David Rosenthal: recommendation

Transcript context

…But I guess the point I'm making is maybe it's the single largest high margin addressable market by a number of consumers perspective, but from an absolute dollar perspective I bet those other markets are larger. The only difference being, you actually have to do the hard stuff like making the food, bringing the food, whatever it is, cars, making cars, margins, segments. Online advertising knows no segments. Everybody Googles. Everybody has a social network account. It's crazy, and ease of scale. I don't think the amount of revenue available in online advertising compares to the amount of revenue available in residential real estate. However, the reason these market caps are the way that they are and the reason these multiples are the way that they are, is gross margin, lack of segmentation, and gross characteristics. Ability to scale, yes. Now, what we're talking about at the end of this episode in our clips with Hamilton as we talked about in the whole episode with him, the mistake that VCs always make is they only look at market size. That's only one half the equation. The other half of the equation is your ability to create defensibility within that market. We haven't talked about that in this episode, this is not the time and place for it, but all of the top companies on this list were able to do that. The other two quick sub-bullets of that that I want to say are, if you look at all these acquisitions on the list with a couple of notable exceptions (DoubleClick being a really notable one) these acquisitions were done early in that particular markets development in the life cycle, the market. Hamilton also talks about this. It's the growth phase of a market, that's when you can create power. You can create defensibility. If you wait too long, you can enter markets later but you're never going to dominate a market unless if you until later. Now, DoubleClick is interesting in that Google bought that in 2008. I think DoubleClick was founded in 1995. But you could argue. That was an evolution in the market anyway. My other sub-bullet is, if you're big-game hunting, if you're big elephant hunting, price doesn't matter, bring a big gun. You can spend $1.65 billion for YouTube and still end up number three on the list. All right, David. In the final section, most commonly known as grading in every other episode, we're going to use this to talk about things we might want to adjust in this list.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.