There is no question that a community north of 800million users has significant value. Zuckerberg is one of the brightest tech entrepreneurs of our generation and he has surrounded himself with the best (I am a fan of Sheryl Sandberg in particular). This business should make money and bucket-loads of it. I am not convinced that a market cap of $100billion at IPO is justified time will tell of course.

Factoring growth potential (which is what these IPO’s are all about) and in order to reach this order of value Facebook would need to increase its earnings to $6.5billion (at 15 times earnings) a year from $1billion (to the cent…what control!) in 2011 over a relatively short timeframe. This would require top-line revenue of $25billion at current earning margins. Revenue for financial year 2011 was $3.7 billion  … for those not mathematically inclined that is substantial growth – and they have been at it for a while .

The only way to grow into this valuation in the short term is through aggressive exploitation of the user base – the user base itself is the business being listed. I don’t see it happening.  In Zuckerberg’s letter to prospective investors he makes a number statements which provide us with clues to his headspace (three listed below):

“Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.”

“We don’t build services to make money; we make money to build better services.”

“We’re going public for our employees and our investors. We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment. As we become a public company, we’re making a similar commitment to our new investors and we will work just as hard to fulfill it.”

So here is my take on it:

Zuckerberg has adequately covered himself i.r.o the integrity of his “commitment to new investors” by making key statements of intent, and covering drivers behind the listing. Reading between the lines his commitment to his new shareholders comes with a big caveat – I intend to do things my way – and the choice of the word “similar” as it refers to commitment seems a carefully selected one. Frankly I am not convinced he is all that committed … his commitment is clearly and quite simply to Facebook and seeing through its vision.  His are words which the public would do well to heed before investing in Facebook.

Warren Buffet famously said “The market is initially a voting booth, but over the long term, it is always a scale.”

Pushing the boundaries of what is considered to be private has and will continue to be important for Zuckerberg to achieve the goals he has set out for himself and Facebook.  Being at the coal-face he understands better than anyone how crucial Facebook’s integrity is and the risks that accompany the aggressive exploitation of his product – you and I. Zuckerberg will grow the business but on his terms.  56.9% of the voting shares in the company will be the mechanism.  And earnings growth is unlikely to come at the pace the $100billion valuation will demand in order for it to hold its value in the short term.

I don’t see average Joe public being aligned on earnings performance so expect to see some short term action on this stock.

For what its worth I believe in Zuckerberg and his team – that they can grow Facebook beyond this market cap.  However I can not see this happening unless there is a shift in emphasis to a transactional model which will take time.  I do not believe the current valuation takes this timing, and associated risks into account.  As a conservative I would like to see at least some evidence of substantial earnings growth on the transactional side before buying stock priced at the valuations being thrown around.

So what does it mean for Cytrus and our customers:

In the short term there is going to be a huge amount of focus and innovation around Facebook’s advertising platform to overcome the inherent challenges Facebook faces with the ad model and grow revenues. We expect to see some groundbreaking stuff coming out of Facebook’s Open Graph initiatives allowing advertisers to target users with more relevant ads with higher conversion rates.  We are also paying close attention to developments on the transactional side.

1 in 5 pages viewed on the Internet in the US are Facebook and its of absolute relevance to our continent.  At Cytrus we are investing a bus load of time & energy in staying ahead of the curve in order to provide strategic advice and the technical skills and frameworks to engage, at the cutting edge, with this crucially important channel to your customers.

P.S. More than half of its users log on to Facebook using a mobile device, a wonderful transactional platform (not great for advertising though).  No doubt Zuck’s got some exceptionally sharp people working on it!

To get your own version of the application on your Android device search for “carapp” on the Samsung app store. (Remember to change your country option to South Africa)

Visit the Samsung app store

Less is more… the design and content of the site was driven by an insight from Saito in a paper he wrote on ‘The Moral Dimension of Japanese Aesthetics’ - he wrote – “Simplicity is not only aesthetic value, it has a moral perception that looks into the nature of truth and reveals the inner qualities of materials and objects for the essence”.

