really makes the movie. Her moves, tone and attitude were all amazing! I can’t wait to see her in other movies.

In the meantime, you owe it to yourself to check out Kick-Ass, it’s different and fun!

Toy Story 3 is very good

Like in Shrek 4, the themes of Toy Story 3 are very grown up as they deal with growing up, moving on, and letting go.

I loved the movie and cried at the end, but despite the raving critics and the 99% Rotten Tomato Meter, it’s not the best movie of the year. That title currently goes to another animated movie: How to Train your Dragon. That movie’s masterful depiction of the relationship between Toothless and Hiccup, not to mention the complex father/son relationship, left me in awe the entire movie. The Kids are All Right might challenge it for the best movie of the year so far, but I have yet to see it.

What to do with your millions

One of the wonders of entrepreneurship is that sometimes we can get lucky and make millions. Paul Buchheit wrote a good article on what to do when that happens. His advice is very practical and covers both how to invest the money (don’t rush to invest it, keep it safe) and what to change in your life (very little – keep working, maintain your friendships, be grateful).

If you are lucky enough to be in this position, you owe it to yourself to read his article at:
http://paulbuchheit.blogspot.com/2010/05/what-to-do-with-your-millions.html

The Master Cleanse Day 11 Update: The End … for Now!

After 11 days of not eating, the time has come to slowly return to a normal diet. I am going camping in Kalalau (in Kauai) for 6 days. I will have limited access to food there and it’s probably a good idea to get some strength before going, especially as I hear the 11 mile hike in is very arduous.

This experiment has shown me how little I really need to live and be happy; always a useful reminder in this world of plenitude. It has also been a useful sharpening of my willpower as I went out almost every night to dinners with my friends who ate seemingly delicious food while I only drank water. On the positive side, it allowed me to speak even more than usual 🙂 It’s also been an interesting exercise in no longer scheduling your life around meals which allowed me to be even more productive than usual.

After 11 days with no alcohol, caffeine or food, I feel as great as usual and healthy. I lost 16 pounds, at least half of which I expect to gain back rapidly. I was able to play tennis reasonably well, though I did have less energy than usual.

All in all, it has been an interesting and positive experience which I will probably revisit in the future.

Shrek 4 is very good

Shrek 4 obviously does not match the originality of the first movie which was the first animated movie I ever saw whose humor and parodies were made to appeal to adult audiences. However in terms of entertainment value Shrek 4 is much nearer the first two amazing movies than the horribly disappointing, muddled and boring third movie!

I really connected with Shrek’s midlife crisis. It’s really easy to lose sight of how good you have it, and really hard to cherish the amazing things you have in life, until you actually lose them.

I loved the entire story and the big closet romantic in me loved to see Fiona and Shrek fall in love all over again!

Don’t believe the critics: Knight & Day is tons of fun!

The movie never found an audience and was panned by critics, but it was incredibly entertaining and the dialogues between Cruise and Diaz were absolutely amazing! The chemistry between Diaz & Cruise was great and the campy tone was exactly what the movie called for.

The movie was mindless, but tons of fun – perfect for a hot summer evening!

The Master Cleanse: Day 6 Update

In a way, I don’t have too much to report. Living on nothing but lemonade with maple syrup and pepper for 6 days has not been as miserable as many predicted it would be. On the other hand, it has not led to a newfound clarity or the spiritual nirvana others predicted. In other words, I don’t feel like much has changed.

The diet has not been that hard to keep and my willpower has not really been tested. I am constantly a little hungry, but not so hungry that it is distracting. I was rather light headed and a bit dizzy for the past few days, but this too seems to have subsided especially since I amped the maple syrup dosage to two thirds the recommended dose (up from half) and drink a table spoon of maple syrup if I feel too light headed.

I have found a few ways to make the diet much easier. I substituted the lemons for limes which I found have much more taste. I really hated the taste of the cayenne pepper and decreased the dose of that and now really like the drink (I would love it if it had no cayenne pepper at all).

On a daily basis, I drink around 2-3 liters of the lemonade (half a gallon to three quarters of a gallon) (8 to 12 250 ml glasses). I also drink about a liter of water. I always drank 3-4 liters per day so this is not exceptional. I can’t be bothered to prepare the drink every time I am thirsty or hungry so I prepare a 4 liter (a bit more than a gallon) pitcher in the morning and carry around a two liter bottle with me during the day. To prepare the lemonade for 4 liters, the dosage that works best for me is as follows:

  • Squeeze 8 lemons or lime with a juicer
  • Put 24 table spoons of maple syrup (32 is the recommended dose, but that tasted too sweet and 16 left me too dizzy
  • Put half a tea spoon of cayenne pepper (the “correct” does would be one and a half a tea spoon)
  • Fill the rest of the pitcher with tap water

That’s it! I don’t feel very different physically and was able to play tennis without difficulty. I don’t think I look very different, but according to the scale, I have been losing around two pounds per day and am now 10 pounds lighter than when I started. I am sure a lot of that is water weight I will regain once I start eating normally again.

