Thursday, February 16, 2023

Making Too Little and Too Much of Metaverse

It is possible to make too little or too much of movement towards metaverse experiences. In the near term, we usually exaggerate the importance of any important new technology. In the long term, we typically underestimate impact. 


Metaverse provides a good example of that adoption process. 


“You need to think about the metaverse the same way you think about the internet,” says Robby Yung, chief executive of Animoca Brands, which operates a metaverse investment fund. “It’s not one thing. It’s everything.”


“When we talk about the metaverse, it’s really just simply immersive technologies,” says digital consultant David Shing. 


The analogy I tend to use is that metaverse is part of a long move in electronic media towards greater realism. Radio was sound only. Movies added sight, but initially without sound. Still, even early movies without sound arguably represented greater realism. 


Then we added sound. Television in black and white arguably did not so much improve realism over movies, but did make the experience easier to consume. The addition of color did add more realism. Many of the later advances in higher video definition and audio quality enhanced realism further. 


Most of our experiments with 3D have not taken hold, but likewise are efforts to enhance realism. Videogames have been the latest examples of greater realism, especially in terms of immersion. 


In that sense, metaverse experiences will simply further extend immersion and realism.


Monday, February 6, 2023

Telefonica Makes Move into Ad Fraud Protection

Advertising fraud is a significant problem for firms that use digital advertising venues, representing an estimated $65 billion in losses in 2021, for example. In 2023, ad fraud losses are expected to climb as high as $100 billion. Some believe fraud losses could be even higher. 


So it is not too surprising that lots of firms make a living with the promise of reducing such fraud. Add  Telefonica to that list of firms promising methods of reducing ad fraud, using tools such as blockchain. 


From the standpoint of firms paying for digital advertising, the actual mechanisms likely do not matter too much. The losses are from inability to reach the targeted potential customers they seek. 


Blockchain is not so much a form of artificial intelligence as it is a complement to AI-mediated ad operations, improving chain of custody, for example.

Sunday, February 5, 2023

Metaverse: How Often Do You Need a Digital Twin?


Perhaps the most common positioning of “metaverse” by its proponents is that it represents the next evolution of applications and experiences accessible using the internet. Perhaps the simplest explanation of what that means is that metaverse is the three-dimensional experience of internet apps and experiences. 


That might include all the tools used to emulate physical presence and physical activities, but the eventual outcome, assuming one believes it will happen, is “presence,” the experience of being in the same place, at the same time, with other people, objects and places, with the ability to interact with those people, places and objects. 


To be sure, some see metaverse as just hype. 


Mark Zuckerberg in 2021 described the metaverse as the “next chapter for the internet,” which is generally the way other proponents describe it. The rival “vision” might be Web3, which looks at governance and data ownership rather than “experience” as the salient defining feature.  


Cisco long has spoken of its room conferencing systems as offering telepresence, in that instance the feeling that remote people are “in the same room.” Even less immersive forms of videoconferencing, such as using Zoom or Apple’s Facetime, offer more engaging forms of human interaction than text or voice alone.  


The evolution of computing offers another analogy. As devices changed from mainframes to mini-computers to personal computers to mobile devices; as media types changed from characters and text to image, video, audio and mixed media; as architectures moved from “dumb terminals” to free-standing personal computers to networked PCs to remote computing using cloud mechanisms, so the internet can be seen as developing.


The movement parallels the other changes: from lesser to fuller; one dimensional to multidimensional; read only to read-write to interactions in real time. Almost any part of the computing or internet experience can be mapped in such ways. Social media, mapping, internet of things, financial transactions, video and audio entertainment and many other use cases can be analyzed as a story of growth in capabilities over time. 


All that noted, it seems to some of us that immersive experiences will emerge as commercial and everyday experiences in an “augmented” rather than full “virtual” mode. Which is to say, people in “real life” will experience some form of experience overlay or surround, more of the time, than full immersion in a primarily virtual experience. 