The website has depth in its simplicity, it reveals as much about the personality and ethic of the company as it does about our focus, track record and skills in things … well … aesthetic.

Well done to the Cytrus team.

The CARmagapp is a state-of-the-art Android application for fans of everything motorcar related and we believe it is going to be a game changer in the publishing industry and particularly in this vertical. The application brings the best of the CAR magazine as well as the CAR web sites together in one powerful, content rich yet simple to use application.

We at Cytrus regard smartphones and tablets specifically as the publishing medium of the future. You can take them anywhere, content is instantly accessible, the interactive experience is richer than traditional print media and let’s not forget … digital has significant eco benefits.

Our app combines:

1. instantly delivered media-rich articles;
2. interactive tools;
3. highly relevant context driven content;
4. personalization;
5. reference databases and;
6. social interaction with other readers, friends or publishers.

So what’s next … in the next 2 months we will focus on expanding the app’s capabilities to work with other services, including the introduction of some cutting edge tech and innovative concepts … but like the new cars released at the show … the details are under wraps.

We are extremely proud to be associated with Ramsay Media and Samsung on this project and look forward to being involved in the life-cycle of this splendid piece of technology going forward.

During the course of my association with various technology businesses and projects, some more successful than others, I have learned that there are two elements that are critical to the success of any technology business – these are:

• A clearly articulated vision, mission, objectives and a focused business strategy
• Strategy by discovery is as important as strategy by design and often more effective

These two elements may appear, at first glance, to be contradictory – they are not. The vision, mission and high level objectives of a business should be durable. Strategies (and the associated goals and programs) should change as discoveries are made through the process of execution. Incidentally it is Cytrus’ exposure to technology trends and innovation as well as the capability to manage change which means we are well positioned to address the needs of our clients. These two attributes are Cytrus’ biggest strengths, and strengths I would like to see built upon during my tenure as Managing Director.

The business strategy itself is part of our competitive advantage and is information better kept off the “world wide web”! Consequently I will limit the coverage of the business strategy to the philosophy behind its development and definition. On this basis I have chosen to focus instead on our vision, mission and values.

Our Vision

To be the premier web and mobile enterprise professional services and solutions firm in South Africa by June 2014

To originate, engage and invest in information technology based ventures, with the potential to generate exponential financial returns

Our Mission

• To advise, design, build and manage the development and integration of online applications and services which inform, connect and entertain users across multiple platforms and with a specific focus on mobile
• To generate exponential returns from ventures
• To remain small, lean and agile

Values

Cytrus is a commercially focused technology company. Cytrus upholds a culture of excellence, and quality, in everything that it does and at all times. Cytrus is a customer centric company and acts with integrity and professionalism towards its customers. Cytrus exposes itself to cutting edge technology and has a culture of innovative thought and the practical application of that thought.

And on that note it is great to be part of the Cytrus team, and I would like to thank everyone here for the very warm welcome extended to me.

About Andrew Davies:

Andrew began his career as a management consultant at PricewaterhouseCoopers working on ecommerce enabling ERP systems. He subsequently joined startup company Fundamo as a product architect. Fundamo is a mobile payment solutions vendor which was recently acquired by Visa Inc. In 2003 Andrew started a telecommunications business specializing in investing in, deploying and operating niche operator services in Africa. In 2006 Mediaring Limited (now Spicei2i Limited), an SGX listed telecommunications operator acquired a stake in the business. In January 2011 Andrew joined Teim Ventures, the holding company of Cytrus to assist in managing Teim Ventures’ technology portfolio. Andrew Davies joins Cytrus on a permanent basis in the capacity of Managing Director from 1st July 2011.

The site was built and designed by our talented team and released at the end of May, and the SA Ubuntu Foundation is already seeing the value.

Kevin Chaplin, Managing Director of the SA Ubuntu Foundation, and Clyde Mallon, Business Solutions Manager of Cytrus, and the author of this blog post, sealing the deal at the recent SA Ubuntu breakfast in Cape Town.

The SA Ubuntu Foundation was established by Kevin Chaplin, previously the Provincial Manager of FNB Western Cape, in an effort to build and strengthen the communities of South Africa. At the core of the SA Ubuntu Foundation is a vision of peace and equality.