I assume a lot of the benefits of the cleanse come from completely avoiding alcohol, caffeine and junk food, while becoming well hydrated rather than the elimination of “toxins”, but regardless of how it works, as long as it works, I can’t complain.

Some people got disgusted by food while on the diet, but I can tell you there is no chance of that happening to me. I looked in envy while my friends were eating delicious looking grilled tuna steaks, pear and gorgonzola salads and a huge selection of amazing looking fruits. The amazing smell of super thin crust truffle and mushroom pizza and barbequed cheeseburgers and hotdogs also left my mouth watering. After 6 days of the bland monotony of the lemonade, I cherish the thought of giving my palate sensory diversity.

To avoid losing too much weight or becoming unhealthy, I will probably stop my cleanse after 10 or 11 days, this Monday or Tuesday, and slowly transition to fruits, soups and salads before making my way to more consistent food. As I am in Buenos Aires, I am looking forward to my first grilled lomo next Thursday or Friday!

I just started the Master Cleanse!

I usually don’t follow faddy diets, especially since I don’t really need to lose weight and if I did eating less and exercising more would be the first thing I would try. That said after my good friend and fellow Internet entrepreneur and angel investor Stephan Paternot raved about it, I decided to try the Master Cleanse.

The Master Cleanse is also called the lemonade diet. Basically, you drink fresh lemon juice with maple syrup, cayenne pepper and water and that’s it. You start by easing yourself into it by eating only fresh fruits and soup for a day or two. You then forgo all food and liquids except for the lemonade and water for a week or two. You then you ease yourself out of it. You can find out the details at www.themastercleanse.org.

I am on day 2 of the diet and so far I don’t have much to report. I feel no different than usual – I have my usual good mood and high energy level. I do feel a bit hungry. Hopefully that will subside in a few days. I will keep you posted in the coming days on the progress!

I guess this means no Ferrari for me :)

William, my best friend and VP of Marketing at OLX, is in the market for a used Ferrari 360 Spider. As a good friend, I decided to help him through the ordeal of car shopping by tagging along to the Ferrari dealer 🙂

The new Ferrari 458 Italia is so gorgeous I considered letting myself be tempted. After many attempts by the desperate dealer to get me to fit into it (and every other Ferrari in the showroom), we came to a definite conclusion: Ferraris are not made for tall people! And at 6’3” I am not even that tall!

Look at the photos below William took of me in a 360 Spider. My head was sticking out so much it was actually hilarious 🙂

Windows Live Sync Beta is fantastic!

Given my itinerant lifestyle I end up working from many different computers. I was looking for a solution to move everything to the Cloud but only had imperfect solutions. Thanks to Microsoft Exchange I already have access to all my emails from any computer and many mobile devices. Carbonite gave me a good backup of all my files and remote access to them, but keeping files in sync between all my computers was always a pain. I would change some files in some folders at home, different files in the same folder at work and keeping it all straight was messy and complicated. I would use a mix of emailing myself the files and copying them on a USB stick, but it was manual, annoying and error prone.

I just installed Live Sync Beta and it’s amazing. It’s easy to setup and keep files in sync between many computers and on the cloud. Best of all it’s free! In the screenshot below you can see I setup syncing between my notebook and my work computer for three folders. If both computers are on, the sync is instantaneous.

The software is not without flaws:

  • The interface is clunkier than it should be – I should be able to go on any folder in Explorer and right mouse click “Keep this folder in Synch with Live Sync” instead of having to manually select folders from within Live Sync.
  • In Explorer there should be a little sync icon next to a folder to show that it is being synced.
  • The focus on peer to peer syncing is annoying. I can see why it’s cheaper from a bandwidth perspective, but many of my computers are not on the same network. You can use the SkyDrive to sync through the cloud, but it’s limited to 2Gb and I can’t find a way to buy more storage. I would be more than happy to pay for cloud syncing.

Hopefully those will be solved in the full product release. In the meantime, if you need to keep files in sync between multiple computers, you owe it to yourself to check out the free beta!

Partial non sequitur: It’s hard to believe Microsoft had a gem like this and I had never heard of it until Daniel Rasmus mentioned it to me over breakfast a week ago. I wonder what similar products are lost somewhere in the Microsoft matrix! I also wonder what weird Microsoft politics infected this project. It seems to have had many different owners over time given the many very different blogs on Sync/SkyDrive/Live Mesh within Microsoft (all of which have been discontinued except for the official Inside Windows Live blog). Also, the product used to be focused on syncing through the cloud when it was called Live Mesh instead of through peers. I hope it becomes the focus again soon!