Archive for the ‘Analysis’ Category
Facebook’s Long Road Ahead
Tuesday, May 13th, 2008Those looking for Facebook to transform their monetization strategy overnight and exit with their highly anticipated IPO anytime soon better not hold their breath. Jessi Hempel highlights the challenges currently facing Facebook. There are some serious problems. The most significant is the “blasé attitude that media buyers have toward the company” according to Hempel. Hempel emphasizes that Facebook ads can sell for as little as 15 cents per thousand impressions (CPM). That’s because the rapidly growing user base has its attention elsewhere while navigating the site.
Monetization isn’t Facebook’s only challenge. Zuckerberg is facing more pressure as he separates himself from his college roommates and buddies who were once his closest allies in favor of a more experienced management team. While it shows maturity on Zuckerberg’s part it no doubt causes tension among colleagues, friends and the management. Perhaps reflection is one of the goals of Zuckerberg’s current trip to India and Israel. I wouldn’t be surprised to see continued changes when he returns from his short sabbatical.
There are some big challenges ahead especially considering that not even Myspace, Facebook’s largest competitor, has not yet figured out an effective way for generating substantial revenue. The company isn’t completely troubled though. Facebook continues to see record breaking growth internationally and is preparing to launch the Facebook Connect service which will help transform the social web. In other words the company is facing classic growing pains. It has reached a critical milestone and needs to push through to become the company that everyone believes it will be.
It is an exciting time for Facebook. It will be interesting to see how the company transforms over the coming year.
Is Facebook a Kids Game?
Friday, May 2nd, 2008Kara Swisher has a post up arguing that Facebook is still for kids. She uses a graph which charts the number of applications for each category. On that chart, the “Just for Fun” category dominates all other categories. This has been one of the biggest challenges for brands entering the Facebook platform. Want to brand your high-end service or product to consumers? Facebook may not be the place for that.
This is why a number of companies are turning toward LinkedIn and figuring out when their platform will launch on a larger scale. They may not end up being a comparable platform to Facebook as individual companies may be forced to approach LinkedIn directly. This is one way that the company can generate the high CPMs that were being buzzed about in the blogosphere earlier this week.
Facebook still has its place though. If you think about various marketing campaigns and who they are targeting, which platform would you be most likely to launch an application on if you are going to advertise the application on the back of a cereal box? I’d probably say MySpace. What about if you are going to advertise the application around your college campus and on your college’s website? Facebook.
Kara may just be right that Facebook is for entertaining and more engaging applications which are less focused on utility. While there are plenty of utility based applications, most of them have not seen success. What about that golden application that I’ve talked about over the past year? Maybe the golden application doesn’t exist and in reality, the golden applications on Facebook are really just highly engaging and fun.
Do you think utility applications will be successful on Facebook?
Facebook Worth $9 Billion?
Tuesday, April 29th, 2008Yesterday Henry Blodget unveiled the new SAI 25 which values the top 25 startups. At the top of the list was Facebook, bringing in a valuation of $9 billion. Didn’t Microsoft value Facebook at $15 billion though? Well yes but as most people know, Microsoft over-valued Facebook. So how about the other Silicon Valley darling, Twitter?
Silicon Alley Insider valued the company at a measly $75,000. The companies are also pegged to the Nasdaq and have valuations updated in real-time via the SAI 25 Live. Many of the valuations are way off the mark and many have no realistic basis. It’s a great attempt though.
As Erick Schonfeld points out, “SAI gets at its $125 million valuation for Digg by “splitting the difference” between a $200 million buyout rumor we reported and the $60-to-$80 million that Kara Swisher came up with. Splitting the difference between two rumors is not exactly the height of financial analysis.”
Regardless of the varying valuations, Blodget has definitely furthered the game of estimating private startups in the Valley. It’s a fun game but nobody will win until the startups get acquired.
Facebook Apps Are the Ads
Monday, April 28th, 2008Yesterday there was a lot of discussion surrounding the CPMs that Facebook application developers are receiving via various ad networks. While I am working on my own project to more accurately monitor run rates on Facebook ad networks, for now, the sample provided by Justin Smith is sufficient enough to come to the following conclusion: why buy branded Facebook ads when you can launch an application yourself?
I had the opportunity to speak with Naval Ravikant of VentureHacks.com earlier today and he stated that as a whole, CPMs on social applications are going down because there is too much inventory. Chances are good that growth in inventory is going to continue to outstrip the growth in brand advertising. This is bad news for most application developers. So how do application developers make more money?
