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Consulting versus Investment Banking after Undergrad

23 Feb

Consultants in board roomAfter completing my undergraduate business degree, I pursued management consulting as a career, first at the Monitor Group then at Bain & Company.  While I left consulting three years ago to pursue a career in technology startups, I still get asked about consulting as a career, especially as compared to investment banking.

It’s easiest to frame my opinion in the context of what you can learn – this is because the majority of investment bankers and consultants end up moving into other careers within 2 – 4 years.  While consulting and I-banking are great training grounds, they aren’t necessarily great matches for everyone long-term.

What you Learn as a Management Consultant:

  • Data Analysis: Depending on the firm and specific clients your work for, you will either do a lot of Excel analysis or TONS of excel analysis.  While this can feel like drudgery at the time, it is an increasingly valuable skill in the workforce, especially in fields like online marketing.  Surprisingly few business people are trained how to think about and solve business problems with data – consultants are.
  • Problem Solving: Consultants are trained how to break down a complex problem into component pieces, understand the assumptions and hypotheses behind each element, and craft a path toward understanding and solving them.
  • Project Management: As the most junior person on the team, you’re often left handling the coordination between the consulting team and the client.  As you get more senior, you spend a lot of time crafting communications (often in PowerPoint decks) about project status, timelines, etc.  This constant management of what’s getting done, by who, and when it will be done is broadly applicable.
  • Communications: In line with the note above, consultants spend a LOT of time in PowerPoint, crafting and re-crafting communications for clients.  This often comes on the heals of analytical work that you’ve done.  When combined with the ability to break down a problem and do analysis to help solve it, the ability to then synthesize and communicate those answers to another professional is extremely valuable.

What I Didn’t Learn as a Consultant, but you Probably Learn as an Investment Banker (based on those I’ve worked with who come from that background):

  • Financial Modeling: While in some cases the data analysis I mention above can take the form of creating a financial model, it rarely does.  More often, you’re analyzing results of a customer survey, pulling apart operational numbers within a business (how many phone calls to customer service, at what average handling time, resulting in what average cost-to-serve?), or calculating market sizes and growth rates.
  • Corporate Finance: While you might be deep within the operational metrics of a business, rarely does that analysis bubble up to the level of looking at corporate financial statement (Balance Sheets, Profit and Loss statements, Cash Flow Statements, etc).  Most everything I know about this stuff I learned as a business undergrad, not in consulting.
  • Public Markets: Similarly, the evaluation of a business as a potential investment target really isn’t part of what the typical consulting project.  A consultant might be looking at the likelihood that a potential joint venture will work out operationally (is there demand for this new product? what capabilities does each side deliver?), they aren’t often tasked with making the ultimate investment decision.

These are obviously just my own experiences and thoughts, but something I thought was worth sharing.  What have your experiences been?

Cost diagnostic at the University of North Carolina

22 Jun

As a management strategy consultant, I am often asked what consultants actually do.  I typically answer with a host of analogies, most often the simple “doctors for businesses” comparison, because we often play the role of diagnosing and providing recommendations to solve specific issues ailing a business.

It is rare that I can share an example of Bain’s work, due to confidentiality restrictions and operating guidelines.  It is unique, therefore, that the University of North Carolina has published a narrated video of an interim report provided by Bain.  A few quick highlights of the video:

  • Highlights of the cost issues Bain is helping UNC address – the “burning platform” that makes it clear that action must be taken
  • Explanation of how Bain’s corporate toolkit and approach, while used most often for businesses, are still relevant for addressing administrative costs in a public / non-profit organization
  • Interim results of their study, such as the finding that there are 9 levels of management within the university, with 50% of supervisors managing only 1 – 3 direct reports, signs that organizational structure / complexity and “spans and layers” of management could be part of the problem

The video is about 15 minutes long, but should be interesting to anyone with a tie to UNC or an interest in the management consulting approach.  View it here:

I applaud UNC for publishing the video.  I must imagine that the student body, faculty, and administration of the university are much more at ease getting this explanation of the project than they could have been based on news media and rumors alone.