That is to say, our likely experience of 3D virtual features will be less a “full digital twin” of the physical world, and more an augmentation of our physical world. In other words, 3D content and features are an augmentation of real life, a bridge between physical and virtual “worlds.”


Ask yourself how much time you currently spend on activities that could really benefit from persistent virtual worlds. Include gaming, media consumption, communications (personal and work), shopping or learning as potential areas where 3D experiences make sense. 


How much time does one collectively spend on all those activities each day, week or month? 

Then evaluate how many of those experiences do not necessarily benefit from some 3D augmentation or immersion. In other words, though one could do so, does it really add value? 


My grocery shopping, which is most of my shopping, does not necessarily benefit from immersion in a 3D experience to conduct those transactions. Travel planning probably does benefit quite a bit, but the actual transactions not so much. 


In other words, 3D might be really helpful for learning activities. It is less clear whether conducting transactions necessarily produces benefits for the user, or how much. Sellers--of course-- will appreciate the ability to support a transaction at the point of sale (which is inside the experience). 


Or, as some skeptics might say, how many people will routinely want to strap a device to their heads most of the time? 


One perhaps instructive example of augmentation rather than digital twin is the Abba Voyage concert produced in London (now running) employing lots of VR and AR to blend an orchestra and music by the band members who appear as Avatars in an immersive live experience. It points the way to how VR and AR might be used in the future, as shared public experiences without the need for goggles or other devices as intermediaries. 


That is an example of augmentation, in other words, not a digital twin. 


That is the way big technology transitions occur. As with hybrid automobiles (gas and electric propulsion both), the new is grafted onto the old for an intermediate period. Eventually, the legacy technology is replaced, but hybrid (use both) tends to be the deployment pattern.


In the case of full three-dimensional and personal experiences, the caveat is that most people will not spend most of their time in such worlds, as a percentage of their day. But look for deployment scenarios that add value when immersion actually does add value, for some activities that happen parts of a day, week or month. 



Saturday, February 4, 2023

When Making Career Choices, Choose Wisely

I once had a management professor give one bit of advice to people just entering the workforce. When choosing an industry to work in, it is better to choose a fast-growing industry rather than a slow-growth or declining industry. 


If one has a choice, it is helpful to be in an industry forecast to show lots of growth, which also often correlates with other valuation ratios, such as enterprise value/revenue. 


Here is a ranking of industries made by Stern School at New York University researchers and updated in January 2023. Looking at EV/Sales ratios, one can see that valuation ratios can routinely vary by an order of magnitude. 


Financial services and real estate investment trusts routinely are valued at 10 to 20 times specialty retailers and as much as 63 times higher than grocers. Compared to fixed network communications services, financial services are an order of magnitude more highly valued. 


IndustryValuation Enterprise Value Compared to Sales Ratio

Industry Name

Number of firms

Price/Sales

Net Margin

EV/Sales

Pre-tax Operating Margin

Financial Services (Non-bank and Insurance)

223

2.18

26.32%

23.49

15.88%

R.E.I.T. 

223

6.35

23.77%

11.06

23.20%

Utility (Water)

16

6.43

25.12%

9.18

29.38%

Green & Renewable Energy

19

3.68

17.77%

7.79

24.48%

Software (System & Application)

390

7.14

14.61%

7.59

21.90%

Software (Internet)

33

5.57

-19.07%

6.33

-5.48%

Transportation (Railroads)

4

5.04

27.65%

6.32

39.86%

Information Services

73

5.77

16.62%

6.26

24.21%

Drugs (Biotechnology)

598

5.78

0.65%

6.18

11.87%

Healthcare Information and Technology

138

4.81

-0.33%

5.33

17.00%

Investments & Asset Management

600

4.15

24.93%

5.16

18.15%

Healthcare Products

254

4.73

7.00%

5.15

15.13%

Tobacco

15

4.19

23.46%

5.05

43.97%

Semiconductor

68

4.63

22.74%

4.98

25.44%

Drugs (Pharmaceutical)

