Bubblewatch

Now that Facebook has filed it's S-1 it is possible to look at the actual reported numbers, which are in short for 2011:

Revenues £3.7bn
Operating costs 2bn
EBIT $1.7bn
Tax $0.7 bn
Profit $1 bn
845m users

The chart above compares the Facebook valuation against fundamentals with Google. Note that I use Google's IPO filings, its actual performance in 2003 turned out to be far better (c $1,5bn revenues and $350m profits), whereas Facebook's probably won't be.

What it shows is that Facebook is in essence trying to get about 15% more value per $ of revenue (or 75% more if you plug in Google's actual 2003 performance), and underlying that is an assumption of a c 2 x valuation per user and per user dollar earned vs Google. Now Google overperformed, so it's not unbelievable at all that Facebook will hit its valuation too, but as it has set the bar higher Facebook will still be under more pressure to deliver the results than Google was.

So, what do we have to believe to believe that Facebook is worth the $100bn?

Firstly, you need to believe that the numbers are even achievable. A valuation of $100bn on a user base of 845m implies a valuation of c $118 per user, within a reasonable timeframe. In financial modelling that is usually taken as 5 years. There are about 2 billion people online today, most estimates think it will be about 3-3.5 billion in 5 years or so time, a reasonable estimate of the the maximum Facebook user base is probably in the region of about 1.5 bn, ie roughly double today, so let us assume the endgame is the valuation of $100bn over 1.5m people, ie about $70 per person in 5 years time. A simple approximation therefore is that Facebook needs to go from c $70/5 = c $15 ARPU, from the c $4 today. Incidentally, Google's ARPU is about $18 today. So it comes to this - do you believe that Facebook can eventually make the same sort of ARPU as Google does, and keep its current market share? Bear in mind that the next 800m people Facebook adds will have much less disposable income than the current 800,000, so the ARPU growth in ratio terms is far higher than Google had to do, as it grew from a smaller base into a wealthier market.

Secondly, long term, ultimately valuation is based on profit. Facebook has a higher profitability than Google at IPO, at c 25%. Google's IPO was c half of that and it only hit the c 25% sort of ratios c 2 years after IPO, and has more or less stayed at around that level. Google now has a c $150bn valuation on c $40bn revenues and c $10bn profit, so for Facebook to justify $100bn longer term you have to believe it can hit c $6-7bn profits, ie revenues of c $24-28bn in about 5 years, and maintaining profis at about 25%. So the question is do you believe there is a sustainable 6-7x growth in profits?

Thirdly, to believe the above two things, we pretty much have to believe that Facebook has as easy or easier a time in the next 5 years than Google has had, ie you have to believe competition and regulatory interference (little surprise the Facebook is beefing up its lobbying arm) will be at worst the same, preferably better and that it makes better use of its cash in funding its growth.

Now this is not a "proper" analysis, but it does bracket the relative IPOs and trajectories for comparison. What it boils down to is that Facebook has set a significantly higher value per dollar earned and user gained than Google, and you have to believe Facebook gets a fairer wind for the next 5 years than Google had over its first 5 years post IPO to justify the $100bn valuation. In other words, you heve to believe it is a (2x) better company than Google.

Do you believe that?

We were asked last week by the Grauniad to comment on the Facebook IPO valuation (see here), and to contrast it with Google, as excitement increases (or maybe not). The valuation I will deal with later, but the compare and contrast with Google is very interesting. In a nutshell, at IPO Google:

- Had revenues of c $1.5bn and had been profitable for several years, making c£350m in the pre-IPO year
- Was a $23bn IPO, ie a ratio of about 15 of IPO $ value/$ revenue, and sold c 8% of its shares at IPO
- Had c 50% of the search market share of about 1bn people online at the time, and was achieving about $2-3 annual revenue per user (ARPU)
- If you assume that translates into about 500 million users, Google's IPO value per user is about $50
- Had been going about 7 years

Facebook is something like this (considerable connjecture, as its reported finances vary widely):

- Revenues of between $2 and $4bn in 2011, profits between breakeven and $1bn (depending on who you read)
- Is seeking a $80 - 100bn IPO, ie a ratio of between c 25 and 50 (on $4bn and $2bn revenue estimates respectively) IPO $ value/$ revenue, and will sell c 10% of its shares
- Which translates into a c $2.5 - $5 ARPU of current users
- Has c 800 million registered users, of about 2bn people online - about 40% of all users - at $100bn that is a $125 per-user valuation
- Has been going for c 8 years

