Strategy Isn't Spreadsheets, Pt 194002
A recent theme here is that strategy isn't spreadsheets.
Here's a great example - Canaan's recent investment in Associated Content.
Associated Content is a prosumer news...thingie. It's ultimate failure is that it is neither market, network, nor community - it realizes no real edge leverage, and so it's chances of true value creation are very (very) low.
So why the investment? Associated Content is great at SEO. So good, in fact, that it gets a lot of attention (5m plus uniques/month). Now, that's all well and good.
The trouble is that it's very myopic. SEO driven traffic, by definition, is the antithesis of high-value attention: it's neither durable nor sticky. As VentureBeat points out, almost none of AC's visitors are loyal to AC.
It's easy to see why - just check the (lack of) quality of a randomly chosen article.
What that means in the real world is that revenues will simply fail to scale (fast).
Conversely, what this bet amounts to, in strategic terms, is simply a bet on SEO. And that's a very risky bet to make.
This is an investment which looks great in a naive financial model - but whose deeper economics are nonexistent.