Things Will Get Worse for Facebook Before They Get Better. A Second Act Is Required. Our thesis is simple. User growth has slowed and in the recent June quarter declined. We expect this trend to continue in the near-term as the following factors negatively impact Facebook’s business. Declines in User Trust and Engagement: The Cambridge…
Disintermediation Defined Disintermediation is when one party inserts itself between an interested party and its customers (see below table of “disintermediators” and “disintermediatees”). Ironically, parties that suffer disintermediation often invite it upon themselves. Google Disintermediates Yelp and OpenTable For the past several years Yelp restaurant reviews appeared on Google business listings (this appears to have…
Content Is King Content is King to quote Sumner Redstone. At CEORater we spend a fair amount of time thinking about content. Over the past 24 months we have considered the following for our platform: 1.) video streaming of earnings calls with associated analytics 2.) employee video reviews 3.) business news (original and third-party) and…
Successful CEOs possess each of the attributes described below. This is an unscientific analysis based upon my prior experience covering and acquiring companies (equity research analyst; M&A executive) as well as my current role as founder of CEORater.
It is important to recognize that while these attributes are qualitative in nature they do impact the bottom-line.
Effective communication is the most important attribute for CEOs to embody. Our lead photo is that of Steve Jobs, the Great Communicator.
- Great CEOs are great communicators: Great CEOs communicate effectively to shareholders, customers and most importantly – employees!
- Get your reps in: Jack Welch used to say that when he got sick of hearing himself repeat a particular message he knew that message was starting to take root with employees. Rocky Marciano knew the best way to maintain his edge on fight night was hard sparring during training camp.
- Coach the coaches: Want a force multiplier effect in your organization? Coach your direct reports.
Great CEOs hold themselves and direct reports (and by proxy all employees) accountable. Do not confuse accountability with intolerance for it is important to encourage smart risk.
Don’t shoot to kill: Sales person misses sales target. OK fine, no variable compensation reward for the period. What behavior will change as a result?
- Is there a communication breakdown in the sales process?
- Where is the pipeline weak?
- How are we engaging with customers and subsequently ingesting and disseminating that sales intelligence? Is that information circulated not only across the Sales organization but with Product Management?
If behavior changes for the better – i.e. improved communication – the miss may have been worth it.
3.) Employees First:
The tried and true principle of taking care of your own first. In return employees will take care of customers. The benefits trickle down to shareholders.
Past and present CEOs that put employees first:
- Sam Walton, Walmart;
- Aron Ain, Kronos;
- Jack Welch, GE;
- Tony Hsieh, Zappos;
- Bernie Marcus and Arthur Blank, Home Depot;
- Reed Hastings, Netflix;
- Scott Scherr, Ultimate Software
Don’t confuse “taking care” of employees with free lunch, coffee bars and foosball tables. Those trivial items may help at the margin, but at the end of the day employees want to be recognized and rewarded for successful missions – both large and small.
4.) Intellectual Curiosity:
Intellectual Curiosity is an attribute we have paid increasing attention to as of late as we began our CEO Personality Analytics effort this May (“Personality Analytics: Technology CEOs Analyzed“)
Our experience is that intellectually curious CEOs are never satisfied (that’s not to say they are perpetually dissatisfied). They are relentless about “what comes next?” and “what aren’t we doing that we ought to be?”
- Intellectually curious CEOs are more likely to solicit feedback from direct reports.
- They are motivated to find the truth, not to have their opinions validated.
- Intellectually curious CEOs are more likely to consider and deploy creative strategies and tactics to deliver customer value.
- They view obstacles as opportunities rather than impediments.
- Intellectually curious CEOs create “adaptable” cultures capable of flexing their business model as customer dynamics and competitive landscapes change.
We consider long-term to mean 10 years or more. Similar to the “time value of money” principle where investment decisions made today can have an enormous impact in the out years, capital allocation decisions made today can impact a given company’s competitive positioning and operations in significant and unimaginable ways 10-20 years in the future.
- Amazon (AMZN): As recently as a few short years ago analysts beat up Amazon for re-investing profits when AMZN appeared to be close to achieving operating profit break-even. Those investments made over a 24-year period (primarily in physical distribution) have paid off handsomely, enabling Amazon to offer same-day delivery service for a mind-boggling number of products. A competitive “moat” if I’ve ever seen one.
- SS&C Technologies (SSNC): Founder, CEO Bill Stone and his team have taken a measured, strategic approach over the years to augmenting the “core” business with a series of reasonably valued strategic acquisitions. This strategic approach has enabled the company to build the deepest and broadest product and services portfolio across the financial services industry in non-discretionary product areas such as portfolio accounting. Early in the company’s life-cycle certain acquisitions may have seemed somewhat inconsequential. However, 30-plus years and $13 Billion of market cap later the company is the leading Financial Technology provider with solutions that address back, middle and front office workflows across the Financial Services industry.
No love without trust. One could also use the word “transparent” to describe a CEO that exhibits consistent behavior whether engaging with a senior executive, a front-line staffer or a customer. We opted for the word “trustworthy” because at the end of the day employees typically describe their CEO as someone they “trust” or don’t trust.
Why is it important for CEOs to be trustworthy? If employees don’t believe you “have their back” – they are less likely to break theirs – for you or for the company.