So, Facebook and Google have quite a few similarities at IPO, but there are 4 glaring differences:

- Whichever way you look at it, Facebook's valuation as a ratio of its business fundamentals is 2-3 times higher than Google's
- Facebook's user base is expected to grow by c 25% - 33% next year and revenues are expected to grow by a similar amount. Google more than doubled its user transactions and revenues in the year after IPO.
- The ratio of IPO value to user ARPU was c 16, for Google, c 30 - 50 for Facebook
- Arguably, Google faced less opposition from elsewhere (privacy etc) that could impact the business model profitability.

My take is that Google IPO'd earlier in its growth trajectory, and was able to more easily "grow into" its IPO value both because it had a lower valuation as a proportion of its fundamentals, and it had more growth in it as less users were connected at the time and revenue is not bounded by registered users but by number of searches per user.

Now, as to the Facebook valuation - is $100bn overvalued? The answer is "what do you need to believe to get to $100bn". If you believe it is worth $100bn, then you need to believe that:

- That the ARPU of c $2.5 - $5 per user can be made to fund a per-user valuation of $125.
- Google had $2-3 ARPU on $23m valuation, and ARPU is c $20 today - so Google hit its numbers. Do you believe Facebook can make a similar jump in ARPU?
- There is probably about a maximum doubling of Facebook users possible, so you have to believe by far the bulk of this growth is in revenue per user from Ads, games etc.
- That Facebook's business model is very scalable, and that there are better economies of scale in Social Networks than in Search so profits are long term sustainable.

So, what do you believe.....

This is a classic dotcom IPO play (small number of shares on sale, lots of hype, very high valuations). Very few make the grade. Google managed it, and more, and today has a comfortable $150bn market cap - but Facebook has set itself a far higher set of bars. In other words a lot more things have to go right, for a long time, for Facebook.

The really inteesting thing will be when Facebook's numbers are published, and every analyst worth their salt will try and work out how the above will be achieved.

But one thing is for certain - this is the starting gun for the Social Media bubble, as we predicted a year ago (see the Broadstuff Bubble-O-Meter above, we started it about this time last year), and we shall now see the extraordinary madness of crowds in spades - as Chris Dixon predicts:

- a bunch of second-tier social media companies go public to satisfy investor demand for "social media allocations" (facebook's reportedly small float of 5b will make this more likely)
- high private valuations for social media companies will last at least another year
- the press will write thousands of breathless stories that make it seem like the future of western culture depends on new facebook revenue streams (see coverage of google's business model post-IPO)
- facebook will continue to do small talent acquisitions until they have their "Google Video" moment and then like all mature tech companies will start acquiring real businesses for 1b+ valuations.
- facebook will - in the eyes of the press - go from darling to "evil" over the next 5 years. (again, see google coverage). (My note - it is already see as more evil than Google ever has been)
- the next 1-2 years will mark the end of this "Patterson cycle", after that, really interesting innovation will start gestating for the next cycle.

The next post will be on the Patterson cycle and the role of Bubbles...stay tuned.

When Web 2.0 broke out in the mid noughties, Deli.cio.us was one of the main services pointed to as part of the New Wave. Now it has been resurrected. What is more interesting is who the the owners are - Liz Gannes on alt.hings.D

New owners Chad Hurley and Steve Chen (a.k.a. the creators of YouTube) have ported Delicious over from previous owner Yahoo, and are ready to show their first revision to the public.

Expectations aren’t terrifically high for the new Delicious, given the rareness of tech comeback stories and the fact that Delicious was never really that popular. But we can’t help but watch, given Hurley and Chen’s magic touch at YouTube.

As Liz says, this was not eventually a major part of the Web 2.0 movement (though it has its own dedicated following) and was bought by Yahoo, who essentially strangled it before selling it on for a song.

Far be it for us to suggest that this goose is being fattened up for the Bubbletime....and postulate how many other defunct mid-noughties brands will become Laz.ar.Us brands....

News today that Ning managed a $200m all-stock sale to Glam Media - AllThingsD:

Glam Media, a social content platform for sites primarily targeting women, said it’s buying Ning, the custom social-platform start-up co-founded by Marc Andreessen. The purchase price wasn’t disclosed, but sources close to the deal said the sale price was $200 million, mostly in stock. Glam has been eyeing an initial public offering, so shares being part of the deal is not a surprise. I had reported in August that Ning was on the block and had been talking to a number of companies, including Google and Groupon. The sale price is well below previous loftier valuations for Ning, which topped $750 million several years ago. Its venture funders have put close to $120 million into the company since it was founded in 2004.

