This week geeks on a plane ( #GOAP) are visiting Auckland for a pitch competition. This is a big deal for local technology led startups and similar businesses looking to accelerate.
“Fourteen high profile investors, entrepreneurs and executives will make their way from Silicon Valley to New Zealand to engage with the start-up scene down here. Among the fifteen geeks are Dave McClure, Founding Partner of 500 Startups and representatives from top US start-ups, VC firms and corporates.
An earlier list of who is on the trip is as follows.
Dave McClure Founding Partner 500 Startups @davemcclure
Organized by 500 Startups, Geeks on a Plane is an invite-only tour for start-ups, investors, and executives. They travel to the most exciting international start-up scenes with the sole mission of uniting geeks and exploring cross-border opportunities.
In association with New Zealand Trade & Enterprise Geeks on a Plane will be visiting New Zealand from 10 – 14 December 2012.”
Update: December 18th – here is a clip from the competition
A couple of years back I wrote a post on The evolution of venture capital which was based around an essay by Dave McClure. This post from Dave is a favourite of mine.
For any social network being able to generate a virtual currency is part of the territory. That gets way more interesting when game or social network users can convert any credits they have earned into a virtual or real currency.
That is the real tipping point for the FB business model and PayPals recent moves to increase the % cut they take from transactions which has (in my view) opened up more competition in the payments space.
At my main bank (ASB ) I have also recently been able to open a direct US $ account. This was prompted by my security concerns with PayPal – (my bank has the equivalent of 2 factor authentication) and the hike in transaction costs at PayPal.
The payments topping point has arrived for Facebook as announced on their developers blog. This is a key paradigm shift for FB and about 3 years overdue but ultimtaley good news for anyone who sells anything online.
Today, we’re announcing two updates to our payments product: subscriptions and local currency pricing.
New ways to monetize with subscriptions
Many developers successfully monetize their apps with one-time purchases of virtual items. Beginning in July, we are launching subscriptions as another way for you to build your businesses on Facebook. With subscriptions, you can establish a recurring revenue stream and offer updated content or premium experiences for a monthly fee….
This transition will be seamless for your users on Facebook. Already, most people see items priced in their local currency in the payments flow. Additionally, we’ll convert any Credit balances into the equivalent amount of value in users’ local currency, which they can spend on in-app items in the same way they do today. People can still redeem gift cards and store unused balances in their account.”
So what does this mean for businesses using facebook credits and other payment scenarios?
“Credits will be phased out by the end of the year and users will simply have a Facebook account with a balance measured in Dollars in the U.S., or whatever currency is native to a country. Facebook’s new member accounts will function similarly to an iTunes account: a user adds a credit card to their account, digital goods can be purchased and immediately charged to the card on file, or can be drawn from stored value in that account…”
“We still expect Facebook to be become a dominant player in the Payments space, similar to a PayPal. Last year, 15 million people bought Facebook Credits, according to their S-1 filing, so it’s assumed Facebook has close to 15 million credit cards on file. By the end of this year, once paid apps are added to Facebook’s App Center, it wouldn’t be surprising if 50 million people, or about five percent of Facebook’s users are purchasing apps and other digital good, like movies, music and TV episodes, which means Facebook would have a pool of 50 million people who have entrusted it with their credit card information
At that point it’s a very short distance to a “Pay with Facebook” blue box showing up every time you make an online purchase (on web sites everywhere, not just on Facebook). Why re-enter your credit card number when you already trust Facebook to handle the transaction and bill your card? For users this could be seen as more convenient and safer than entering their credit card number on multiple sites. Facebook is PayPal on steroids, with the strength of a billion members.
And then, what’s to stop Facebook from introducing a Facebook Credit Card? Facebook could be bigger than PayPal and become Visa or MasterCard as well. Facebook has the potential to become a universal wallet for both online and offline purchases.”
The real question here is why has it taken Facebook so long to take on PayPal since converting credits to a local currency balance.
I think there will be some significant security challenges for Facebook ( as there already are for PayPal) and that is why I have opened foreign currecny accounts directly with my bank.
At least my bank has a security team in place and while the convenience of Facebook and Paypal payments is hard to beat – they and iTunes are now giant targets for online hackers.
If you have an online business that already takes Facebook credits then the guy to follow is
“Peter Vogel @pvogel Co-founder, Plink (Online-to-Offline loyalty program) 12.5% Canadian, social media entrepreneur, promoter and creator of disruptive technologies Denver, CO · http://www.plink.com”
I use a social media app called Foursquare to keep an eye on what is happening in local businesses. In NZ we suffer a little from lower population densities, lack of public WiFi, expensive smartphones and expensive mobile data but the last 2 are starting to swing back in favour of the consumer.