What’s in a name?

Ubuntu is expressed in Xhosa as “Umntu ngumntu ngabanye abantu”, directly translated in English as “people are people through other people”. More to the point this means, “I am human because I belong to the human community and I view and treat others accordingly”. A truly African word for a universal concept, and what a great concept this is.

Showcasing a Proudly South African cause on the world’s greatest platform

Naturally, a universal concept requires a truly universal channel in order to share its vision with the world. There is surely no better channel then web.

Even old Uncle Bill – Bill Clinton that is – has some unique insights into the impressive reach of the web:

“When I took office, only high energy physicists had ever heard of what is called the Worldwide Web… Now even my cat has its own page”

– Announcement of the Next Generation Internet initiative, 1996

Whilst I sense that Uncle Bill may have stretched the truth a bit, there is certainly no doubt that the web is a powerful and exceptionally popular channel for spreading universal messages. With this in mind, Cytrus decided to lend our online expertise and web development skills to the SA Ubuntu Foundation – a great cause that we can really get behind.

Cytrus evaluated the SA Ubuntu Foundation’s needs and soon realised that they needed a little more than just a website. By taking the administration of their monthly breakfasts online, we were able to simplify a great deal of the administrative work associated with these breakfasts.

The recent SA Ubuntu Foundation networking breakfast at the Hilton Hotel in Cape Town

Cytrus is excited to be involved with the SA Ubuntu Foundation and looks forward to helping them take their vision to the world, by providing them with the an effective online platform to do so. Who knows, maybe even Bill Clinton’s cat will catch some ‘Ubuntu fever’.

Check out the SA Ubuntu Foundation’s fantastic new website now.

This week, our Product Manager Retha took to the blogosphere to share her thoughts on group buying schemes – a concept that, she says, has fascinated her for quite some time.

Here are her thoughts:

When I first read about Groupon’s success internationally I was quite intrigued as it makes perfect sense that social media will end up having a great influence on the success of a business, where word-of-mouth is the main marketing drive. My interest in social media and the influence it has on business is no secret, so I was very quick to register with local sites when they started offering group buying specials.

A group buying scheme basically works like this: A supplier of a product or service uses the group buying scheme to market a special, offering one of their products or services at a hugely reduced price for a limited time, sometimes also limiting the number that can be sold. They specify a minimum number of people who have to buy in on the deal before the “deal is on” and open to further buyers. If this minimum is not reached, the deal is supposedly not “on” and falls away, but I have yet to see this happen.

You can understand how it would work for buying a product such as a heart rate monitor, as with this offer by UbuntuDeal in February offered at 50% discount. The company who sells the heart rate monitors will probably pay less per unit if they buy in bulk from their suppliers, or if they have stock they need to sell quickly. Everyone is happy: The supplier who sold 23 heart rate monitors, the 23 people who bought these at 50% discount, and UbuntuDeal, who made some money on the deal for the use of their platform and their marketing of the special.

Here’s another example of an actual special on Twangoo.co.za earlier this year: Vredehoek Laser & Beauty Clinic offered a full body massage, body scrub, mani & pedi at R299, a saving of 60% (or R451) on the usual price of R750. I bought in on this one and had a wonderful massage, scrub, mani & pedi just as it promised – all for R299! Bargain! What worries me about this type of offer is how long it took to do – 2.5 hours – while keeping one therapist and a room busy for all of that time. Knowing that they sold 182 on Twangoo and 120 on Groupon in just 11 of the usual 24 hours, that is 302 treatments of 2.5 hours each, keeping a therapist and a room busy for 755 hours. Using the opening times advertised on their site, they are open a total of 45 hours per week, so it will take one person over 16 weeks to do all the treatment sessions sold in this special.

While the vouchers are valid for 6 months, we all know the desire for instant gratification when you have just spent money on something you want! Everyone started calling straight after they bought the voucher, and the beauty clinic had a hard time satisfying them all with bookings. Take into consideration the inevitable cancellations and postponed treatments when made so far in advance, as well as the products used (such as body scrub, acetone, nail products, massage oils, etc) and public holidays, and you start to get the picture. I wonder if it was worth it for the clinic?