Timing is everything, Ning was an early-generation SocNet that didn't sell at the time its contemporaries like Bebo, MySpace et al did, and has been superseded by next-generation ones. This is a face saving sale for the Ning founders and a part of Glam's "pump up the volume" of traffic pre IPO.

But this capitulation by the Ning founders also points to early signs of a deflation in The Bubble - Groupon has pulled its IPO (to be seen when it has another shot), and Facebook has now been pushed back for another year. Be interesting to see what Zynga does, given it is another of the recent Tech darlings that has recently filed a $1bn IPO.

If the last Tech Bubble is anything to go by, there will be a series of deflations like this followed by increased inflations in this one. Too early to all this deflation, but definitely a reduction in inflation.

Update - contra indications to a still infalting bubbleworld - an Incubator's Incubator! (hat tip @bobbiejohnson)

In a post earlier today we noted that the problem with a blog like TechCrunch is that its Economics will conflict with Ethics, most specifically the Ethics* of being part of of a large corporate - "Fast and Loose" is great for a small independent organ, not so good for a slow and tightly run large media empire. When you are a small organ you can both write about, and invest in, the same companies. You can't as part of a large corporate media empire. Michael Arrington, TechCrunch founder, has pretty much laid this dilemma out in a post on TechCrunch in what looks a lot like an ultimatum to his acquirers:

We’ve proposed two options to AOL.

1. Reaffirmation of the editorial independence promised at the time of acquisition. Given the current circumstances, that means autonomy from Huffington Post, unfettered editorial independence and a blanket right to editorial self determination. To put it simply, TechCrunch would stay with Aol but would be independent of the Huffington Post.

or

2. Sell TechCrunch back to the original shareholders.

If Aol cannot accept either of these options, and no other creative solution can be found, I cannot be a part of TechCrunch going forward.

AOL are unlikely to be able to do (1), for 2 main reasons:

- They are a large corporate and a great, rich lawsuit/hate campaign target for any pressure group they upset, so allowing their Tech organ to effectively look like a DotCom style market analysis business for it's Editor's investment fund is a PR disaster and maybe a legal one. Remember Henry and Mary and all that from last time round - the resulting scandal made the SEC force banks to drop doing both analysis and sell side activities in the same unit and pay large fines ( Purely out of goodwill, of course ).

- Even worse, AOL are co-investors in this same startup investment fund run by Mr Arrington, doubling the conflict of interest complications

For these reasons the financial and legal risks are probably too large to give TechCrunch pure editorial independence, especially now.

Option (2) is quite hard as well - If they sold it back so soon after buying it, at a loss, they would looks like fools and no doubt prompt all sorts of questions about their management competence. Senior heads would roll. If they tried to sell it for more, who would buy?

This is a real sign of the Bubbletimes, this whole brouhaha wouldn't be happening without the silly money now being thrown at Silicon valley technology startups, and all who sail with them. In fact one wonders why TechCrunch sold to AOL when it did (Sep 2010) as the Bubble was already evident (we opened our Bubblewatch section in April 2010) but to be fair it was only visible to geeky trend watchers like us - the really obvious froth only started about February 2011 (this year) after AOL bought HuffPo. One imagines a certain amount of D'Oh at TCHQ soon after that

In our early post we pointed to the interesting insight into the economics of a Tech blog that the TechCrunch datasieve is opening up, but putting the backroom negotiations on the front page is a new one on us old M&A hands too. And given that that post has set the scene for this one, we do now turn a slightly quizzical eye at the alleged independence Messrs Siegler and Carr claimed they have

In that post, I also commented on Stowe Boyd's point that this was looking like a tragedy like Titus Andronicus and wondered it was not a tragedy or even comedy. I am wondering now if this is more the Theatre of the Absurd....and here we all are in the front row.

*Please note - When we talk about Ethics here, we are not talking about Morality - we are talking about What Gets You Flamed/Sued/Fined/Incarcerated.