Killing Netflix “Profiles” – A Stupid Business Decision

19 Jun

Netflix LogoNetflix is ending its longstanding policy of allowing customers to hold multiple profiles under a single account.  The announcement was sent to users today:

We wanted to let you know we will be eliminating Profiles, the feature that allowed you to set up separate DVD Queues under one account, effective September 1, 2008.

Each additional Profile Queue will be unavailable after September 1, 2008. Before then, we recommend you consolidate any of your Profile Queues to your main account Queue or print them out.

The profiles feature was an excellent way for multiple people living in a single household (husband/wife, roommates, etc) to maintain separate queues and profiles of the movies they have liked, disliked, etc., while keeping a joint account of discs sent to the same address for billing purposes and convenience.

The rationale for the move is not substantially explained in the Netflix communication.

While it may be disappointing to see Profiles go away, this change will help us continue to improve the Netflix website for all our customers.

The most likely explanation is that Netflix has determined that joint accounts are causing them to lose revenue due to their pricing structure.  In effect, multiple users in a single household gain scale efficiencies because it is cheaper to have a single account sending 4 discs at a time ($23.99) than it would be sending 2 different accounts 2 discs at a time ($13.99 x 2, or $27.98, a $4.00 difference).  If multiplied across millions of accounts on a monthly basis, that could mean a lot of additional revenue for Netflix.

… IF it doesn’t turn a large number of their customers away.

The real shocker can be found on the FAQ linked from the email sent out today:

You will not be able to transfer your Profiles data to a separate new account

Consider moving all DVD titles in your Profiles Queues to your main account Queue

How does that make any sense?  Does Netflix seriously expect the wives and roommates and brothers and sisters who have been sharing accounts to merge their accounts into a single account and lose all of the individuality and “social profile” data that they used to enjoy from the site?  This mass of data, and the power of the Netflix recommendation engine was one of the major differentiators that kept its users on the site.

To quickly come to my point, this is a plain stupid business decision.  Here’s why:

  • Users will now have to pay two bills where they used to pay one
  • Users will lose all of the data they have built up over time while using Netflix, eliminating the barrier that once kept them from switching to a competitor, such as Blockbuster
  • Users who decide to stay with Netflix will be forced to spend hours re-entering their movie ratings and rental queues
  • Users who have been too lazy to close or downgrade their accounts won’t renew their accounts, killing the “momentem” that once kept them paying every month
  • Users who do decide to turn their single account into two different accounts will feel like Netflix is nickle-and-diming them, forcing them to pay more for a less convenient, equivalent service that they used to pay less for
  • New customers that might have been attracted to the idea of a single Netflix account per household (it’s easy to convince a new roomie to pay $3.00 a month to move from a 2 to 3 disc account, when they might not have been willing to pay $9.00 a month to get an account of their own)

Who wins from this decision?

  • Traditional competitors who can take advantage of the mass of new potential customers shopping for a DVD rental service (e.g. Blockbuster)
  • New competitors (e.g. iTunes movie downloads) who will open their arms to an influx of users who no longer have any reason to stay with Netflix and its old DVD-by-mail technology

Am I missing something here, or did Netflix just make a huge blunder?

Apple’s MobileMe: A Good Idea for the Wrong Price

11 Jun

Apple’s new MobileMe service, which will allow consumers to sync their mail, calendar, contacts, and other content across their phone, personal computer, and any other device which can access the web, has been been called “The Most Interesting part of this year’s WWDC” and heralded by some to be poised to “Crush Exchange and Google.” While the enthusiasm for a clean, integrated connectivity service is understandable, it exaggerates the willingness of consumers to pay for a service that, while imperfect in its implementation today, is almost entirely available today FOR FREE.

I don’t believe that MobileMe adds enough incremental value for consumers to be willing to shell out $99 – $149 per year for the ability to do what they can already. MobileMe is a service that is too expensive and too late.

Seamless connection of email between mobile and web? Try Gmail and its handy mobile application for the iPhone and Blackberry.

