The How To Find Big Stocks Newsletter
We turn waves into wealth
August 2012
We spent most of July in Southern Germany where in between eating schnitzel and drinking
plenty of apfelshorles. We also got caught up with some interesting books (email us for our list)
and had a chance to review waves and the companies we have highlighted in them. There is
one company, loaded with disruptive technology, which seems to be smack dab in the middle of
several major investing waves.
One of the reasons why we seem to spend so much time highlighting Destiny Media
Technologies (DSNY) is because we feel all of this company’s technologies have the potential
to change net worth’s, it’s that simple. Based on the number and type of questions we get about
DSNY, we feel it is imperative that investors understand this story before Wall Street does.
Readers of our book, How To Find Big Stocks (www.howtofindbigstocks.com) and
HTFBSN subscribers will recognize one of the most successful venture capitalists, Geoffrey
Moore, as a person whose investing philosophy we mimic. He coined the phrases “tornado,
gorilla, chasm and bowling alley” to identify opportunities for dramatic investing opportunities.
He ONLY invests in companies with a competitive advantage in a tornado (investing wave). In a
nutshell, he shows how to find the conditions required for a Big Stock to develop, and how they
do indeed develop.
As Steve Jobs was quoted in Moore’s book, Inside The Tornado, “The Chasm is where many
high-tech fortunes have been lost...the Tornado is where many have been made”.
We want to share a few quotes from the book “Inside the Tornado” that describes Destiny
Media Technologies’ Clipstream G2 (non Java) perfectly: (boldface is our highlight) http://
www.amazon.com/Inside-Tornado-Strategies-Developing-Hypergrowth/dp/0060745819
Such are the market forces generated by discontinuous innovations, or what more recently
have been termed paradigm shifts. These shifts begin with the appearance of a new category
of product that incorporates breakthrough technology enabling unprecedented benefits.
It is immediately proposed as the natural replacement for a whole class of infrastructure,
winning early converts and enthusiastic predictions of a new world order.
A new paradigm, a discontinuous innovation that promises to break the IT backlog
New products, designed to the new performance vectors, incorporate software that simply
blows away the old reference points. Their new capability translates into the kind of competitive
advantages that stimulate virtually any business customer.
Now this book is a little dated but the principles certainly still apply today. For example, as
a company/product that had gorilla potential but failed, Moore states the following referring
to Netscape’s Navigator: the technology of the browser was not all that difficult to reverse
engineer.
It is our opinion that Destiny Media Technologies’ Clipstream G2 is a product that is about to
cross the chasm and create a tornado. This could turn DSNY into a veritable gorilla!
Clipstream is the epitome of disintermediation (a major tornado for the Internet) for streaming
video on the Net. Publishers can sell/broadcast directly on the Net without any middleman.
Streaming video data currently comprises over 50% of the traffic on the Net, and even more
importantly, is growing at a 52% compounded rate annually.
When the CEO described Clipstream as "extremely disruptive to an existing paradigm"
and the paradigm includes not one, but TWO billion-dollar industries (with ONE being a $MultiBillion$
opportunity), our ears perk up. On the July 17 conference call we got an even clearer picture
of Clipstream G2, and make no mistake, this IS disruptive technology.
(we posted this on one of the stock message boards)
The mere concept of ONE video format that can be played on all browsers/devices/OS AND
without storing on streaming servers is huge.
Having the software that enables this is huge®.
Having the patents around this concept and technology is enormous.
Yes… DSNY definitely qualifies as a BIG STOCK.
To top it off, look at what the management team also did to insure the IP is protected. They
hired an outside patent firm that specializes in patent litigation to find ways around their patents.
They paid a firm whose expertise is getting around patents, to reverse engineer their IP.
Simply brilliant!
In order to fully appreciate the potential magnitude of G2, you have to understand how
the "existing paradigm" works today. With every video you see or play on the Net, there
are many steps necessary in order for EVERY viewer to be able to play them. We note the
word "play" because the ultimate end is to really be able to "view" them.