There have been some interesting behind-the-screens revelations of TechCrunch's modus operandi as it implodes (or whatever its doing) - MG Siegler:

First and foremost, the concept of an “editor” at TechCrunch is essentially just a title and nothing more. Generally speaking, neither Mike nor Erick (TC’s two “co-editors”) are overlords that dictate what everyone else covers. With a few exceptions (mainly for newer writers), no one person even reads posts by any other author before they are posted.

Traditional journalists may be appalled to learn this. But this is a big key of why TechCrunch kicks their ass in tech coverage. We’re fast and furious in ways they can’t be, because they’re adhering to the old rules. Are there benefits to those old rules? Sure. But in my opinion, the benefits of the way we work far outweighs the benefits of the way they work.

If you want a more objective take, simply look at the number of tech stories we’ve broken over the years versus the number any old school publication has. Our system works.

And it works because instead of a reliance on top-down management and editing, the emphasis is on hiring the right people. TechCrunch works because we’re a bunch of driven reporters with great instincts that excel at working independently. Sometimes junior writers hone those instincts by watching senior writers and asking questions. And there is plenty of good, healthy collaboration. But for the most part, it’s very a much a trial by fire — only the strong survive.

.....

Mike certainly could have that power if he wanted it. Again, he is the creator and the driving force behind the site. But he’s smart enough to know that the site wouldn’t function as well that way.

Instead, he sits back and lets the rest of us do what we do. Again, he’s hired extremely well. He knows we’ll kick ass without any oversight from him. In fact — and I think he’d be the first to admit this — sometimes any guidance from him can be a distraction. “Hey did we hear about this?” “Yes, Mike, we covered that two weeks ago.” “Oh. Okay. Carry on.”

Then Paul Carr (apparently writing at the same time as MG above, apparently unknown to each other)

For one thing, TechCrunch writers edit and publish their own stories. We don’t have a morning editorial meeting in which Mike — or anyone else — signs off on stories; we don’t have an editorial work flow at all in fact. Generally speaking, Mike doesn’t see stories until they appear on the site and if he has any input on what’s written it’s given after the fact. I have never, ever known Mike to tell even the most junior writer what line to take on a story. A personal example: I once wrote an extremely negative post about a company in which one of Mike’s friends is a significant investor. I heard nothing from Mike when I posted the piece. It was only months — literally months — later that he mentioned to me in passing how many calls he’d received complaining about the piece and demanding that he “do something” about me. Mike had laughed them all off: he doesn’t interfere with his writers.

Low Overheads, Low Cost Management and Low Cost writers (I don't know how much the writers are paid, I'm assuming they are mainly on freelance rates) - a lesson in Economics for the serious News Organs if ever there was one.

But it doesn't come without risks, and I think they are around what Stowe Boyd calls Linelessness, in that the New Media does not accept the invisible lines of the Old....

Even at a old school bastion of journalism like the NY Times, editors and authors have to pick what stories to follow, out of the infinity of potential stories in the universe. There is no infallible, objective mechanism to pick stories, one that is fair and unbiased in some truly general and provable sense. The reality is that all organizations (and individuals) have to settle for extreme approximations of what a hypothetically unbiased approach to news coverage would produce, if such a thing actually existed.

Arrington’s heresy in all this is the simple fact of owning stock in the companies that he and others at Techcrunch are covering. This was old news years ago, when Mike was a small entrepreneurial blogger, and even later as the head of a go-go tech blogging company. But now that AOL has purchased TechCrunch, and then invests in CrunchFund, old school media takes another look and cries foul.

They cry foul for good reason, as in the past you can quote examples ad infinitum where if the analyst and the investor are on the same side of the Chinese Walls*, you get very biassed advice ( Dot Com coverage anyone?) and over time, this destroys reputations and businesses. That is one sort of risk for an independent fast and loose blog to take (TechCrunch), but not for a slow and tightly managed wannabee major media (aka sue-able) empire (AOL/Hugffington/etc). As Stowe points out though, this brouhaha is all the product of the Machiavellian cocktail of greed, power...and fear of missing out on the Bubbletime.

it wasn’t journalists that created Arrington, but the tech scene: a tight-knit, self-absorbed community of investors, entrepreneurs, and wannabes, all desperate for ink, share-of-mind, and a chance for the brass ring. So many hanging on every word printed in TechCrunch, trying to get written up, hoping for a leg up in the steeplechase that is the central animating goal of the tech scene.

Maybe the deep libertarianism of the West Coast tech scene is a factor here, also. The ideology that the elite should be allowed to do whatever, and that there is no need for regulation or lines.