Seamless connection of calendars? Try Google Calendar and Google Sync for mobile, which smoothly integrates into your Blackberry.

Photos hosted on your desktop and online? Try using Picasa Web plugins for iPhoto, or the Picasa application for PCs.

Getting this kind of functionality today does require that users plug the pieces together on their own. And it isn’t necessarily perfect. Admittedly, some of the features offered by MobileMe are not offered elsewhere – at least that I know about. For instance, constantly synchronized filing and sorting images and files (if I merge two albums in iPhoto, after both have been uploaded to Picasa Web, I have to duplicate that action on the Picasa website) and synchronized contacts (my BlackBerry integration with Lotus Notes or Outlook is perfect, but MobileMe, which is positioned as “Exchange for the rest of us,” is clearly targeting users that have neither) are both new and useful services, but are not justifiable at this price point.

Apple announced its new MobileMe service yesterday at the WWDC in San Francisco. The service is not yet available on Apple’s website (you can currently only sign up to be notified when it is ready), so I can only speculate as to its full functionality. MobileMe will replace its existing .Mac service. Given how weak customer enthusiasm had been for the original .mac service (which I also feel is largely due to its price relative to other offerings from Google and Yahoo), however, MobileMe’s heritage isn’t exactly a bragging right.

One reason MobileMe could win some users initially, however, is that consumers may rush in to claim valuable username real estate. “” has a certain ring to it…

What do you think? Are MobileMe’s features enough to win consumers over? Will they be willing to fork out $100 for features that can essentially be pieced together for free online today?

Coverage of the announcement of MobileMe:

Harnessing the Ocean’s Power for Electricity

9 Jun

Finavera Technology\'s AquaBouy, which is to be deployed off the coast of CaliforniaThis week’s Economist contains a couple of interesting articles in its Technology Quarterly outlining a variety of approaches to harnessing natural and renewable sources of energy for human consumption. Specifically, it focuses on technologies capturing power from the ocean.


The first looks at new technology for off-shore wind farms which would allow them to be located much further off the shoreline, generating more energy from higher-velocity winds and fewer complaints from nearby residents whose views have been blocked.

the stronger winds out at sea can generate more electricity, and hence more revenue: wind blowing at 10m/s can produce five times as much electricity as wind blowing half as fast, and this greatly favours building more offshore wind far

Instinctively, this seems like a winning combination: it moves electrical generation out of “my backyard,” where so few people are willing to have it, while also improving the economics of wind energy by tapping a more reliable, stronger source of wind.

The ability to get the electricity generated offshore back to where it is consumed, and the amount of energy lost in transmission would seem to be major barriers to the technology’s success. As would the cost of the turbines and maintenance, which would both seem considerably greater than a traditional land-based wind farm.


The second looks at the approaches to harnessing wave power which are showing the most promise.

YOU only have to look at waves pounding a beach, inexorably wearing cliffs into rubble and pounding stones into sand, to appreciate the power of the ocean.

Unlike wind and solar energy installations, wave energy sites could theoretically be located far from the coastline if an easy means of transporting the electricity were developed, once again eliminating the “not in my backyard” objections of most other forms of electrical generation.

Alas, harnessing it has proved to be unexpectedly difficult. In recent years wind farms have sprouted on plains and hilltops, and solar panels have been sprinkled across rooftops and deserts. But where the technology of wind and solar power is established and steadily improving, that of wave power is still in its infancy.

The article outlines a number of different designs and approaches to capturing wave energy, but none appear to be the obvious choice for the future. Each faces obstacles that have thus far kept them from widespread adoption.

A recurring problem, ironically enough, is that new devices underestimate the power of the sea, and are unable to withstand its assault. Installing wave-energy devices is also expensive; special vessels are needed to tow equipment out to sea, and it can be difficult to get hold of them… Another practical problem is the lack of infrastructure to connect wave-energy generators to the power grid. The cost of establishing this infrastructure makes small-scale wave-energy generation and testing unfeasible; but large-scale projects are hugely expensive.