Well, one way is to hire a sales team but for individual developers this is typically unrealistic. So what are they to do? Well if you have enough targeted inventory, you might be able to get into Federated Media but you better have millions of page views on your application and your application must be something that brands will want to place their name on. Honestly the best option for developers is to get acquired and work with a larger development team.
Most developers can’t expect a million dollar pay out though because their application is going to have decreasing cash flows given the decreasing CPM scenario. Given that apps are basically annuities with decreasing cash flows, the sooner you sell, the better. So who are the people making money in the current environment? Companies with a substantial sales force that are doing direct brand outreach are the winners because they have their fair share of inventory to pick from to fill new branded applications.
So what should brands do? What they already are doing! Brands are creating engaging applications and driving users to their applications with cheap inventory. Do you see any better options for application developers?
Facebook Chat From a True Facebook Expert
Friday, April 25th, 2008While the following video doesn’t have much that stands out to me, one thing has really grabbed my attention: how much Facebook has become an integral part of many peoples’ lives. I had a good 30 minutes of conversation last night with two individuals who enjoy Facebook chat but could give you hours of feedback on what the downfalls are.
Thanks to Amanda Mooney for posting the video. It’s a great example of how much Facebook chat has already had on at least one college girl’s life (not so sure about the other girl though!).
When Has Playing By the Rules Ever Paid Well?
Wednesday, April 23rd, 2008There was a panel at the Web 2.0 Expo today in San Francisco titled “The Facebook Platform: Finding Success in the Facebook Economy.” So far all signs depict a negative image of the panel. Not of the panelists per say, but that all the panelists were bitching about the state of the Facebook platform and the lack of money in the “Facebook economy.” When the platform launched we instantly saw a number of millionaires made overnight and when you can smell money in the air, you can guarantee that VCs are prowling around and entrepreneurs are trying to sniff out opportunity.
This ridiculous world of Web 2.0 is filled with risk takers, some of whom take so much risk, what they participate in should be considered gambling. Attend one of the Web 2.0 conferences and you are sitting among a sea of gamblers who will all jump at the opportunity to share with you what their strategy is. I too am one of those risk takers and everyday I share with you what my strategy is. There is nothing any of us in this industry like more than sharing with you our thoughts on the world because occasionally we are proven right.
Somewhere I once read that Nietzche said, “Out of chaos comes order.” We are slowly witnessing that take place in this landscape. The real businesses are floating to the top and a few that have been quick to adapt are also keeping their heads above water. While some have found beauty in Chaos, within the chaos you will find aggressive individuals who don’t play by the rules and will do anything to get to the top. That’s how you win in the wild west and that’s how many of the leaders have risen above.
Joyce Park, co-founder and CTO of Renkoo, claims that Facebook has “built a system where you can only win by cheating.” Don’t hate the player Joyce, hate the game. The reality is that Facebook is not a place for the faint of heart. It’s a landscape filled with aggressive risk takers that know how to win when everybody is trying to play dirty. There is a rapidly growing graveyard to support those that have failed to create sustainable business models and are running on a treadmill that will soon be unplugged.
That is the cycle of venture investment and entrepreneurial spirit. It’s not all winners and it’s not all pretty. One thing it is though: insanely fun.
Can Useful Apps Succeed on Facebook?
Monday, April 21st, 2008Yesterday Om Malik discussed a conversation he had with Sarik Weber who’s company had developed a free SMS application on Facebook. Om as well as Sarik were surprised with the relatively low success of the application. Additionally, Om noted that the top SMS application on Facebook were only receiving around 500 active daily users. A quick glance at VOIP applications on the site yields similar results.
For Om, the lack of growth in these applications caused him to question the “viability of Facebook as a communications hub.” I disagree with Om in that Facebook is a communications hub but the only difference is that people communicate differently on the platform. While people use the Facebook based mobile site and Blackberry application, users are simply using the applications to send Facebook messages and update their statuses not leverage other applications.
Is the communication going on via Facebook the same conversation going on via email. While much of it is, most of my business communication still takes place outside of the network. As of now there are very few utility based applications that have been successful at doing anything more than building out existing Facebook features. Offering new communication channels have continuously failed on the platform.
So what will succeed? Right now widgets, games and applications that extend Facebook’s functionality appear to be in the lead. We have yet to see the success of enterprise applications on the Facebook platform. Will robust applications that support productivity ever succeed on the site? I doubt it. Facebook is a tool for productivity. What do you think? Are there any highly useful and highly functional applications that you spend a lot of time on?
Will Facebook be the Center of Social?
Wednesday, April 16th, 2008Earlier this week, Ted Leonsis posted about the future strategy of Facebook. He hits on how Facebook needs to figure out what they want to become and whether or not they “want to be needed or loved as a brand and as a service.” It’s the utility versus entertainment question and ultimately I think Facebook has already stated that they want to become the most effective social utility.