281

4.38

18.35%

4.85

27.37%

Beverage (Soft)

31

4.16

14.60%

4.67

19.14%

Bank (Money Center)

7

2.55

26.96%

4.49

0.10%

Brokerage & Investment Banking

30

2.14

16.01%

4.46

0.31%

Banks (Regional)

557

3.2

30.31%

4.34

-0.10%

Utility (General)

15

2.47

12.68%

4.28

18.03%

Hotel/Gaming

69

2.75

1.10%

4.2

4.23%

Beverage (Alcoholic)

23

3.38

5.76%

4.07

20.17%

Restaurant/Dining

70

3.16

9.28%

4.07

12.80%

Real Estate (General/Diversified)

12

3.14

12.67%

4.02

18.60%

Power

48

2.14

9.17%

3.75

15.67%

Computers/Peripherals

42

3.41

16.68%

3.67

21.43%

Semiconductor Equip

30

3.43

22.27%

3.66

27.44%

Household Products

127

3.23

11.25%

3.65

17.12%

Software (Entertainment)

91

3.54

20.91%

3.59

25.65%

Telecom Equipment

79

3.31

13.29%

3.56

18.63%

Precious Metals

74

3.3

7.18%

3.55

10.10%

Shoe

13

3.06

11.17%

3.22

12.83%

Telecom (Wireless)

16

1.98

2.54%

3.18

12.37%

Entertainment

110

2.47

0.90%

3.06

7.44%

Environmental & Waste Services

62

2.44

7.29%

3.03

12.85%

Real Estate (Development)

18

1.42

15.04%

2.81

17.48%

Total Market

7165

1.95

8.89%

2.8

11.60%

Electrical Equipment

110

2.38

7.31%

2.77

10.25%

Machinery

116

2.28

8.51%

2.67

14.00%

Oil/Gas Distribution

23

1.54

2.08%

2.6

10.82%

Aerospace/Defense

77

2.1

4.05%

2.55

8.68%

Diversified

23

2.16

0.98%

2.5

3.59%

Chemical (Specialty)

76

2.05

8.07%

2.48

14.80%

Cable TV

10

1.19

7.91%

2.43

19.52%

Total Market (without financials)

5649

1.93

7.77%

2.35

12.03%

Telecom. Services

49

1.01

12.81%

2.18

19.95%

Insurance (General)

21

1.7

15.21%

2.16

21.86%

Construction Supplies

49

1.72

8.23%

2.15

11.16%

Oil/Gas (Production and Exploration)

174

1.83

26.01%

2.12

35.68%

Food Processing

92

1.66

7.10%

2.1

11.94%

Metals & Mining

68

1.86

9.66%

2.06

22.84%

Business & Consumer Services

164

1.69

4.92%

2.05

9.22%

Advertising

58

1.49

3.79%

1.96

11.11%

Retail (Building Supply)

15

1.64

8.67%

1.96

13.81%

Electronics (General)

138

1.73

6.32%

1.94

9.83%

Retail (Online)

63

1.63

0.64%

1.87

1.84%

Education

33

1.57

2.92%

1.85

5.16%

Auto and Truck

31

1.32

5.02%

1.81

6.49%

Recreation

57

1.22

1.30%

1.77

8.31%

Hospitals/Healthcare Facilities

34

0.85

5.31%

1.57

11.62%

Retail (Distributors)

69

1.06

7.30%

1.45

11.90%

Trucking

35

1.07

1.29%

1.45

9.18%

Coal & Related Energy

19

1.35

20.44%

1.43

22.17%

Insurance (Prop/Cas.)