So - some predictions from the lessons of TechCrunch - the New Economics clearly are the future, but the Lineless New Ethics may not prove to be quite so stable. Stowe again:

But in the current TechCrunchgate, the lines aren’t about illegality: this is a story about identities, and the communities that create them. An identity conflict, a culture conflict, and one that might end with a truly Shakespearean close, like Titus Andronicus, with nearly all the dramatis personae lying in a heap on the stage.

All the world is a stage, but whether this is just another drama, an unfolding tragedy or a bit of comedy remains to be seen.....

*Update - please note When we talk about Ethics here, we are not talking about Morality - we are talking about What Gets You Flamed/Sued/Fined/Incarcerated.

Something is in the air at TechCrunch:

TechCrunch is on the precipice. As soon as tomorrow, Mike [Arrington] may be thrown out of the company he founded. Or he may not. No one knows. And if he is, he will be replaced by — well, again, no one knows. No one knows much of anything. Certainly no one at TechCrunch. This site is about to change forever and we’re in the total fucking dark. I’ve been able to piece together little bits of information here and there, and it’s not looking good. Hence, this post.

By now, if you read TechCrunch, you likely know about the nuclear situation that has exploded over the past several days. Mike unveiled an investing entity known as the “CrunchFund” with full AOL support — so much support, mind you, that they’re the largest backers of the fund — only to have his legs kicked out from under him due to what can only be described as nonsensical political infighting and really poor communication. To make matters worse, some Journalists (with a big “J” and even bigger senses of entitlement) have proceeded to pile on, despite having no real knowledge — at all — of the way TechCrunch actually works. And now here we are.

The only thing that surprises me is that anyone thinks you can (i) sell to AOL and then (ii) "pivot" from writing about, to investing in, startups without major changes.

It's a Bubbleworld brouhaha, as it means the money flooding into funding flimsy startups is higher than the money going into talking about them. The old Gartner Hype Curve says it all - when a market moves from talking about some new new thing at conferences to actually investing serious money in it, its getting to the top - the "Peak of Unrealistic Expectations" - of the hype curve.

Its business as usual on BubbleWatch, as AOL/TechCrunch's Michael Arrington starts a startup fund:

Mr. Arrington is starting a venture capital fund to invest in the start-ups that TechCrunch covers.

The $20 million CrunchFund is financed by AOL, Mr. Arrington’s employer, and by many of the top firms in venture capital — including Sequoia Capital, Kleiner Perkins Caufield & Byers and Greylock Partners — which Mr. Arrington also covers on TechCrunch.

Nothing like a conflict of interest there......but so far, so predictably bubbly (In fact he's a bit late to the startup fund party, see our Bubble-O-Meter above - but the more the merrier in Bubbletimes)

And yet, there is also this interesting aberration - Analysts are calling Groupon overvalued, the bounders - PE Hub:

In one of the nicer reports to be published about the daily deals company in recent weeks, Benchmark Co. analyst Fred Moran told Reuters that he considers the company’s oft-cited valuation of $25 billion “very high.”

This morning Henry Blodget of Business Insider jumped into the fray, defending Groupon from the many slings and arrows it’s been taking by writing that the company “can make money – but it won’t be easy.”

Well, that's Henry for you, ever the optimist...but it is interesting that a DotCom II darling is actually being called OverValued. Sarah Lacy thinks its because essentially they Werent Invented In the Valley. I think its because they are overvalued.

What will be interesting is to see if this new crop of analysts have a pop at some other overvalued IPO's in waiting......We have a sniff that step 6 is starting, but Step 7 in the Bubble-O-Meter may be delayed a bit!

We (triumphantly, yet reluctantly) crank the Broadstuff Bubble-O-Meter to Level 6 (see above) in July, based on the news from Betabeat that yet again. as in 2006/7, Lawyers, Consultants, MBAs and Bankers are leaving for startups.

“I can’t tell you the whole idea.” The Internet entrepreneur on the other end of the phone sounded panicky. “It’s going to sound ludicrous and ambitious, more ludicrous and ambitious than most.”

The voice belonged to a 27-year-old Stanford law student—“just about the oldest you can be where I cannot remember not having a computer”—who was in New York last week to talk to people about his new concept for a website.

He gave a few vague descriptors that could apply to half the start-ups in New York.

