Facebook and Google generate over $1Mn in revenues per employee annually

Among the tech giants, Facebook's average revenue per employee is the highest, at $1.16Mn/employee, just marginally ahead of Google's. 

So what does a high revenue per employee indicate? Basically, it indicates the revenue generating efficiency of a tech business, where the primary cost driver is really the employees - engineers, managers and sales people. Of course, this is not a perfect measure. Amazon for example, wouldn't technically be as comparable due to their costs of physical goods, but by and large, this works for most tech and knowledge-based companies.

This metric also indicates how much the company can invest in talent. With over $1Mn of revenues per employee, both Facebook and Google can both offer employees better direct compensation. More importantly, they can also invest in top-notch infrastructure, support and perks for each employee. Being able to cream off the best talent in the industry and supporting them well would go a long way in sustaining competitive advantage. 

The open question of course, is whether Facebook can scale revenues by10x to Google's $38Bn while maintaining the same employee revenue efficiency, or would it do even better. My guess is that Facebook's revenue per employee would decline from here - mainly because they'll start to employ more people into adjacent areas of growth where monetization won't be as effective as the core business (e.g. a recruiting a full division for Instagram where there's still no revenues...)

Motivating the killer zombie game designer: Valve Software

Valve is the company that is responsible for many hours of sleep deprivation during my time in college. Instead of running simulations for my GPRS thesis, I'd be up late at night fragging my fellow hostel-mates on Counterstrike over the LAN. It set a new bar for FPS games and has continued to do so with new titles, including the super fun Left4Dead that pits you and your buddies against the zombie apocalypse.

Valve's employee handbook was recently published on the internet and it is a humorous, well-illustrated and  well-written document. It shows what it takes to run a company that relies on creativity and innovation. Much of it resonates well with what Daniel Pink writes about  in his book Drive. The core idea is that businesses in the new economy need to think about new ways to motivate (and implicitly, attract) employees. Carrots & stick approaches work well for repetitive tasks where efficiency matters, but not for spurring creativity and innovation. Daniel anchors around three elements of motivation : Autonomy, Mastery and Purpose. I've highlighted how Valve puts this in practice, at times quite radically:

Autonomy : Freedom to direct own work

- It starts off with self-directed project involvement. While poking fun at Google's famous 20% time, Valve allows full autonomy for employees to sign up for projects

"We’ve heard that other companies have people allocate a percentage of their time to self-directed projects. At Valve, that percentage is 100. Since Valve is flat, people don’t join projects because they’re told to. Instead, you’ll decide what to work on after asking yourself the right questions. Employees vote on projects with their feet (or desk wheels)."

- Informal teams instead of hierarchical org structures, titles and job descriptions. Teams and roles are formed and structured organically and are temporal to the project. 

"Project teams often have an internal structure that forms temporarily to suit the group’s needs. Although people at Valve don’t have fixed job descriptions or limitations on the scope of their responsibility, they can and often do have clarity around the definition of their “job” on any given day. "

Mastery: Getting better at something that matters

- Explicitly calling out the need for broad skills and expertise within an area. 

"The most successful people at Valve are both (1) highly skilled at a broad set of things and (2) world-class experts within a more narrow discipline."

- Evaluating performance closely based on mastery. Instead of performance metrics that are team-based (e.g. sales), evaluation is based on individual contribution and mastery plays a large role. Valve gets the teams to rank their team members based on (i) Skill/technical ability, (ii) Productivity, (iii) Group contribution and (iv) Product contribution. 

Purpose: Contributing to something that is larger than oneself

- Being part of top-rated games played by millions of people already should be an impressive purpose, but the handbook goes further in painting out the purpose.

"Valve will be a different company a few years from now because you are going to change it for the better. We can’t wait to see where you take us. The products, features, and experiences that you decide to create for customers are the things that will define us."

All very Utopian... and raises questions to whether if all this is all nice internal PR. I think what makes this real though, is that they recognize what they'll not be good at by taking this path. 

As Michael Porter puts it "Strategy is about making choices, trade-offs; it's about deliberately choosing to be different". Too many companies say they want to do empower employees and remove hierarchy, etc. but in designing their org and policies, also start introducing elements for maintaining consistency, structure, etc. - leaving them with no HR strategy at all and nothing more than a set of hollow new mission and vision statements. 

Ad blocking

Two parts of this post, one on AdBlock, the product. 

The other part with my thoughts on the potential implications of online ad blocking. 

I installed the popular AdBlock extension to my Chrome browser and realised how much difference it makes to the browsing experience on some sites. 

The extension seamlessly removes ads off any websites you browse, reducing the clutter significantly. It also does the same for video ads, so YouTube pre-roll ads are skipped and it removes the in-video text ads too. 

