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The Biz Roundup April 15

This is officially the definition of “deflation,” but, thankfully, without the “spiral” part.

Consumer prices fell 0.4 per cent over the year to March, the labour department said yesterday, and dipped 0.1 per cent last month from February owing to weak energy and food prices. The drop in prices has lessened pressure on consumers who have seen their wealth savaged by the recession.

But core prices, which exclude food and energy and are the measure by which economists judge the risk of general deflation, rose 0.2 per cent from February and were 1.8 per cent higher than in March 2008.

(“US prices drop for first time since 1955,” Financial Times, April 15) This is what these numbers mean: while this is technically a deflation (prices have dropped), this is only because Americans have given up buying many of the things they don’t need, like Hannah Montana t-shirts and plasma TVs. What Americans do need to buy, like food and gas, have risen in price. A mild deflation is, in the end, the mild corrective to increased savings rates and the paying down of debt, both of which are good in the long run for the economy.

It’s like American Idol. But without the singing. And Simon. And someone gets to make a lot of money.

Dozens of aspiring entrepreneurs will vie for a share of $800,000 in seed money at this month’s Rice Business Plan Competition.

(“Startup Showdown,” CNN Money, April 15) Come meet the contestants and see what kind of ideas they can offer to your startup.

Microsoft overpaid again . . .

In December CEO Mark Zuckerberg said the company was open to raising new money but only at the previous $15 billion valuation set by Microsoft. . . . some investors are biting, but not at that price. A source with knowledge of the possible transaction tells us that Providence Equity Partners (who are also investors in Hulu) and General Atlantic have submitted term sheets at “around $2 billion” valuations.

(“Decision Time For Facebook: Term Sheets Received At $2 Billion Valuation,” TechCrunch, April 15) The irony is that the runaway success of Facebook is limiting its options. Literally tens of millions of people join Facebook every month and the company is nuking $20 million every month. But users are called “users” for a reason — they’re enjoying Facebook for free without really clicking the ads or paying their way. At this rate, Facebook will be Outonyourassbook by 2011 unless it gets some cash pretty fast.

One third of all ecommerce. Now, there’s a target worth hitting. (AMZN) could be responsible for close to a third of all U.S. e-commerce transactions, RBC Capital analyst Stephen Ju asserted in a research note this morning. Ju notes that Amazon’s reported revenues consist of a mix of gross revenues from its own businesses plus net third-party commissions. To date, he notes, Amazon has not given a break down of the two numbers, other than as a percentage of units shipped. The question, he says, is how much third-party gross merchandise value is flowing through Amazon’s platform – and what slice of all e-commerce Amazon is actually facilitating.

(“Amazon: Now One-Third Of All U.S. E-Commerce,” Barrons, April 14) Here’s a thought. Help Amazon reach the magic 50% number. Cruise on over and buy our book! Buy several for all those special people in your life!

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