There only point of failure in my own opinion is that they haven’t yet manifested their ultimate goal which is being the center location of social knowledge. What is social knowledge? Earlier today I touched on the difference between social and search and how social could ultimately become the future of search. First they will need to have the largest aggregate of users’ social data and then be able to decide what individuals’ expertises are.
Facebook is best positioned to become the center of social on the web. They are rapidly becoming the largest social site on the web and is most effectively aggregating data about relationships and the conversations between them. As Ted says in his post, Facebook “will also have to innovate and redefine utility-like services such as email, messaging, search, chat, storage and self-expression.”
I’ve argued this before. Facebook has the potential to redefine how we handle email overload by creating filtering systems which are based on our social graph. Rather then going into details on the subject again, I’d rather simply say that Facebook is in the position to become the social search engine and the social homepage of the net. Since much of our information will be socially filtered, we need a system which most effectively maps the graph and tracks the influence of people.
There are an endless number of ways that Facebook could improve their system to become the center of social on the web. The only problem that they face is they become increasingly cluttered as the community grows. If they can provide more systems to reduce the clutter and reduce the novelty of their site, I think Facebook could become the center of social on the web. What do you think? Will Facebook be our central location for tracking all that’s social?
The Multiple Facebook Personalities
Tuesday, April 15th, 2008How do you use Facebook? Brandon Rennels sent me a message last night notifying me of his findings after using Facebook for the past four years. He appears to have an interest in anthropology as he has compiled a fairly substantial list of user types. Do you fit any of these?
The Addict
The symptoms are obvious: Facebook as the home page, giving up going on Facebook for Lent, and an inability to distinguish actual news from the News Feed. The Addict spends sleepless nights rummaging through old photo albums and wall posts.
The Adding Machine
How is it possible for someone to have so many friends? Easy, everyone likes receiving new friend requests, and The Adding Machine takes full advantage of that. Day in and day out they add strangers, with hopes of it translating into real friends. Easy to spot by the ridiculously large amount of friends and impossibly small number of wall posts.
The Ambiguitor
Are they in or out of the closet? “Interested In” and “Looking For” changes often, and while browsing through photos may provide clues, The Ambiguitor likes to keep you guessing. Maybe it’s because they aren’t sure themselves.
The Application Junkie
Has every application known to man due to the unfortunate combination of a lack of friends and a surplus of time. The Application Junkie has a tendency to invite all their friends to become “pirates” or “vampires” or “zombies” or “slayers”, but doesn’t realize that if you didn’t accept the first 10 requests, the outlook on 11 and beyond doesn’t look too good.
The Awkward Adder
After the friendship is consummated on Facebook, things turn sour. The reasons for adding may vary but the result is always the same: awkward! You see The Awkward Adder in the halls, on the street, and while the first post-add encounter may be a “hello” or a head nod, you soon begin avoiding the person when you see them. Yet you don’t defriend them…
The Blast from the Past
Didn’t know them in high school and you don’t know them now, but that doesn’t stop The Blast from the Past from adding you as a friend. “Hey Brandon didn’t you have Mr. Spitz for Chemistry at PCEP?” Yes but that doesn’t mean we’re friends!
The Comment Whore
Is the first to comment on new photos, regardless of the time of day they are posted. Whenever someone comments afterwards, a reply-to-the-reply is pretty much a given. The Comment Whore’s behavior can be explained by a desire to be a part of the action 24/7.
The Crusader
Most people’s profile reflects a wide array of interests, but The Crusader has only one. It may be going green, promoting diversity, or getting Chuck Norris on the presidential ballot; regardless, their cause is out there. Oftentimes they have written heartfelt notes, created events, and joined multiple groups rallying around their cause.
The De-tagger
Read one too many “employers-are-on-facebook” articles and thus de-tags every possible objectionable item for fear of their debauchery finding its way to the company recruiters. The De-tagger has been known to delete photo comments and wall posts, and their profile is almost always private.
The Drunk
Pretty much self-explanatory. Easy to spot by the ratio of photo comments and wall posts from 2am-4am as compared to any other time of day. SOMETIMES THE DRUNK’S POSTS ARE IN ALL CAPS AS IF TO SAY, “HEY PAY ATTENTION TO ME!” Oter timse ervtything iss speld wrogn. May the time stamp be the judge.