When Hershey puts out a new Internet ad, they turn to their ad agency for online help. The ad
agency has to format EACH and every one so all devices; browsers and operating systems can
play them. The ad agency has to transcode each ad into the Windows, QuickTime and Flash
format. Some agencies go so far as to format in several other formats, but the top three are
mandatory.
Why at least 3 formats?
Unlike websites where every device can play text and images, because they have a standard,
there is no standard for video as HTFBSN subscribers know all too well. In order to play a
video, a player must be "launched" when you go to play it.
If you're using a Windows device and don't have a QuickTime player, you won't be able to view
the version in QuickTime format. In addition, if you're using an iPad or Mac, you won't be able to
play the Windows or Flash version.
The proliferation of new devices (tablets & smartphones) and browsers (Chrome, Safari,
Explorer, Firefox) have added even more “players” just making it even more costly for media
publishers to get their content "played". For every new ad produced, EACH and EVERY one
has to be formatted (the technical term is called transcoding) in multiple versions just to be sure
every device can even see it!
Producing multiple versions of the SAME ad unnecessarily costs publishers over $1B per year.
Yes, you read that right…$1 Billion, hence industry number one that Destiny’s technology
impacts.
Not only do these publishers have to make multiple versions of the same ad, but they have to
pay a content delivery network to STORE them on computers (streaming servers) all over the
world. The video file is NOT stored on the same server (computer) as the website. Storing and
moving all of those media files require a content delivery network provider. The content delivery
network industry is approximately $3B per year, and there you have industry number two, a
larger $Multi-BILLION$ opportunity impacted by Destiny’s technology.
A typical method of viewing a video.
1. Type URL and you are sent to the website, or web server
2. Website determines your browser, and device
3. Website then determines which formatted file (ad) is appropriate for your device and retrieves
from a streaming server (a separate computer)
4. Streaming server sends the file to the web surfer
5. The "player" is opened and video is "played"
That is a lot of unnecessary time, work and expense.
Here's how Clipstream's G2 disrupts the existing paradigm.
Instead of having to produce multiple formats, ad agencies or media publishers format their
ad in ONLY ONE format, namely Clipstream. Knowing that EVERY device, browser and OS
can "view" a Clipstream ad/video, they no longer need to make multiple versions of the same
content. Say goodbye to unnecessary formatting (transcoding).
With a G2 video, the website owner can simply store the ad/ video on JUST the web server.
With Clipstream, the video file can be stored on the web server, just like regular text or images.
Say goodbye to unnecessary hosting (streaming servers).
Effectively masquerading as part of the web page and making the video look like standards
based web content, a G2 video automatically gets populated into caching servers where each
subsequent viewer reuses the original stream which was pulled from the original website.
This allows the original website to reach way more people with the same infrastructure.
This is not something new or unique to the industry. It's called "HTTP streaming" or
"Progressive Download", but hardly anyone else uses it in a high-volume environment.
They typically use streaming servers, which are not cacheable, except through
content delivery networks. These very same CDN’s who’ve built out custom caching
infrastructure and who bill the client, still charge clients even if it is cached! By
comparison, with HTTP, the G2 caching is for free.
Typical method of viewing a Clipstream video:
1. Type URL and you are sent to website or web server
2. The browser simply sees the video as common text/image. (the unique part with G2)
3. Browser plays the video, no player is launched or required.
While everyone is excited about HTML5 being the next generation “standard”, publishers are
STILL required to produce at least 3 formats (Windows, Quicktime and Flash) and store ALL
of them on streaming servers. In other words, publishers must still pay to have their ad
transcoded and stored.
HTML5 versus Clipstream's G2
This is how HTML5 works:
1. The browser hits web page
2. detects the device/OS/device
3. redirects them to a compatible streaming server for the file
4. file is loaded on to device and “player” is launched
How Clipstream’s G2 works:
1. browser hits the webpage
2. grabs the video as easily as it would an image off the screen.
There is only ONE file (no transcoding) and NO streaming servers.
With Clipstream there are NO players to update or load. Your PC is never “connected” to
another server leaving it vulnerable to malware and hijacking.
We weren’t able to ask questions on the July 17 conference call so we asked CEO Steve
Vestergaard for an interview instead.
(We’ve boldfaced certain statements that we feel are notable)