I recently worked on a foodie website called Tweet2Eat which is in the Hawkes bay at present. It combines dining out with the latest real time data from restaurants and cafes in that region. I can see a combination of Yelp / Foursquare / Plink and Tweet2Eat becoming very successful.
Much as I hate the idea of anyone earning $ on Facebook for eating at Burger King – I think that the Facebook payments changes open up a raft of new opportunities for everyone.
What do you think? – use your FB or twitter login to comment below.
Last year a couple of big finance stories caught my attention. I had just seen the movie Inside Job .
What was very interesting to me was the idea that economists and other academics in the finance world had been utterly compromised by the global financial meltdown.
The other story concerned Wachovia bank laundering $400b of blood money but more on that one later.
In fact they (academic economists) have been completely implicated in the demise of the system yet those very same people were reappointed to high ranking roles by the Obama administration. So point 1 – same old, same old means the same results which is privatise assetts – socialise losses and that bailout was US$700b.
(Add both numbers together and that is $1100b and that is thought to be a tip of the iceberg read of that problem.)
Follow the money. $700b is a very big honeypot and what has happened to that money?
The Four Horseman Film attempts to answer these questions and more. Accountability and public policy results?
“Four Horsemen is the debut feature from director Ross Ashcroft which reveals the fundamental flaws in the economic system which have brought our civilization to the brink of disaster.
23 leading thinkers –frustrated at the failure of their respective disciplines – break their silence to explain how the world really works.
The film pulls no punches in describing the consequences of continued inaction – but its message is one of hope. If more people can equip themselves with a better understanding of how the world really works, then the systems and structures that condemn billions to poverty or chronic insecurity can at last be overturned.
Solutions to the multiple crises facing humanity have never been more urgent, but equally, the conditions for change have never been more favourable.”
Update: In NZ? – listen to this interview from Kim Hill show today (5th of May 2012)
Ann Pettifor interview is 30 mins but well worth watching. It is not in the film. Key answer from Ann: “We have to regulate & control the banks” – Keynes & Roosevelt had the right tactic back in the 30′s.
Another related story from April last year
“How a big US bank laundered billions from Mexico’s murderous drug gangs As the violence spread, billions of dollars of cartel cash began to seep into the global financial system. But a special investigation by the Observer reveals how the increasingly frantic warnings of one London whistleblower were ignored”
That large banking group in the paid $US150 m in fines recently for money laundering something like 400 billion $ of drugs money. $150m is a large fine but compared to $400b & all of the other similar cases that didn’t get prosecuted – it is a slap on the hand with a wet bus ticket. ( My calculator can’t cope with that but as a percentage $150m/400b – its a rounding error!)
‘More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico’s gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.
“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank’s $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement.
The conclusion to the case was only the tip of an iceberg, demonstrating the role of the “legal” banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.’
Turns out the GFC was an opportunity for some big finance houses to rort the public finances as well as actively engaging in eye-popping financing of criminal activities. In little old New Zealand I don’t remember any of these stories even making the news.
I can remember the Savings & Loan crisis of the 80′s but these more recent stories are much more significantly disturbing. The finance system is completely broken and the sooner we change it the better.
Of course there is more to the story;
“By 2007 the trade in derivatives worldwide was one quadrillion (thousand million million) US dollars – this is 10 times the total production of goods on the planet over its entire history,” says Stewart. “OK, we’re talking about the totals in a two-way trade, people are buying and people are selling and you’re adding it all up as if it doesn’t cancel out, but it was a huge trade.”
The Black-Scholes formula had passed the market test. But as banks and hedge funds relied more and more on their equations, they became more and more vulnerable to mistakes or over-simplifications in the mathematics.”
“The equation is based on the idea that big movements are actually very, very rare. The problem is that real markets have these big changes much more often that this model predicts,” says Stewart.
“And the other problem is that everyone’s following the same mathematical principles, so they’re all going to get the same answer.“*
….
“Not all of those subsequent technologies, says Scholes, were good enough. “[Some] had assumptions that were wrong, or they used data incorrectly to calibrate their models, or people who used [the] models didn’t know how to use them.”
Scholes argues there is no going back. “The fundamental issue is that quantitative technologies in finance will survive, and will grow, and will continue to evolve over time,” he says.
But for Ian Stewart, the story of Black-Scholes – and of Long-Term Capital Management – is a kind of morality tale.”
“The problem with all these models is they don’t price in liquidity (i.e.. the ability to shift volume at a certain price). When everyone wants to exit the building at the same time, there is a crush!
It’s very similar with financial policy making. They work from theoretical models, which might have some validity on paper or in small, closed situations but don’t hold up amidst the rampaging and unpredictable hordes of humanity.
This is what I meant by saying policymakers are operating out of the same toolbox and, therefore, can never find or consider solutions that might actually work.”
