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I recently closed on a real estate purchase.  If there was one area of life that screams for the web, it has to be this one.  I’m not talking about sites like Realtor.com (yawn), Trulia, Zillow, or hotpads, these are all OK for armchair looking, I’m talking about the process itself:  the process is so *intensely* paper based, I’m quite convinced that half the Amazon rain forest was consumed in my transaction alone.

Let’s start with the offer process.  I offer X.  My Realtor prepares a 37 page offer.  I sign here, initial there, and he faxes it to the seller.  Naturally the seller counters.  His Realtor prepares a 40 page counter.  You can see how this goes on and on.  Of course through all this faxing, the initial copy becomes unclear, necessitating a completely new contract.  I’ve finalized $10 million dollar offers by e-mail.  Why I can’t even make an offer on a piece of property that way boggles my mind.

Next is the lending process.  I started on Lending Tree.  You fill out a 10,000 screen on-line questionnaire and then what?  You start getting e-mails.  To get actual information from these lenders, you are immediately *faxed* 10 pages of paper that must be physically signed, and faxed back, with a copy in the mail.  So I’m already up to a potential 40 pages of paper, just to get a squishy maybe, maybe not, commitment of an interest rate.  Why can’t this be done on-line?  Beats me.  Must be the lawyers.

I ended up not using a Lending Tree lender, and chose Carteret Mortgage instead.  Now here was a company who at least understood my pain.  A simple on-line form, leading to a quick loan qualification letter.  Really the only thing I had to sign were two simple forms stating that the information I’d provided them on-line was correct.

Once you choose a lender, then the fun really begins.  Because I’m self employed, I’m a five headed hydra to most lenders.  Can I give you a screen shot of my on-line banking balance?  Oh no, we need your bank statement.  Well now most banks don’t even give you paper statements any more, and none of my choices for savings even produce statements – that’s why they can pay a higher interest rate.  Does it matter that these very same banks write mortgages?  Nope.  Find some way to get it on paper.  The coup de grace was when my accountant was required to fax in a letter stating that he had prepared my 2005 and 2006 tax returns.  It didn’t matter that he had signed my tax returns, and that I had sworn to the IRS that he had done so.  Apparently banks are a higher authority than even the IRS.  This is simply a small snapshot of the amount of paper that had to be generated simply to get the loan.  Needless to say there is a well worn path from my front door to my mortgage broker’s front door.

So finally the day of closing comes.  Can this be done at least by fax with signed pages in the mail?  Oh no.  It must be done in person (plus $45 in dubious “courier” fees).  Why is this?  I have no EARTHLY idea!  I’ve been practicing law for 17 years, and have closed over 20 transactions of up to $200 million.  How many of these have been in person?  Zero. 

So what can we all learn from this experience, which almost all of us have had?  First is that many of us in the Internet industry live in a bubble.  Some of my pain would have been lessened if I owned a scanner.  I don’t.  Why?  I don’t really need one.  My clients don’t want more paper (or pseudo paper), their customers don’t want paper, the only people who do?  Lawyers.  Indeed, I believe that there is a special place in hell for lawyers who FedEx me DMCA complaints in 10 pound boxes.    

Second, let’s get off our addiction to the paper format.  How about a New Year’s resolution to decrease our use of the .pdf format 50%.  The receiving party either has to print the file out, or make their comments by e-mail, which generally have to be printed out to be understood.  I remain unconvinced that sending everything in .pdf form leads to fewer changes/comments.  A “living” document like Word or some other changeable format, typically leads to better deals anyway.  .pdf files also have to be printed out, signed and faxed.  Just as legally binding are services like Echo Sign that provide evidence of signature and an unchanged contract.

Finally, let’s all stop being so risk averse.  Why do I get DMCA complaints in 10 pound boxes?  So that someone can argue that I had actual knowledge of the facts set out on the documents in the box.  Both case law and the Federal Rules offer ways to demonstrate that knowledge without further harming the environment with paper and the jet fuel needed to get it to my doorstep by 7 am.  It may take some additional thinking, but in the end, it should all make our lives simpler, and more efficient.

What won’t change?  My engagement letters.  My malpractice insurer requires them to be on paper and physically signed.  Sigh.

 

Tucows (AMEX:TCX) has lost 50% of its market value since July 2007. Yes it has dropped from $1.26 to $0.63 a share, a 50% drop over the last six months.

The Company just released it’s year end financial statement, so now is a good time for a quick review of the basics:

-    Annual revenues were $74.6 M vs. $65 M for the previous year – up 14%, nothing wrong there.
-    Net Income $2.6 M vs. $2.1 M – up 24% — direction is good.
-    EBITDA $8.7 M vs. $5.8 M – up 50% — something to write home about.