I have no doubt that the 302 people walking through the Vredehoek Laser & Beauty Clinic door led to new clients who made bookings for further treatments, but I can’t help thinking that they may have chosen the wrong treatment(s) to offer this way. If they had chosen to offer a mini-manicure or pedicure, which can take as little as 30 minutes and can be done in a more public space (and while the therapist could have been talking to the client and introduced other treatments), would the beauty clinic have got more out of the deal?

I feel it’s also necessary to mention at this point that Vredehoek Laser & Beauty Clinic did not get the full R299 per treatment either. Remember Twangoo and Groupon did a lot of work from their side to build a trustworthy name in the industry, as well as to style the page for the offer, market it and provide the platform for receiving all the bookings and payments. They are expected to take a cut of the revenue, and according to insiders, this can be as high as 50-60%. This would have left the beauty clinic with only 25% or less of the original value of the treatments sold. (I understand each deal is negotiated with the supplier, so there are no fixed rates).

My point is that while consumers certainly score by buying products or services this way, the suppliers should be careful not to overextend themselves by offering unsuitable products or services. My feeling is that there should be some guidance from the group buying sites (like Twangoo, Groupon, UbuntuDeal, Dealio, Skoop, Wicount, MyCityDeal, Dealson and others) on what will be the best deal to offer on their sites. This will also help maintain consumers’ confidence in the ability of suppliers to keep up their end of the bargain.

One other thing I have noticed about the suppliers/advertisers on group buying sites is that they may provide incorrect information to these sites and the consumer will assume the information is supplied by the site. An example of this is the Popular Mechanics deal offered earlier this year where the offer on MyCityDeal mentioned the R108/year discounted rate as being a 70% saving on a 12-month subscription to Popular Mechanics, but when I checked the Popular Mechanics site I noticed they quote their standard subscription at R22,50 a month including VAT and postage, thus R22,50/m x 12 = R270. This makes the saving only around 40% on the advertised subscription rate, although the 70% discount is easily explained as being on the shelf price of the magazine. It would do the group buying sites well to ensure the information they publish is correct in order to keep consumers from mistrusting them!

That all said, I am a consumer – and a very wise one at that. I love nice things, I love being pampered and I love a good bargain! Thus I have bought into a number of these deals over the past few months and will continue to do so while I watch with interest to see how this industry unfolds, and how many more group buying schemes will appear on our local web. As long as they understand and keep in mind that they’re walking a tight rope with most of their referrals done via social media and word-of-mouth, and thus putting the consumers solidly in charge of their success and that of their suppliers, they will continue to be used and referred by both consumers and suppliers.

Silicon Cape aims to create an environment that attracts promising entrepreneurs, local talent and investors, thereby encouraging innovation and giving start-ups a platform for success. The initiative was launched by Justin Stanford (Director at 4Di Capital) and Vinny Lingham (founder and CEO of Yola, Inc.), who were inspired whilst on a trip to Silicon Valley. Since then the event has evolved and attracted a lot of interest from the IT community, both locally and abroad.

The Silicon Cape hosts networking events once a quarter, with the aim of getting all of Cape Town’s top talent and investors in one place. Aside from networking, relevant speakers are selected from the community to share their success stories and encourage and support local start-ups. Not to forget the Elevator Pitch, a unique Silicon Cape initiative that gives 6 individuals/start-ups a minute to pitch their greatest idea to the community.

With the event being hosted at La Med, you couldn’t imagine a better way to spend a summer afternoon in Cape Town, especially with Cell C picking up the bar tab.

After lounging around on the deck with a cold one we were encouraged to come in side for the presentations. The event saw presentations from MoTribe, GrouponZA (formerly known as Twangoo) and Cell C.

Vincent Maher and Nicholas Haralambous from MoTribe built a mobile social network that has attracted some 500,000 users in just a matter of months. They gave some insight into how they took an idea and turned it into a business venture that has recently attracted capital investment from 4DI Capital.