The Role of Silicon Valley

Will the innovation of offshore wind and wave technologies happen in the same place so much technological innovation has occurred in the last twenty years? Interestingly, the article mentions that PG&E, the Bay Area electrical utility, is one of the first adopters of wave technology.

In December Pacific Gas & Electric, an American utility, signed an agreement to buy electricity from a wave farm that is to be built off the coast of California and is due to open in 2012

The PG&E project will involve deploying the Aquabouy, which is produced by Finavera Renewables of Vancouver.

Each Aquabuoy is a tube, 25-metres long, that floats vertically in the water and is tethered to the sea floor. Its up-and-down bobbing motion is used to pressurise water stored in the tube below the surface. Once the pressure reaches a certain level, the water is released, spinning a turbine and generating electricity.

Could this early adoption of wave technology, along with San Francisco Mayor Gavin Newsom’s well-known interest in alternative energy, mean that the Bay Area has an early lead in the development of this, the latest of alternative energy technologies?

Greystripe – Developing a Complete Mobile Phone Advertising System from Scratch

7 May

Greystripe LogoAfter attending a presentation yesterday by CEO and Founder, Michael Chang, and VP of Operations, Kurt Hawks, about their startup, Greystripe, I have a newfound appreciation for the challenges that face entrepreneurs innovating in a part of the market where there is so much uncertainty. Greystripe’s primary revenue stream is from the sale of visual ads placed on mobile phones, but the story of how they got there, and the challenges they had to overcome, was both inspiring and daunting. I want to share a condensed version of that story, although I apologize in advance if any of it has been mangled in the retelling.

Where they are today:

Greystripe is an advertising network, content publishing partner, and distribution network for mobile phones that is VC backed by Steamboat Ventures, Incubic, Monitor Ventures. Its most recent capital round, a series B, raised $9 million. Their free, ad-supported games are being downloaded at a rate of 250,000 per day, by users all over the world.

How they got here:

Chang’s presentation focused on how the company has evolved since getting off the ground in 2005, and the multiple iterations the company has gone through in creating its current business model. The company started with a focus on mobile advertising in a single vertical: location based services. Inherent from day one in this business were challenges of developing content for different screen sizes, across different phone manufacturers (e.g. Nokia, Samsung, Motorola) with different operating system software (e.g. Palm, RIM, Microsoft), operating on different telephone networks (e.g. AT&T, T-mobile, Verizon), with different wireless technologies (e.g. GSM, CDMA). The complexity would not stop there.

As it became clear that location based services were evolving much slower than they had hoped, Greystripe’s focus shifted to a different vertical, gaming and applications. Games were sourced from publishers (e.g. Digital Chocolate, Hands-on Mobile), modified with the company’s AdWRAP technology, which inserts additional blank screen pages for advertisements before and after gameplay, and offered for free to users to download on their mobile phones. The next challenge, then, was to find advertisers who would pay for the full-screen advertising real estate within these games. Their search for an advertising network which could effectively source those ads on their behalf turned up empty, and again the fledgling company was back to the drawing boards.

Developing an advertising network, which places ads on behalf of companies and advertising agencies, would require a larger sales force, and a different business model than Greystripe had originally envisioned. A sales team was hired, relationships developed, and the first ads were placed. As the network took shape, and advertisers began to take notice, two new challenges would emerge. First, visual modifications would have to be made to the ads to serve the multiple screen sizes and formats, and second, the games would have to be distributed to users for download. The second would prove to be particularly daunting: it became clear that there were no effective distribution avenues available to ensure that games could actually reach users.

The next iteration of the company therefore took on this challenge: developing a diverse set of distribution channels for publishers. These have evolved to include mobile providers’ own catalogs of games and applications available for download, the sites of the game publishers, and GameJump, a portal developed by Greystripe.

Greystripe today is fully functional end-to-end, and is revenue generating (though not yet profitable). The company is now in its fifth iteration of its business model, and both Chang and Hawks sounded optimistic that even if not the company’s last, that it offered their greatest chance for success to date. Chang acknowledged that future developments could include gathering more detailed profile information about the users of its ad supported games, layering on location sensing technologies, and using it to more precisely target ads to specific users, allowing them to demand a higher premium per screen view from advertisers.