Tucows has a market cap of $46.5 million. The overall value could be stated as:

-    5.3X EBITDA
-    .62X trailing revenues.
-    PE Ratio 18.68

So why is Tucows trading so low? Why has it dropped a whopping 50%? As a high tech firm it deserves at least a 40 P/E ratio. It should be trading at a 1X revenue range, frankly more. That would take it back the July stock price.

The problem is the Tucows balance sheet. The Company has $80 million in liabilities. How is Tucows going to make it? Given current EBITDA one could take almost 10 years to pay it back, not including interest. The game is over; tank the deal, time to trade out.

WRONG WRONG WRONG —- Tucows needs more liabilities, I think liabilities should go through the roof. They should be the master of liabilities; the street just doesn’t get it.

Financially speaking there are not many firms like Tucows. They sell millions of little things, sort of like Coca Cola. However those little things are domain names, selling for lets say $12.  Since they are paid “up front” for a specific period, usually one year, the revenues for these are recognized at $1 per month, not the $12 when the transaction occurred. Sort of like cash vs. accrual accounting.

The bulk of the liabilities time out in one year, when hopefully, they start all over again. Look at it as millions of itsy bitsy revolving loans.

Of the $80 million in liabilities, $50 million (63%) is tied to deferred revenues resulting from domain registration sales. Domain name registrations account for 73% of revenues.

Usually I hate deferred revenues (which is a topic for a separate writing). However for Tucows it is the business model.

I might be naive, but I don't think many people drive up to Tucows and say…"I stopped using my domain name…I want my $3 back". I have a hard time rationalizing how GAAP, in the practical world, should apply here.

Tucows – Has a deferred problem. One the street does not understand, and one I think is holding the stock price down.

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The operating system was the first thing I had to choose for my server. The choice was between Free/Open Source software (FOSS) and a proprietary system (Windows or Unix). Unix systems include Linux, BSD, Solaris, and a several proprietary Unices. Windows variants include servers based on NT, XP, and so on. If you are thinking of deploying a server, this is your first decision, too.

My view is that one should choose the system one knows - or would like to know. Because making the most of the server is more important than the OS used, and skills and knowledge affect security and ease of use much more than the differences between the operating systems. And that's from someone who is both an MCP and a long time user of Windows, Linux and MacOS.

Now, if you are a veteran of the operating system holy wars, you are probably at the boiling point by now, so let me elaborate. Yes, Windows and Unix are not the same. Under the hood are very different beasts. But as a user, I am more interested in what affects me, not in the way the software handles threads on a multicore processor. To me, Unix/Linux is a command line system with grapic user interfaces added on top, while Windows is a graphical system with command line utilities attached to it. Six of one, half dozen of the other. Traceroute versus Tracert.

Proprietary systems cost money, but for that you get documentation and some hand holding and tech support. With open source you have community documentation and advice, so you are dependent on the kindness of strangers, some of whom have pretty rough edges.

Bugs in FOSS are easier and faster to modify and repair. With proprietary systems you are dependent on the vendors, and your bug may be number 328 on the list. But you need to know how to code, or be lucky enough to find a responsive developer involved with the software in question (yes, it CAN happen).

But the most important aspect of running a server is performance and security, and these depend more on the server administrator than on the OS. Securing and optimizing servers require learning the system in depth, applying updates and patches on a regular basis, modifying default configurations, removing and adding components, etc. It takes attention to details, constant vigilance and endless tweaking. You'd better like doing it in your OS, because you'll be doing it - or worrying about it - every day and every night.

So by now you probably wonder which system I chose. Here is an assignment - find it out… The web site is www.words2u.net - use one of the tools that report the underlying OS, or read through the few pages that are already finished - the Tech details are there somewhere.

Wednesday January 25^th’s Domainfest keynote was presented by John Battelle CEO of Federated Media.  John chronicled his business career in traditional media, and how it led to his current position.  While his career is basically a timeline of the booms and busts of Web 1.0 to Web 2.0 (a term I loathe) his major point was that the web, what users expect, and what you can do, has changed.  This point has been driven home to me again and again at the conference, and honestly, why I was encouraged to attend.

Many of the speakers, presenters and the live domain auction itself, focused on topics like increasing  pay per click revenues by doing things like adding pictures.  That this gambit is short term at best was illustrated when John showed a screenshot of the site be.com.  It’s difficult, if not impossible, to come up with a reason why you’d want to navigate to this site – there really is nothing on the landing page that is in any way related to the two top uses of the word “be” (at least according to Google), as the stock ticker symbol for BearingPoint or the country Belgium (or for that matter, one of my fraternity brothers band “be”).  Rather, there are the standard links that every site seeking to capture “type in” traffic includes:  Dating, Cars, Electronics, etc. etc.  Now while I’m sure that the owner of be.com makes a decent living, and Hitfarm, the company that provides the landing pages is in fact optimizing the landing page to reflect traffic patterns, I can’t help but think that something’s missing.  The “parked pages” concept seems to be a concept that does not reflect current use of the Internet, or those uses that are right around the corner.

