Here are some interesting quotes from the document:

Search Advertising Likely to Be Winner in Macroeconomic AftermathAlthough we acknowledge that all types of advertising, including search, will likely be hit by advertising budget reductions in 2009, we think search advertising will be the long-term winner in the reshuffling of budget allocations. We believe the weak macroeconomic environment has forced advertisers to test performance-based search advertising at an accelerated pace. Even after economic strength returns, we think advertisers will stick with their new allocations based on better metrics and higher measurable returns. Specifically, we see newspaper and radio advertisements suffering the most from these budget shifts.

Social Networking Needs a New Monetization Approach
We do not believe social networks can drive sufficient revenue from an ad-based model to grow profits. We do not expect broad adoption of advertising on social networking sites by large advertisers, and we think that, to the extent advertising takes hold on social networking sites, it will more frequently be in the form of performance-driven ads than display. We believe the near to medium term presents several significant challenges to the adbased revenue model for social networks that will prevent these sites from reaching their valuation expectations:

Ad spending forecast looks weak. In a weak ad market, with allocations declining to a variety of existing media, we think adding another experimental ad channel could prove difficult.

Large advertisers may be put off by environment. We continue to believe adoption could be particularly slow among traditional advertisers, which may not want to advertise their brand alongside content they can’t fully control.

Advertising on social networks can be complicated. Successful advertising on these sites involves more than just an incremental extension of existing campaigns. Some advertisers end up pulling back after an initial lack of success, while others are reluctant to add yet another wrinkle to their marketing approach.

Given the above challenges, we think revenue at social networks will need to come from sources other than display advertising. We see several possibilities, not all of which can apply to each network:

More performance-based advertising models, such as CPA ads or lead generation;

Sales of virtual goods, which can further the depth of the user experience on a social site;

A model that exposes a site to the classifieds or eCommerce markets, both of which are gaining market share from their offline counterparts; and

Paid premium memberships or selling a la carte paid features (such as the ability to post more or higher-quality photos).

Several sites are already pursuing a variety of these approaches (both LinkedIn and Classmates, e.g., sell premium memberships). We expect much more experimentation as the market continues to mature.

The Internet Is More and More a Performance-driven Model
Over the last five years, performance-based advertising has gained market share over the CPM-based model. This trend is most clearly seen in the U.K., where the online ad market is more mature (~15% of ad dollars are spent online compared to only ~8% in the U.S.). In the U.K. market, we think roughly 85% of total online ad dollars are spent on the performance-based model.

Mobile Is Long-term Interesting, but Near-term Challenging
With 84% of Americans using mobile phones (CTIA), we firmly believe the mobile market is a promising opportunity. Given this level of reach and better mobile Internet technologies and hardware, we think this medium is becoming attractive to advertisers. As a result, Google, Yahoo!, and MSN are strategically focusing on establishing market share in this industry.

However, although mobile phone penetration is high, the mobile search market is in the early adoption stage. In 1Q’08, only 15.6% of wireless subscribers were using mobile Internet services, according to Nielsen Mobile data. Even within this small subset of mobile Internet users, usage drastically trails that on PCs. Nielsen Online reports that the PC Internet user visits more than 100 domains per month, whereas mobile Internet users visit 6.4 individual websites per month, on average.

We think mobile Internet adoption will not accelerate until the introduction of better phones and technologies. 3G networks perform up to 6x faster than prior mobile Internet networks (Nielsen), which we think will greatly improve the user experience and make it more comparable to that on a PC. Additionally, new phones such as the iPhone have improved the size and resolution of the screens. However, we note that smart phone technology has not yet become the norm and uptake of mobile Internet likely has a ways to go. Additionally, we find it unlikely that advertisers will quickly be adopting mobile advertising. In addition to not having the scale and reach of the Internet, mobile advertising is difficult, as it involves dealing with multiple ad networks and mobile service providers and creating ads that can be viewed on small screens. Furthermore, we think advertisers will cut back on experimental models of ad spend in the face of this economic recession.

I tend to agree with many of the points made. This document is packed with a ton of good research and insight into the online market. Obviously, the opinion of J.P. Morgan analysts isn’t necessarily fact. This document is packed with real facts and figures that are accurate and some good insight based on these vales. If you want to download it and check it out click here: Click to Download the J.P. Morgan Internet Investment Guide

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This talk was filled with interesting and useful information on a variety of topics, but a portion I found particularly interesting was an example Charlie gave to illustrate a point he was making. He was talking about Carl Braun and said, “His rule (Carl Braun’s) for all the Braun Company’s communications was called the five W’s you had to tell who was going to do what, where, when and why. And if you wrote a letter or directive in the Braun Company telling somebody to do something, and you didn’t tell him why, you could get fired. In fact, you would get fired if you did it twice.”

This struck me as a simple but wonderful idea, albeit a bit harsh. As a manager I am constantly in a position where I am asking employees to do various tasks with little or no explanation. After reading this, I thought about my own experiences doing the bidding of my managers. I could recall many instances where I became upset about being asked to do something. Usually because I didn’t understand why it needed to be done or why the individual asking couldn’t do it themselves.

Over the last few years as I have transitioned into a management role I have found that this is more difficult to do than I previously thought. As a manager, my time is often spread very thin and I rarely have time to stop and explain every detail of each decision. Due to this, I am likely frustrating my employees just as my previous managers have frustrated me. This same disconnect can easily happen between two employees on the same level as well. One employee asking another to perform a task may be seen as one employee being lazy and pushing their tasks onto another. This may or may not be the case and given a proper explanation for the request the employee is more likely to happily complete the task.

Encouraging yourself, and your employees to communicate the reasoning, or “why,” behind their requests will help in a couple of ways. First, it will help others understand why they’re being asked to do something. If justifiable, they will be less like to become frustrated or disenchanted with the organization and you as a manager. Second, this will discourage employees and managers from unnecessarily passing work onto others. If someone doesn’t have a real reason or explanation of why they need to pass on a task then they will be less likely to pass the buck.

The entire transcript can be found at:

http://vinvesting.com/docs/munger/art_stockpicking.html

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I have always admired Warren Buffett as a businessman.  In the often unethical world of business he has managed to construct a sustainable empire based on ethical business practices and sound investment policies.  As a finance student I spent a great deal of time analyzing his methodology.  Over the years I have read a number of books and articles about Warren Buffett and his investment style. I have enjoyed reading about Warren predicting the fall of over priced tech stocks prior to the burst of the tech bubble. I also remember reading in Berkshire Shareholder letters Warren Buffett’s prediction in 2006 of future problems in the housing market, the same ones we are now experiencing.  It is easy to see how investors and society can easily get caught up in these bubbles and in retrospect his point of view makes perfect sense and matches perfectly with the strategy that has made him the world’s richest man. The hard part is avoiding the trends in the first place.

Anyway, I am very anxious to start reading The Snowball.  I will report back here for whoever may be interested.  The book is quite long so I would imagine I will be working on it for awhile. For now, I am going to go start reading about Warren Buffett the anomaly.

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