51

1.21

4.05%

1.39

6.49%

Oil/Gas (Integrated)

4

1.31

15.17%

1.39

17.46%

Building Materials

45

1.1

10.30%

1.36

13.94%

Broadcasting

26

0.6

11.90%

1.33

14.75%

Insurance (Life)

27

0.83

6.07%

1.33

8.39%

Packaging & Container

25

0.79

6.06%

1.25

9.63%

Farming/Agriculture

39

0.94

5.66%

1.22

7.78%

Computer Services

80

0.93

2.53%

1.17

6.89%

Apparel

39

0.81

5.07%

1.16

11.11%

Publishing & Newspapers

20

0.88

2.82%

1.16

7.75%

Engineering/Construction

43

0.87

2.16%

1.08

4.69%

Transportation

18

0.89

6.99%

1.08

9.38%

Shipbuilding & Marine

8

0.82

21.55%

1.07

26.33%

Air Transport

21

0.42

-1.71%

1.02

2.08%

Real Estate (Operations and Services)

60

0.52

-0.76%

1

0.50%

Retail (Special Lines)

78

0.72

3.86%

0.97

5.74%

Office Equipment & Services

16

0.6

2.36%

0.93

6.26%

Chemical (Diversified)

4

0.64

13.16%

0.91

13.56%

Retail (Automotive)

30

0.59

4.07%

0.91

5.73%

Chemical (Basic)

38

0.63

9.70%

0.89

13.14%

Furn/Home Furnishings

32

0.6

2.03%

0.88

7.89%

Homebuilding

32

0.71

13.98%

0.85

18.79%

Auto Parts

37

0.62

2.16%

0.82

5.19%

Retail (General)

15

0.7

2.35%

0.81

4.12%

Electronics (Consumer and Office)

16

0.78

0.54%

0.78

2.11%

Paper/Forest Products

7

0.58

10.23%

0.77

18.59%

Healthcare Support Services

131

0.61

2.01%

0.69

4.00%

Steel

28

0.58

14.70%

0.68

19.89%

Reinsurance

1

0.58

3.54%

0.63

4.64%

Oilfield Svcs/Equip.

101

0.47

5.25%

0.58

7.37%

Rubber and  Tires

3

0.14

4.21%

0.55

5.84%

Food Wholesalers

14

0.29

1.09%

0.41

2.10%

Retail (Grocery and Food)

13

0.24

1.96%

0.37

2.92%

source: https://pages.stern.nyu.edu/~adamodar/pc/datasets/psdata.xls


The point is that, when one has a choice, choose to enter an industry with higher growth rates or higher valuation ratios or both. 


The same sort of relationship also holds for managerial success, once those choices have been made. It is easier to be a “hero” when one has worked in a fast-growing, more-profitable industry to begin with. The same amount of effort and talent is likely to produce consistently higher outcomes compared to the same effort and talent expended in a slow-growth, lower-valuation industry. 


Of course, one has to evaluate the particular valuation metrics used. Also, not every ranking, even using the same metric, will produce the same results. That can be the case when industries routinely rely on different amounts of debt financing, when “cost of goods” is disparate, or when a ranking is unrepresentative of all firms in an industry (focusing only the largest firms, for example). 


Industry

EV/Revenue

Publishing

31.54

EDP Services

23.45

Construction/Ag Equipment/Trucks

19.54

Computer Software: Prepackaged Software

17.81

Biotechnology: Biological Products (No Diagnostic Substances)

17.75

Real Estate Investment Trusts

17.62

Retail: Computer Software & Peripheral Equipment

17.18

Biotechnology: Electromedical & Electrotherapeutic Apparatus

16.85

Managed Health Care

14.97

Ophthalmic Goods

14.57

Business Services

14.37

Finance: Consumer Services

14.29

Real Estate

12.69

Auto Manufacturing

12.53

Multi-Sector Companies

10.34

Biotechnology: Commercial Physical & Biological Research

10.33

Medical/Dental Instruments

10.17

Advertising

9.96

Semiconductors

9.82

Investment Bankers/Brokers/Service

8.57

Oil & Gas Production

8.51

Hotels/Resorts

8.29

Beverages (Production/Distribution)