“I definitely don’t want it in the newspaper,” he said. “I’m worried that even little sign posts toward what I want to build are dangerous.”

When the Tech world moves from collaborative to competitive it means (silly) money is entering the game in large wodges, and get rich quick dreams are right behind. As Betabeat notes:

Cheryl Yeoh was working as a management consultant for KPMG, an 8:30 a.m. to 8:30 p.m. gig that kept her in Scotch tastings and Michelin stars, when she realized sometime in the middle of April that she needed to do an Internet start-up for something. Anything. The idea was secondary. What mattered was making something amazing that could reach not just hundreds of people or thousands, but millions. “I knew I could do something greater,” she told Betabeat. “Every time I met someone who told me, ‘Oh, I’m a founder of so-and-so,’ or whatever, I don’t care what company it was, every time they said that I thought, oh my gosh, why am I not doing this, I know I can start something, I know I can do something.

Those who were around last time will remember this mindset only too well, as Betabeat alo notes:

Whether it’s due to The Social Network or the new wave of billion-dollar tech I.P.O.’s, lately it seems like everyone has a start-up. Betabeat first noticed it in our own neighborhood, the tech-tending East Village, home of Foursquare. On a recent weekend, we overheard an entrepreneur talking about pitching investors over brunch on St. Marks and glimpsed another demonstrating his website’s Twitter integration to a friend at Ninth Street Espresso. We tried to eavesdrop on a bearded, 40-ish fellow ranting about his start-up to a friend in Tompkins Square Park around 9 p.m. on a Wednesday and caught the words “convertible note.” The trend has invaded our building as well. The Goldman Sachs engineer on the second floor wants to join a start-up. He asked us about tech events.

Another strong predictor is the increase in the number of startup recruiting events (production of startups is key to meeting the increasing amount of dumb money entering you see....)

Evidence of the city’s start-up fever can be seen on Meetup.com—the New York-based, dot-com-era start-up that became a hub for local techsters—where the number of recurring tech events has wildly accelerated: Startup Lunch, 104 members; Dumbo Tech Breakfast, 641 members; UWS Startup Meetup, 164 members; the NYC Startup Garage, 208 members; NYC Startup Weekend, 337 members; the NYC Lean Startup Machine, 1,553 members; the New York Technology Bathhouse Meetup, 25 members.

And then there is Twitter - $800m in, of which half is to cash out the existing investors....

In a move reminiscent of one done by Facebook in 2009, Twitter is close to completing $800 million funding deal that will include a second part in which around $400 million of the total will be used to cash out current investors and also employees.


......


That is especially important since the company is not likely to go public for at least a year or more. And, while it could also be sold to a bigger company such as Google, that is also not in Twitter’s immediate future.

Its not Twitter we are looking at for stage 7, though...

The Circle of Bubblelife says there is one every minute...... just don't invest the 401(K) this time round!

From AllThingsD, Spotify:

....has raised around $100 million from DST, Kleiner Perkins and Accel. Spotify has been working on the round for more than six months, but people familiar with the company tell me it didn’t actually close until this week. Spotify CEO Daniel Ek can use some of that cash to support a planned U.S. launch this summer. He now has U.S. licensing deals with three of the four big music labels and is in advanced talks with holdout Warner Music Group. Spotify is also working with Facebook on a significant integration deal, but that won’t be tethered to the U.S. launch, I’m told.

Some context for the funding: U.S. Web music service Pandora, which went public Wednesday and got hammered in the markets yesterday, is currently valued at about $2.1 billion

One assumes there is some link between Pandora's IPO and the sudden funding of Spotify

It's still a tough play, as AllThings D note:

Unlike Europe, however, the U.S. has several existing subscription services that also stream unlimited tunes for $10 a month, and those have yet to take off, even though the services are now compatible with popular handsets like Google’s Android and Apple’s iPhone.

During the time that Spotify has spent trying to get to the States, meanwhile, three different cloud/locker services have launched in the U.S. as well: Amazon and Google allow users to move their own music to an Internet-based server, where they can stream it to PCs and some phones.

Couldn't come soon enough therefore, as they have had to cut down on the free service in Europe which, however you look at the "why", reduces the ability to grow. No doubt most of the money will be used to bribe US labels penetrate the American market, but we also wouldn't be surprised to see the free service limitations released therefore, as news of crashing European numbers does not play well in the run-up to an IPO.

Watch this space..........