I wonder how difficult it would be for domain owners to utilize new technologies to truly optimize their sites.  While I fully understand the power of Big IP, I wonder how difficult it would be to create a series of template sites that capitalize on the current use of the domain name?   If you can’t figure that out, how about a wiki?  People who come to the domain could tell you what they came there for.  What about some “Office 2.0” tools you get for free that enhance the value of the page to the users?  Features like this might increase the value of the domain itself, but also remove some of the legal issues surrounding domaining, that make life difficult for domainers.

Sticking with what works is a decent business philosophy, but keeping your eyes open, and creating a nimble organization is, I’d say, a crucial component to success.

Lest you think I’m picking on domainers, let me make one thing clear:  I think it’s worse in the hosting world.  For crying out loud, how much bandwidth, disk space, and free domains can the industry give out before hosting is totally free?  For hosts, business is moving in the same direction as domains.  The cost of including new tools has significantly declined, and your ability to include them with minimal engineering has increased.  Look, for example, at Hostway.  Hostway’s business has expanded from shared, and now includes domain parking services.  It’s really only a matter of time before the services provided to parked pages is expanded to include creating sites of more apparent value.

I think, sometimes, we need to venture out of our comfort zones to see what else might be out there. 

The Green Grid http://www.thegreengrid.org, the growing non-profit group aimed at advocating for energy efficiency in the data center held a conference call on Friday to discuss several announcements pertaining to the organization’s technical forum taking place today and tomorrow at the Parc 55 hotel in San Francisco.

On the call were Green Grid directors John Tucillo and John Pflueger, the latter of which is also a member of the organization’s technical committee.

Beginning today, (not coincidentally the one-year anniversary of the Green Grid’s launch in 2007) the technical forum is titled “Get Connected: Assess Today for Efficiency Tomorrow,” a sort of rallying cry to help people understand the organization’s goal.

Coinciding with the technical forum are several announcements from the organization.

The Green Grid says it committed to the industry a year ago that it would continue developing deliverables that could be built into a framework that will let end users to assess their data centers in a way that will enable them to improve their efficiency. Today, the organization says it is presenting that framework, and demonstrating how it operates.

The framework itself is comprised of tools and technologies, as well as strategies and methodologies, developed through the collaboration of the Green Grid’s participants.

According to Pfleuger, four specific “deliverables” are being introduced at the tech forum this week, representing the efforts of three of the organization’s original working groups:

Addressing Organizational Barriers to Managing Efficiency

In many cases, says Pfleuger, organizations are set up in such a way that the paying of the energy bill and the decision-making that affects that energy bill are handled by entirely separate groups

“This paper takes a look at that situation and offers some alternatives and some guidance on how to possibly address those organizational barriers.”

Baseline Efficiency Market Study

Produced by the data collection and analysis working group, which goes out into the community, and puts together the picture for the rest of the technical committee.

“The first deliverable out of this group is a fairly comprehensive study on existing and common practices in the industry today with regard to improving energy efficiency and managing for efficiency.”

The data came from personal interviews with data center owners and operators, drilling down into what they’re doing today and may be doing in the future.

Peer Review of Lawrence Berkley National Laboratory on High Voltage Direct Current in the Data Center

“Folks who have been following this space is very aware that one of the questions that has a lot of visibility in the community is one of power distribution in the data center. In 2006 Lawrence Berkley completed a study on direct current in the data center. And as a result of that study, a lot of people have been interested in this particular technology, and what opportunity it affords for improving efficiency in the data center.”

The power task force has completed a fairly extensive peer review of the study, and will be presenting that report at the tech forum.

Five Ways to Save Server Power

The operations working group, concerned with providing guidance for things that happen after a data center is commissioned, and day-to-day data center operations.

“This deliverable is essentially a best-practices sheet for saving server power.”

The deliverables discussed in the call, in addition to being presented at the event, will include extensive white papers. While they don’t currently appear to be available at the organization’s website, they’ll presumably be found here.

It was a long call, and this is becoming quite a long post. But rest assured there was more to discuss. I’ll follow up tomorrow with some more interesting stuff.

 Microsoft has never borrowed any money before, the envisioned $44.6 billion ($44,600,000,000) buyout of Yahoo may stain the balance sheet.

All business owners know how tough it is to borrow money. It is especially hard for that first time borrower. 

Bill…we need your last three years W2 statements.

Bill…you started this company with assets some would say were pilfered, please supply documentation.

Bill…we need to pull your FICO score, you can sign this release, by the way we are waving the $25 report fee.

Bill…we understand you recently gave away $30 billion, we need a cash flow analysis.

Bill…we usually require a personnel guarantee from senior management, how much equity do you have in your home?

Yes - life is tough for first time borrowers.  

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