Groupon, the world’s largest group buying site, recently acquired Twangoo, the successful South African group buying website. Wayne Gosling and Daniel Guasco from Twangoo shared their experiences and the background on their origins and future plans.

Lastly, the Cell C CEO showed up to discuss the importance of broadband in Africa. No, not Trevor Noah, but Lars Reichelt himself! He also explained how better broadband capabilities would help to further the goals of the Silicon Cape, and he unveiled the company’s latest tech offering: Mytools, an online tool to give mobile phone users the ability to manage all aspects of their phone calls and voicemails online.

Amid the presentations, Cell C decided to up the bar tab by another R10 000; the food was served, including the most amazing cocktail hamburgers, and people mingled and networked to their hearts’ content. Not forgetting that all this took place against a near perfect backdrop offered by Cape Town.

With more events like this it is only a matter of time before Cape Town does become the Silicon Valley of Africa.

And, just in case you were still confused as to why this is all happening in Cape Town, here’s another view from our spectacular spot that evening.

2010 speakers include: Pregs Govender, Commissioner of the SA Human Rights Commission, Rudolf Gouws, Chief Economist at Rand Merchant Bank, Jeff Radebe, Minister of Justice & Constitutional Development, Lt.Gen. Mzwandile Petros, Provincial Commissioner of SAPS in the Western Cape, Kuseni Dlamini, CEO Old Mutual SA & Emerging Markets, Braam Malherbe, who ran, walked and climbed the Great Wall of China in 98 days, Sindi Mabaso Koyana, Group CFO at the Passenger Rail Agency of SA, and many more!

Guest speaker Gary Kirsten inspires at the Vineyard Hotel

The January meeting took place last week at the Vineyard Hotel & Spa where 130 business people attended this prestigious event. The speaker, Gary Kirsten, ex-SA Cricketer and coach for the Indian cricket team, entertained everyone with tales of his years as a cricketer for South Africa. His vision and plan for the Indian cricket team is clear and inspiring, and even the less sport-mad among the attendees (like me) were hanging on his every word.

The format of these meetings is centred around the main speaker, with one or two sponsors being given the opportunity to highlight their product for a few minutes each. Kevin Chaplin usually entertains the meeting with a few truths and even some African language lessons, and some lucky draws give more time to highlight products. Each attendee is given the opportunity to state their name and company name to the whole meeting, and those who take the chance to say more are usually fined by Kevin in his usual firm-but-friendly way.

Altogether, the meetings are very well run by an experienced crew in an entertaining way. No formal networking is facilitated around the tables but attendees are encouraged to network with each other once the speakers are done. I find attendees very friendly and keen to meet new people – even the high profile business leaders are relaxed and open to being approached by anyone who’d like to meet them.

The venues are always out of the ordinary for a business network meeting. A few examples of previous venues are: the beautiful garden of the Belgian Embassy in Newlands, Protea Fire & Ice Hotel in Gardens, Atlantic Imbizo Conference Centre and the Pavillion in the V&A Waterfront. The food is outstanding, and there is ample time and space for networking before and after the event. At the last two events, the attendees were also entertained by the talented Gugulethu Tenors!

SAUbuntu’s Ilchen Retief sends a list of attendees before the meeting to all who will attend and this helps to identify who you would like to meet and allows for some research on their credentials and companies. Networking at its best!

About SAUF

The SAUF was established in 2006 by Kevin Chaplin, former Provincial Manager of First National Bank Western Cape and now SAUF’s MD. Kevin also heads the Amy Biehl Foundation where several amazing programmes make a difference in sports & recreation, arts & music, health & safety and education in South Africa.

For more information and invitations to this outstanding networking opportunity, go to http://www.saubuntu.co.za or send an email to ilchen@saubuntu.co.za.

bada, Samsung’s own open mobile platform, was launched one year ago. It gives developers the opportunity to create mobile applications for Samsung handsets, millions of which are used around the world. Cytrus is one of the few companies in Africa that has the expertise to develop applications for this platform.

Download the African Weather Forecaster, Lotto Results or Sky Cycles Calculator apps now at http://www.samsungapps.com