It comes with a simple but good-enough set of options, including which sites to apply ad-blocking, temporary pause ad blocking and lets you edit and add advertisement filter lists.

For Firefox users, there's Adblock Plus.

For Safari users, there's Safari AdBlock.

For IE (why are you using this??) , there's Simple Adblock. 

Here's an example for Facebook before and after:

Here's an example for Google search. I've set it to allow ads for Google search though, since the ads tend to be quite relevant and aren't as intrusive as display ads. 

Few thoughts as I use this... 

Probably not a significant threat to the digital advertising business in the near term 

There's already over 4 million users of AdBlock for Chrome and 12 million active users for the Firefox version. However, I don't think there'll be a significant enough usage of such blockers in the near term to really threaten the industry directly, plus the folks who have ad-blockers installed are likely to be those who don't click ads anyway. 

"Independent" browsers could win in the longer run if ad-blocking becomes popular 

In the scenario where ad-blocking becomes more mainstream, the browser wars would then tip in the favour of browsers like Safari and Opera where their parent companies don't rely as much on advertising for revenues.
I'm impressed that Google has allowed this ad-blocking extension on Chrome, even though this directly threatens advertising revenues (over 98% of their 38Mn revenues last year). Still, I'm not sure they can do so if there is truly significant use of this - imagine the conversations between the Chrome product manager and the Search/Display ads product manager..

Arms-race between ad-blockers and advertisers in video ads space
The conflict between content-providers and ad-blockers could be more pronounced in the video ads space. These tend to be the ads that are more intrusive (e.g. pre-roll videos) and user would be more willing to pay to skip these. Meanwhile, for video content providers, these are the ads where number of impressions and length of engagement matter most since they're designed to build brand/product awareness for advertisers, very much in the same vein as traditional media advertisements.
This would then lead to competition to out-fox each other from technology perspective, with advertisers looking for ways to detect and prevent content delivery if blockers are found, while ad-blockers keep searching for new ways to provide the service while remaining undetected to content providers.

What Facebook is getting for 1Bn

There's already a slew of coverage on the 1Bn price paid for Instagram by Facebook, and some views on what triggered Facebook to do this - mainly focusing on Facebook panicking at the growth of a potential challenger:
- Here's why Facebook bought Instagram [GigaOm]
- Did Facebook panic? [CNNMoney]

Price aside, does this purchase make sense? What is Facebook actually buying here?
They get 13 employees who know a thing or two about social & mobile photo app development and a ~50Mn mobile installed base. I think what really makes the case though, is the 1.5Mn photos posted daily by Instagram users. While this pales in comparison to the 250Mn posted on Facebook daily, these are the types of photos that delivers the user engagement that Facebook can monetize.
1. They're current - taken and uploaded on the go
2. Instagram photos are the ones that generate the most comments and interactions on FB, much more so that, say, full album uploads from the desktop
3. In most cases, you reveal location with these photos - more data for targeting ads

If Facebook is valued at $100Bn, then Instagram is fair value at 1bn as long at it increases users' time spent on FB by over 1%

AirBNB, Wimdu and Roomorama in SE Asia

Triggered by the news of Roomorama merging with Lofty, and having a lot of time over this Easter break, I took an interest in looking at AirBNB, Roomorama and Wimdu recently to see how they are doing in South-east Asia and which would be best for a traveller to these parts. For those unfamiliar, these companies are all short-term rental platforms - allowing travellers to rent from people who are willing to rent out their rooms or homes. 

Actual traffic and users for each site are not easy to find, but it's relatively straightforward to check out how each of these sites perform from a supply perspective. 

AirBNB

AirBNB leads overall listings in major SEA markets, with ~35% more listings overall to the next site. Besides Malaysia, where they have a clear lead, they're neck for neck versus either Wimdu or Roomorama in most of the major markets (see chart). 

They have a significant lead in user reviews though, implying higher user engagement than the other two sites.

Roomorama

Despite the Roomorama's base in Singapore and its Asia-focus, Roomorama lags AirBNB in terms of inventory in SEA. It does however, lead in the main market of Thailand, and has carved out a strong lead in the niche country of Cambodia. 

The listings aren't always true 'B&B' and tends to feature budget or boutique hotels. This puts Roomorama in competition with the Expedias and Hotels.com of the world. 

Wimdu

I had expected more from Wimdu, given the big push by its parent owner, Rocket Internet into South-east Asia over the past few months. From the job listings on its site, Wimdu seems to be mainly run out of Berlin now and in the region, there is only focus on Singapore, and oddly enough, Philippines, which I can't quite explain. 

In conclusion, I'd probably use AirBNB on my next in-region vacation, but if I were to list a room, I'd list on all three sites as they all seem professionally done up, seem to have sufficient traffic, and have minimal cost differences. Roomorama is the cheapest for hosts - 0%, while the other two charge 3%.