7.85

Major Pharmaceuticals

7.75

Other Consumer Services

7.38

Specialty Chemicals

7.31

Environmental Services

7.16

Industrial Machinery/Components

6.81

Misc Health and Biotechnology Services

6.78

Biotechnology: In Vitro & In Vivo Diagnostic Substances

6.68

Restaurants

6.62

Investment Managers

6.62

Industrial Specialties

6.54

Movies/Entertainment

6.51

Building operators

6.25

Telecommunications Equipment

6.19

Other Transportation

6.15

Diversified Commercial Services

6.08

Electrical Products

6.01

Television Services

5.95

Electric Utilities: Central

5.72

Radio And Television Broadcasting And Communications Equipment

5.59

Services or Misc. Amusement & Recreation

5.5

Savings Institutions

5.35

Rental/Leasing Companies

5.31

Water Supply

5.22

Internet and Information Services

5.19

Diversified Financial Services

5.15

Railroads

5.08

Biotechnology: Laboratory Analytical Instruments

5.03

Precision Instruments

5.01

Medical Specialties

4.89

Power Generation

4.74

Motor Vehicles

4.65

Oil/Gas Transmission

4.62

Specialty Foods

4.52

Military/Government/Technical

4.43

Assisted Living Services

4.41

Package Goods/Cosmetics

4.22

Diversified Manufacture

4.01

Metal Fabrications

3.98

Finance/Investors Services

3.94

Medical Electronics

3.86

Ordnance And Accessories

3.82

Wholesale Distributors

3.75

Office Equipment/Supplies/Services

3.66

Natural Gas Distribution

3.55

Broadcasting

3.49

Fluid Controls

3.46

Banks

3.46

Tools/Hardware

3.35

Oilfield Services/Equipment

3.29

Commercial Banks

3.24

Computer peripheral equipment

3.23

Major Chemicals

3.12

Medical/Nursing Services

3.11

Aerospace

3.06

Major Banks

3.04

Specialty Insurers

3.01

Life Insurance

2.91

Agricultural Chemicals

2.88

Paints/Coatings

2.85

Building Materials

2.84

Homebuilding

2.8

Air Freight/Delivery Services

2.79

Building Products

2.78

Computer Software: Programming Data Processing

2.68

Farming/Seeds/Milling

2.6

Other Metals and Minerals

2.56

Recreational Products/Toys

2.54

Catalog/Specialty Distribution

2.54

Shoe Manufacturing

2.5

Precious Metals

2.5

Other Specialty Stores

2.3

Consumer Electronics/Video Chains

2.24

Electronic Components

2.23

Computer Manufacturing

2.2

Steel/Iron Ore

2.19

Professional Services

2.18

Packaged Foods

2.17

Marine Transportation

2.12

Containers/Packaging

2.09

Electronics Distribution

2.07

Trucking Freight/Courier Services

2

Service to the Health Industry

2

Newspapers/Magazines

2

Consumer Electronics/Appliances

1.95

Meat/Poultry/Fish

1.93

Home Furnishings

1.93

Apparel

1.77

Auto Parts: O.E.M.

1.76

Integrated oil Companies

1.73

Hospital/Nursing Management

1.71

Pollution Control Equipment

1.65

Automotive Aftermarket

1.57

Aluminum

1.57

Coal Mining

1.54

Textiles

1.5

Department/Specialty Retail Stores

1.49

Food Distributors

1.47

Paper

1.4

Clothing/Shoe/Accessory Stores

1.35

Plastic Products

1.31

RETAIL: Building Materials

1.15

Engineering & Construction

1.09

Consumer Specialties

1.04

Property or Casualty Insurers

1.01

Transportation Services

0.99

Accident & Health Insurance

0.98

Oil Refining/Marketing

0.93

Tobacco

0.92

Other Pharmaceuticals

0.92

Finance Companies

0.91

Trusts Except Educational Religious and Charitable

0.79

Forest Products

0.51

Food Chains

0.31

source: https://eqvista.com/revenue-multiples-by-industry/




MWC and AI Smartphones

Mobile World Congress was largely about artificial intelligence, hence largely about “AI” smartphones. Such devices are likely to pose issue...