For the potential entrepreneur’s in the audience, Chang offered several tidbits of advice – including the importance of this kind of iteration and evolution in the formation of a business: “Push things far enough to really test the business model, but without pushing them so far that you run the company into the ground.”

TripIt and Dopplr – A Match (which could be) Made in Heaven

17 Apr

TripItI was recently introduced to TripIt, a “next generation” travel site which has really impressed me in my first day as a user. It replaces Dopplr (which I have used for approximately four months now) as my favorite startup travel destination on the web for two major reasons: its superior input methodology and the practical usefulness of the site’s main service: itinerary aggregation.

While these sites are clearly competitors, I think they might find that if a collaboration agreement could be reached, the sum would be greater than the parts.

Primary Functionality:

Dopplr LogoIf you were to ask me what Dopplr’s primary purpose was – its raison d’être – I would say creating community around travel, particularly for frequent travelers. It notifies me when I will be in the same place as one of my friends (still hasn’t happened to date, but I like the idea) so that we might meet up and grab dinner or a drink, or perhaps to share travel plans and tips. It also allows users to share their ideas and expertise about the places the visit frequently with other users online. In other words, it is a site that’s all about community. Unfortunately, there isn’t much of one yet. Until it has gained the faithful participation of more of my friends and acquaintances (which it has certainly been doing in the last few months), it just isn’t very useful to me.

TripIt, on the other hand, has a pretty compelling service from the get-go. It offers to aggregate the disparate elements of my travels into a single master itinerary. In effect, it does all those nice things your assistant would do for you when planning your travel, if you were lucky enough to have one. It allows me to look to a single location for all of my travel details: what flight I am on, what time it leaves, when it arrives, what seat I am in, what hotel I am staying at (at what address, with what phone number), and which rental car company I will be using to get there. It even provides a few handy “value-adds” such as weather forecasts for the locations I will be in each day, and quick access to city maps.

In January, TripIt added some social functionality and is attempting to build a community element which appears similar to Dopplr. Nevertheless, it’s community appears to be even thinner than Dopplr’s, and has a long way to catch up.


Whereas Dopplr offers a fairly easy and intuitive method of inputting travel locations and dates, TripIt introduces an input methodology that is truly groundbreaking (in my experience, at least). Instead of requiring any real effort on my part, all I have to do is forward them my confirmation emails (from United, Hertz, and Sheraton, for instance) and it parses the information to identify all the pertinent details. It loads this detail into my calendar instantly and automatically, even capturing things like my frequent flyer numbers.

Another blogger who recently compared Dopplr and TripIt suggested an even better idea: setup an email filter to automatically forward travel plans to TripIt, eliminating even that minimal effort required to put the site to work for me. With an email filter in place, TripIt would automatically aggregate all travel details, update my travel calendar, and stream it through iCal to calendar programs like Google Calendars. (As a side note, am I the only person who wishes you could use an iCal stream as an input into an existing Google Calendar entry, rather than requiring you to establish a separate calendar for external feeds?)

Once in my Google Calendar, my travel plans (and location) would be easily shared with friends and colleagues. Even better, once they join the TripIt community, we can even build collaborative itineraries (such as a business trip with several colleagues making arrangements for the group individually).

The Case for Collaboration:

In summary, TripIt has quickly won me over on its practicality and simplicity. Where it still falls far short of Dopplr, however, is on the community element. Dopplr’s Facebook application and blog widget (which I use here as well as at allow me to quickly and easily allow others to track my location. The potential value of discovering that a friend’s travels will overlap with my own is strong enough to convince me to continue updating my itineraries there in the meantime. If, however, TripIt’s itinerary aggregation and input could be joined with the powerful potential of community I see in Dopplr’s model, it would be a match made in frequent-flyer heaver.

