Salto Partners

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Groupon November 2012

Talked to ECommerce Times about Groupon this week. Here is the upshot.

Groupon reported another quarter of disappointing earnings as its core business stagnated. It’s stock went down 30 percent to an all-time low of $2.76 and this might not be the end of it. Also one of its major rivals, Living Social, is piling up losses. Amazon.com was forced to write down its Living Social investment as result. There are a number of reasons why companies such a Groupon are struggeling. The macro economic headwinds are one of them. But they won’t explain the landslide in the stock price from $25 in November of 2011 to sub $3 only 12 months later.

The key question is: Is Groupon’s current model good business. Let’s take a look at the merchant side first. A Raymond James survey of roughly 115 merchants that used daily deals services during the fall found that 39 percent of merchants said they were not likely to run another Groupon promotion over the next couple of years. That is a big blow. The top reasons were high commission rate and low rate of repeat customers gained through offering a promotion. 32 percent of the merchants reported are losing money on the promotions. Nearly 40 percent said the Groupon offer was less effective than other types of marketing.

Let’s take a look at the consumer side. Existing customers interested in signing up for daily deals has waned too. Groupon reported last week that the average revenue per active customer (defined as an account that has purchased a deal from the site in the previous 12 months) fell to $63.96 in the 12 months to September 30 from $76.49 a year earlier. Meanwhile, Groupon has to knock on increasingly more doors to find willing merchants who want to participate. What’s even more important is that this approach scales with the size of the sales work force. It doesn’t scale as a function of its superior technology. In short this means high operating costs, less profits, increasingly higher management complexity.

It’s time for Groupon to reinvent themselves. The daily deal aspect of its business doesn’t have to go. It needs augmentation. Other companies have successfully transformed themselves. Take eBay as an example. They were once the leader of the “used goods” market place. It’s now one of the dominating e-Commerce platforms for all types of merchants featuring a same day delivery service rivaling Walmart and Amazon.com. A similar transformation for Groupon is needed. Groupon Goods is the right step in this direction.

Here you find the full story: http://www.ecommercetimes.com/story/Groupon-Loses-Its-Grip-76600.html

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PMI Webinar Succeeding in Life Sciences: Questions and Answers

PMI’s Community of Practice for the Pharma-Industry did it again! They put together another  outstanding webinar on November 13, 2012. Between the noon and the evening call we had over 700 registrants world wide. My special thanks go out to Prashant Rajopadhye for organizing this event. We were a bit short on time at the end of the call, so I wasn’t able answer all questions. As promised, please find below my answers to the questions gathered.
 1. Is spending per approved drug a proxy for a company’s efficiency?
The numbers shown in the webinar were based on a study published earlier this year by Forbes. Click here to find the article. These numbers don’t account for research on additional indications for existing drugs, which is a non-trivial part of the work in Pharma R&D organziations. However, the numbers are both indicative of how efficient R&D is performed and how effective the leadership team is picking promising compounds.
2. What are the sources for crowd fundings? Just a few main sources?
The idea of crowd funding is that people like you and me can invest in companies with an appealing idea. There are a number of sites such as Kickstarter that bring entrepreneurs and “retail investors” together. Crowd funding  promises to be another viable financing option (next to Venture Capitalists, Banks, Angels) for companies looking for capital in exchange for equity. As I mentioned on the call, it’s also an opportunity to test out an idea. In particular for consumer oriented companies, it’s a way to find out if a product or service has a wider appeal.
3. I dispute the claim that R&D is enhanced by merger. As an employee of Burroughs Wellcome, GlaxoWellcome and then GlaxoSmithKline – bigger does NOT map directly to more discoveries but instead impead discover if only because of the additional levels of approval required. Please comment.
I agree that M&A transactions are a double sided sword. Over the last few years we have seen a number of large scale mergers across the globe.  We have seen large drug companies consolidating their operations. In a recent article with Contract Pharma I surveyed the deal landscape over the last few years.  The hope is that post-merger, the acquiring company will have a stronger pipeline of drugs that can be carried forward in their R&D organization. Additional benefits are an enhanced worldwide distribution system to better access strategic markets. In some cases, companies can retire plants because of redundant manufacturing infrastructure. These are the main reasons why it is so tempting for CEOs to look at M&A. However. It’s one thing to put an M&A deal together. It’s another to make a deal work. Overcoming post-merger integration issues is a non-trivial task. First, there are cultural issues between the two companies starting at the executive level down to the lab level. It takes years for companies to fully develop a combined culture, and sometimes it really doesn’t happen at all. Second, the promise of a solid pipeline of drugs could be overestimated. In other words: 1+1 < 2. Third, post-merger integration slows down a business considerably. The day a deal is announced people begin to worry about their future instead of being focused on the task at hand. What will happen to my organization? What will happen to me? Should I start looking for a new job? This kind of thinking happens on both sides – the acquiring company as well as the acquired one. During the integration phase, organizations spend a lot of time making it all work. Who is in charge? Who is part of the go-forward team? What should our process be?
4. How do you address the ethical concerns of external funding?
The processes or procedures are actually the same in either case. Small and mid-sized companies are subject to the same ethical rules and regulations that apply to larger firms.
5. Can you comment on the emergence of personalized medicine and it’s impact on the three major topics in today’s presentation?
This is a big question. So much for now. The technologies underpinning personalized medicine could enable the pharmaceutical industry to develop a more efficient drug development process, based on the latest research on disease pathophysiology and genetic risk factors. Furthermore, a therapeutic agent could be marketed on the basis of a companion theranostic test result.
In the webinar we talked about some of the enablers for this sort of development. DNA Sequenzing, cloud computing and big data analysis. Only because of advancements in these areas we are able to look for personalized medicine.
6. Thanks Dr. Andreas. Very good analysis on the oppurtunity in the Pharma industry. I would like to understand in current or future webinar : How can i add value as PM in this industry. Do I need to have an in-depth knowledge on Pharma process and procedure.
It’s definitely important that you, as the PM, understand Pharma processes and procedures. This allows you to effectively communicate with your peers, who likely will be scientists. It also allows you to put together credible cross functional project plans.
Some companies insists that their PMs should have a scientific background. I personally believe that it can be helpful, but that it’s not a requirement to be successful in that role. But again, you need definitely a solid understanding of all the relevant processes and procedures.
 7. Andreas, do you think that the implementation of ISO 21500 could help sponsors to reduce CROs inefficiencies regarding PM?
I have no data points that allow me to come up with a definitive answer specific to ISO 21500. However, I think a lot of confusion in the relationship between Sponsors and CROs can be avoided by providing transparent status of a project. To the extent that the application of ISO 21500 helps with this problem, I believe it can have a positive impact.
8. What is the best way for an eperienced PM/PMP ina different high-tech area to prepare for a job in Pharma?
I think it is important that you learn in depth how the pharma R&D process works. Some companies have mapped out their processes explicitely. If that is the case for the company you are working for, then I would strongly  recommend to study those process maps in great detail. It also helps, if you are familiar with the therapeutic area you are working in. Both the familiarity with processes as well as a – at least highlevel – understanding of the therapeutic area helps you to communicate effectively with your team members.
9. How do other countries compare with USA with regard to patent periods before generic competition is allowed?
Significant international harmonization of patent term across national laws was achieved in the 1990. The WTO implemented the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement). Article 33 of the TRIPs Agreement provides that the “The term of protection available [for patents] shall not end before the expiration of a period of twenty years counted from the filing date.” Consequently, in most patent laws nowadays, the term of patent is 20 years from the filing date of the application. This however does not forbid the states party to the WTO from providing, in their national law, other type of patent-like rights with shorter terms. Utility models are an example of such rights. Their term is usually 6 or 10 years.