Square’s Jack Dorsey – Tech’s Best Value Over Past 14 Months
We dipped into our CEORater database as we regularly do and ran a query to return the Technology stocks with the greatest stock price appreciation over the period January 3rd 2017 through February 23rd 2018.
We then took the Top 20 Technology Companies as measured by stock price appreciation during the period and asked the question: “Which of the 20 Technology CEOs were the best value in terms of CEO Compensation required to generate each percentage point of stock price appreciation?” For example, in the case of Mr. Dorsey at Square (tkr: SQ, Dorsey is also CEO at Twitter tkr: TWTR) who finished first on our list, for every $7 dollars of CEO Compensation the Company generated one percentage point of stock price appreciation.
Second on the list was Take-Two Interactive’s (tkr: TTWO) Strauss Zelnick at $183 of CEO Compensation for every percentage point of stock price appreciation generated. The table below details the Top 20 CEOs. Further, below the table each CEO name is linked to his/her CEORater profile page where additional detail may be found.
- Jack Dorsey, SQ
- Strauss Zelnick, TTWO
- Tobi Lütke, SHOP
- Lew Cirne, NEWR
- Jack McDonald, UPLD
- Michael D. Rumbolz, EVRI
- Matt Maloney, GRUB
- Guy Sella, SEDG
- Valentin P. Gapontsev, IPGP
- Martin Plaehn, CTRL
- Brian Halligan, HUBS
- Chip J. Paucek, TWOU
- Jayshree Ullal, ANET
- Vlad Shmunis, RNG
- Steven W. Streit, GDOT
- Kevin M. Sheehan, SGMS
- Philippe Courtot, QLYS
- Joey Levin, IAC
- Jen-Hsun Huang, NVDA
- Reed Hastings, NFLX
Bezos is Top Tech CEO with a Total Stock Return of 83,639%
We recently queried our CEORater database to identify the Top Technology CEOs as measured by stock price performance during each CEO’s tenure. Amazon’s Jeff Bezos topped our list by a wide margin. For purposes of this exercise it helped to have been a CEO for an extended period of time. It is also interesting to note that 8 of the Top 10 and 14 of the Top 20 CEOs on our list are Founder CEOs. We define “Founder” CEOs as those CEOs who were present for the first dollar of revenue earned. Additional detail may be found at CEORater.com. Contact email@example.com for Excel spreadsheet detail.
Yes if You Ask Us While AT&T moving to acquire Time Warner and Disney (and Comcast?) moving to acquire Fox are interesting deals, it’s more interesting to us what the next chess move may be in a world that increasingly values content (live sports and premium original content in particular). We recently wrote about and…
Disney plans to acquire 21st Century Fox in order to create scale for its OTT Netflix competitor. We previously wrote about the deal announcement here. Post close, the content streaming game is effectively a two-horse race between Netflix and Disney. Game over you say? Au contraire – the game has just begun!
No, we’re not referring to bit player Hulu – which Disney will own 60% of post Fox deal close. Rather, the media/technology landscape is not static. Apple plans to invest $1 billion in original content (TV and film). Amazon is a content juggernaut and will have invested approximately $5 billion in video content during calendar year 2017 (Netflix approximately $6 billion over the same period, $8 billion in 2018). Facebook announced a deal with the NFL in September 2017 to stream game highlights and is reportedly looking to hire executives to secure the rights to additional live sports-related content. Could TV and film be far behind for Facebook? You may have noticed that Google is pushing its YouTube subscription service if you’ve watched a YouTube video lately. However, we haven’t heard rumblings of YouTube looking to become aggressive in acquiring third-party content or investing in original content. Video content libraries are grist for the mill for these content giants. Every independent video content provider and content library (i.e. movie & TV studios) is “in-play.”
A combined Disney/Fox OTT service and Netflix are the clear OTT content leaders. However, when the dust settles we suspect that both Disney/Fox and Netflix will be acquired by some combination of Apple, Amazon and Facebook. Apple and Disney have a relationship and therefore we would favor Apple as the likely Disney acquirer. It is unclear if Apple would initiate takeover talks with Disney or if Tim Cook is a counter-puncher and would wait for another company to move first on Disney before making an approach. Our view is that Apple, Amazon or Facebook could potentially move on Disney as soon as the Fox deal closes or nears close. Disney negotiations with Apple or any potential suitor would likely put Netflix in play. This time around it may be more difficult for Reed Hastings to resist.
A Disney Fox deal could be announced as early as this week. “Content is King” to quote Sumner Redstone, and Disney in recent years has loaded-up on content (Pixar, Marvel, Lucasfilm) to push through its OTT network – BAMTech. Fox’s movie library would further bolster Disney’s original content library – feeding BAMTech’s demand for content. We fully expect that post-deal close Disney will begin to pull Fox content from Netflix’s platform similar to how it plans to pull its content from Netflix beginning in 2019. Listen to the CEORater Podcast to learn more: Ep. 93: Netflix Loses In A Disney Fox Deal.
AT&T Ought to Be Allowed to Acquire Time Warner “As Is” AT&T (T) ought to be allowed to acquire Time Warner (TWX) “as is” (earlier today AT&T extended the deal close deadline to April 22 2018). It is puzzling why the Justice Department would push back on the deal. We recently covered the topic in…