Where from Here:

It will be interesting to see how the TripIt business model develops. In my initial usage of the site, I didn’t see any obvious indicators of what their eventual business model would be. Following in the steps of the likes of TripAdvisor by adding advertising and the ability to book trips would seem a logical course of action. One interesting suggestion made by another blogger was to enable travelers to re-book previous itineraries through a simple interface asking for the dates of the repeat booking, which could then be executed through a partner, such as Expedia or Kayak.  Given the convenience this would provide the user, you might be able to extract a small booking fee.

It is an exciting time in the development of online travel tools – I wonder what’s next.

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Growing Excitement Around Product Recommendation Software

9 Apr

Richrelevance Logo

When you are shopping, a sales person who can quickly understand your needs, preferences, and budget and make a reasonable, logical recommendation is invaluable. While shopping online has typically required that customers already know what they were looking for, or that they conduct extensive research online in advance of a purchase, software is increasing playing the role of the sales person. While approaches to providing customer shopping recommendations have evolved with time, however, today’s software leaves considerable room for improvement. The recent funding of a Bay Area startup focused on customer recommendation demonstrates that venture capitalists have started to wake up to the potential this technology could hold.

Consumer recommendation tools online initially began by mirroring something that already existed in the print world: editor’s reviews and “product of the year” comparisons. Later came “Buyer’s Guides” which followed a simplistic logic to evaluate a few short responses to an online survey to provide a customer recommendation. Then came Amazon‘s product recommendations, based upon the analysis of other customer decisions (“others who purchased this item also purchased…”). This basic methodology has since been implemented in a number of different places around the web, with varying success. I would argue that NetFlix has been the most successful – the one site where I have significant confidence in the accuracy of the recommendations I receive, and act upon them with little or no knowledge of the film recommended. NetFlix, unlike today’s iTunes or Amazon stores, however, does this by not only considered what I have purchased (or viewed) before, but also how much I liked it.

If other online stores were able to earn my trust to a similar level without requiring the lengthy initial interview NetFlix used to gauge my movie taste, and were able to more deeply understand my shopping parameters, tastes, and the reason I arrived at their site, they would stand to gain a greater share of my wallet. If Amazon had been able to successfully recommend a book to me which I enjoyed (rather than assuming the South American literature textbooks I bought for college courses indicate a passion for Spanish authors), I would be far more likely to trust their recommendations a second time, and to begin to rely upon this functionality, visiting their store on a consistent and regular basis.

Baynote, a software firm located in Cupertino, raised $10.75 million in a second round of funding last year from Steamboat Ventures.  Its software attempts to understand customer intent by observing their actions on a website, and groups him or her into one of several customer archetypes to best deliver their anticipated needs.  The challenge, however, is that a customer’s visit may be so short as to fail to give enough evidence of intent for the software to accurately predict their intent.

Richrelevance, a San Francisco based technology startup which yesterday announced it had closed a Series B round of investment valued at $4.2 million dollars backed by Greylock Partners and Tugboat Ventures, is attempting to deliver this kind of next-generation product recommendation software. Built by David Selinger, a leader from Amazon’s recommendations team, richrelevance promises the ability to enhance a web store by personalizing the shopping experience and providing relevant, high quality product recommendations. Unfortunately, however, its technology doesn’t appear to make any massive improvements upon the flawed system in place at Amazon.

Perhaps this shouldn’t be surprising, however. It turns out the challenge of substantially improving recommendation algorithms and technology is a very considerable one. Even NetFlix, which posed a large cash reward to the tune of $1 million for any person or team which could improve the accuracy of its prediction software by 10%, has been unable to meet this seemingly modest goal after over a year and a half.

I will watch with curiosity as other companies tackle this challenge. I believe it is a field with significant growth potential, and one where I would be excited to see more innovation and expansion.  In the meantime, reasonably talented retail sales people need not worry about losing their jobs… just yet.

ING Direct Enters Low Cost Investing

18 Dec

ShareBuilder LogoWith an email announcement sent to ING Direct customers last night, the integration of ING Direct and ShareBuilder is official:

I’m pleased to announce that ShareBuilder, America’s most innovative online brokerage, is now part of ING DIRECT.