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Smart Grid Technology Is Reshaping The Energy Sector

The Smart Grid is arriving quickly. Globally. Utilities and energy consumers will move from a flat rate model to a more flexible and detailed billing model. At a quater hourly rate utilities will be able to measure how much energy a customer consumed. Off-peak consumption will be cheaper than energy used during peak hours. There will be rewards for energy consumers who are able to shape their consumption profile.

This shift is essentially enabled by technology. Utility companies will have to invest into new billing systems as they transition their legacy system to Smart Grid technology. So far, utility companies can only handle simple flat rate tariffs which are based on meter data from manual readings. The readings occur at best monthly. Sometimes they are on a quarterly or even annual schedule. In the Smart Grid world, utilities collect automated meters readings based on quarter hourly collections createing a massive increase of data.

In addition, utilities need to offer additional capabilities to truly leverage the Smart Grid.  There is the need to provide online payment options. Utilities need to provide their customers visibility into their consumption history and give them early warnings to avoid bill shock. Energy customers need analytical tools that enable them to conduct what-if scenarios on load shifting to lower their energy bills by shifting load to off-peak hours.

The future Smart Grid is enabled by smart technology.

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Facebook Q3 2012 Earnings

Facebook’s earnings report was better than expected. The company had revenues of $1.262 billion in Q3 2012. That’s a 32.285% increase from the same period last year.  GAAP Net income was a loss of $59 million mainly due to share based compensation costs and related tax roll expenses. Otherwise the company posted solid operating margins. Wall Street expectations had been slightly lower.

During the earnings call Mark Zuckerberg highlighted some major breakthroughs. First, Facebook has more than a billion people using the site each month. Second, 600 million people are using mobile devices to share and connect. The last three months were crucial for Facebook in terms of its mobile strategy. Facebook made $153 million in sales from mobile advertisements, a revenue stream that didn’t exist seven months ago. Mobile revenue is 14% of advertising revenue in Q3.

 Zuckerberg made mobile a strong priority for the company. And it showed. Facebook completed the rebuild of its app for iOS. It improved of the platform for mobile developers by launching new software development kits for iOS and Android as well as a deeper integrating into iOS 6.0.

Facebook had a positive Q3 2012. But the exciting results of its mobile ad business are not the answer to all questions either. Facebook is still playing catch-up. eMarketer estimated the size of mobile at revenue at $2.61 billion this year.  $153 million mobile ad revenue is just a fraction to the total market opportunity. Investors will keep watching how aggressively Facebook is able to ramp up its mobile business.

You can read the full article here.