The Fake
Beautiful body, gorgeous face, a perfect smile…and no photos tagged with other people? If it smells like a rat… The Fake’s profile is noted for the geographically diverse friends, lack of friends from high school or college and wall posts that begin with “We haven’t met but I just wanted to say…”
The Flaunter
Inspiring Theodore Roosevelt quotes, a list of activities a mile long, and an “About Me” that rivals Thoreau. The Flaunter looks amazing on paper (er…webpage) but only by conversing with their friends can you find out if they are indeed all that, or if they are just a damn good writer.
The Late Bloomer
They resisted. They really did. For months, years possibly, The Later Bloomer heard friends gushing about Facebook and how great it was; but because they don’t like following trends they avoided it. However, as the features increased and the pressure mounted, they caved. Oh how the mighty have fallen. Easily spotted by the quintessential first wall post: “Never thought I’d see the day…” or my favorite: “sellout”
The Minimalist
Only the essentials: Name, Network, Sex and maybe a couple interests. The reason? The Minimalist claims apathy but more often than not they like to view others more than they like being under the microscope.
The News Feed Neurotic
It’s as if your life was an RSS feed wired directly to their brain. “So Rennels I see you took down your relationship status, Babinec beat you at Jetman, the Shadow Council has been hanging out a lot more and you finally saw Across the Universe.” Needless to say, your life is much more exciting to The News Feed Neurotic than their own.
The Obnoxious Event Planner
“You’ve been invited to Bobby’s 23rd Surprise Birthday Bash!!” That’s great except it’s during finals, the event is in Texas and I don’t even know who Bobby is. By looking at the event page you conclude that the other 2,400 people “Not Attending” probably don’t know Bobby either. You wonder if The Obnoxious Event Planner believes in the law of large numbers or they’re just naïve. Or both.
The Past-Primer
Usually graduated from college before 2000, and thus, missed the boat. The Past-Primer has fewer than 100 friends, a photo collection of random shots over the past 10 years and wall posts consisting of “OMG I haven’t seen you in forever!!”
The Photoshop King/Queen
The profile photo is at the perfect angle, with superior lighting and precise cropping. Clicking on “view more photos” tells a much different story. The Photoshop King/Queen usually has a noticeable difference between photos they tagged of themselves and photos tagged by others.
The Picture Whore
The fact that someone can have over 40 albums in less than one year mystifies some, but to The Picture Whore it’s just another day on Facebook. Looking through the sea of photos reveals some answers: six photos of the same two people in the same place at the same time but at a slightly different angle. One would think to only post one but to them 6 photos = 6 Facebook photos.
The Poker
Even though poking has no stated purpose, that doesn’t stop The Poker from initiating an unheard of amount of “poke wars” every time they sign on. Although you think poking was so 2006, they respectfully disagree. Poke back if you dare.
The Poser
The contradictions are clear from the beginning: an application about reducing our carbon footprint and a picture of The Poser in an H2 Hummer. A “Favorite Quotes” section filled with dissertations on dignity, self-respect, and the noble pursuit of higher ideals, and an album titled “Blackout ‘08: the saga of second semester.”
The Stalker
No explanation necessary. Thank God for private profiles.
The Status Abuser
____ is bored. ____ had a long day of classes and has an even longer week ahead. ____ is watching TV. ____ wonders if anybody cares anymore. The Status Abuser wants anyone and everyone to know exactly what they are doing and thinking at any given moment in time. Greatest invention of their life? Facebook Mobile.
The Wall Post Conversationalist
A new method of communicating has emerged, which has many questioning what our society is coming to: the wall post. Never before has it taken so long to say so little, and never before have you spent so much time reading other people’s conversations. Although it would seem illogical to discuss the reasons for a breakup via a public forum, the Wall Post Conversationalist doesn’t mind blowing up your News Feed.
Brandon Rennels was kind enough to write this as a guest post. If you enjoyed this article, find him on Facebook and send him a message.
Can You Sell Your Facebook Profile?
Monday, April 14th, 2008Yesterday, there was a lot of buzz about how the RocketBoom founder put his Twitter account up for sale on eBay. When I last checked, the account with 1,500 followers was going for $1,125. How about those that have twice as many friends on Facebook? Technically, selling your profile would theoretically violate Facebook’s terms of service since it would be a misrepresentation of the person using the profile.
Then again, you could switch the email address and photo and it wouldn’t be that person’s profile anymore. While I haven’t inquired into Facebook, my guess is that any sold profile would be immediately banned. Such a situation also make one wonder which profile is more valuable, a Facebook profile with 1,500 friends or a Twitter account with 1,500 followers. In my own opinion I think Twitter could be more influential but then again leveraging friends lists on Facebook can accomplish the same goals.
Ultimately, I’m not sure that you can sell any social profile. People add you as a friend on social sites because they actually know you or have similar interests. There isn’t much value once the person you wanted to connect with is not active. What do you think?