… ShareBuilder was created by its pioneering founders to make it simple and affordable for regular folks to invest in the stock market.  Thanks to ShareBuilder, investors big and small can now invest, big time.

The deal, which was first announced in November, introduces an interesting new element into the world of low cost brokerages.

Earlier this year, BusinessWeek covered several new players in the world of low cost equity investment, including the likes of TradeKing, Zecco, and ThinkorSwim, who use a powerful combination of social networking and low cost trading to target first time investors. First time investors value the social element because it helps them make sense of the world of investing through easy to follow blogs, forums, and FAQs. Users answer one another’s questions, reducing the need to hire an army of support staff to help them.

Yet first time investors are also the target audience for ShareBuilder, which earned rave reviews in Forbes “Best of the Web” for its investor starter packages that included an investment guide, investment certificate, and a copy of the Wall Street Journal Guide to Understanding Personal Finance; distinctly “old-school” approaches to targeting this same audience. Its online guides to investing in ETFs are similarly praised by Forbes, and 40% of their users invest in them.

So the question comes to my mind: why did ING pick ShareBuilder? From the little I know of the company, here is some common-sense speculation:

  • Acquire a well-established (ShareBuilder has been around since 1996) with a good reputation and track record
  • Acquire new customers for ShareBuilder, and use the existing base of ING Direct users to add new users to ShareBuilder
  • Acquire a company with a similar target customer to ING Direct: the financially inexperienced
  • Extend ING Direct’s product offering of simple investment offerings to include equity investments and ETFs

How can we analyze those criteria to understand the prospects for these new social investment sites to be acquired?  The first two bullets don’t currently play well, as both are still young and have relatively small pools of users, but that could change with time.  The third and fourth fit quite well, assuming there are some other big fish like ING Direct looking to get into the world of equity investments.

But it is the choice of ShareBuilder and its technology approach which has me thinking this morning. It seems to be part of the “old guard” of web investment (forgive the expression: web investing 1.0), lacking any significant social elements that the new players are using as their main differentiator. But which is the better approach to addressing the needs of new investors? Easy to use, self-service FAQs and free investment books, or forums and user-generated content?

Since obviously the answer to that will depend on the particular user, and their need and desire to interaction and personal advice, I suppose the question really becomes: how big is the pool of new investors who prefer “traditional” help tools, as compared to “social” tools? Are there enough new users comfortable with social networking to slowly erode share from eTrade, ShareBuilder, and the like?

An emerging generation of young professionals who spent their college careers on social networking sites would seem to bode well for Zecco and TradeKing, but it would be interesting to see an analysis: for every 100 new investors joining a brokerage online today, how many go to each?  And what can the new players do to increase those figures to their advantage?

Trading “Green” – The Global Carbon Index

13 Dec

BarcapI ran across an interesting press release from Barclays Capital today about their recent launch of the Barclays Capital Global Carbon Index (BGCI). It was also covered in various News Outlets:

This is the first time that such an index has been made available to asset managers, private banks and institutional investors, according to Barcap.

The Barclays Capital global carbon index (BGCI), intended as a benchmark for the rapidly growing carbon emissions markets, is made up of two sub-indices that track the performance of EUA credits in the EU emissions trading scheme (EU ETS) and Certified Emission Reduction (CER) credits generated by the clean development mechanism (CDM) [part of the Kyoto Treaty].

While my understanding of the financial markets is limited, this is an interesting innovation in that it will allow investors to buy into the growing market for “greenness” – the offsets and certified environmental upgrades of businesses.

It would seem that, certainly over the long term at least, truly environmentally-friendly business opportunities and technological advancements will continue to become scarcer and more difficult to achieve. For polluters needing to trade their carbon emissions with more “green” counterparts under increasingly popular carbon trading schemes (the US is set to follow in the EU’s footsteps here), selling “black” and buying “green” will only become more expensive with time.

A commodity with growing demand and increasing scarcity? Sounds like a good investment to me.