Lou Kerner may be a bit misunderstood.
When I blogged about last week’s profile of him, I did so without comment. Most people did the digital equivalent of rolling their eyes when they read his unofficial title, Wall Street’s First Social Media Analyst. This skepticism is understandable – he is talking about a very controversial subject (valuations of venture startups) and most of what he says gets chopped up by the media soundbite machine.
I had an interesting conversation with Lou on Friday. We talked about his background as a Goldman Sachs analyst during the Web 1.0 days and I got a better sense of what he’s actually trying to accomplish as a Wall Street social media analyst. It boils down to this: There is money to be made in venture stage companies by covering them based on earnings and revenue potential like a public company analyst. It may be highly lucrative for Lou’s investors and partners to have a framework with which to assign values to these companies. We can disagree on the valuations themselves but Lou is coming about his guesses using math, not hype.
For example, here’s Facebook versus Google on Revenues from one of Kerner’s presentations:
Besides, in 2009 he publicly pronounced that Facebook was at least a $100 billion company, opening himself up to every ounce of scorn the media and blogosphere could muster at the time. Two years later, Facebook is at $85 billion based on the last private stock transaction I believe.
His March 2011 Social Media Overview SlideShare is critical to understanding his views but I will also drop a few of the ideas from our discussion below…
* Kerner is not a bandwagon guy, he began publicly talking about social media in 2003.
* He once pitched Zuckerberg to sell him a stake in Facebook at Harvard way back in the beginning, he was almost successful at closing a round when Facebook was valued at $15 billion.
*That controversial report about Facebook being worth $100 billion was the first piece of company research he had written since the 1990s.
*Kerner is also not a “This time is different” guy. There is no talk about new paradigms. He concedes that this time is the same and that many social startups will not exist after the inevitable washout.
*He will not be writing research on the LinkedIns and Groupons when they come public because what he really wants to do is be an investor in these companies as opposed to a traditional analyst.
*He was writing his social media research of his own accord and then a friend of his at Wedbush called him to bring his show over to their stage.
*He differs from the bubble-spotting skeptics on the question of where we are for this innovation cycle. He points to the mindblowing pace of innovation coming out of Facebook on a daily basis to make this point. The skeptics believe that this is already 1999 and the end of the social media boom is upon us, Kerner argues that it’s only 1996. It’s early, he says, really early.
*He unabashedly believes that the social media wave will ultimately be the biggest engine of wealth creation in history. My “c’mon!” didn’t elicit so much as a flinch – he is a true believer.
I find myself in agreement with Kerner on many things. We both believe that Twitter is going to be way more important and globally ubiquitous than it currently is but as an analyst he concedes that there really is no way to analyze and value the company just yet. We also agree that there is a tendency for people to hear big numbers ($10 billion! $50 billion!) and automatically call it a bubble.
My takeaway from the call is that Lou Kerner is looking at this stuff like an analyst and not a promoter, he is talking to more startup and media people on a weekly basis than anyone on The Street and that this could, in fact, be his moment.