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Social Media: LinkedIn Proves the Power of Three-Way Action

Written By Noah Mallin | June 19, 2008 | Share This |

3 Way

One of the great things about social networking sites like Facebook or MySpace is the ability to see what your old buddies are up to without actually having to talk to them. Hey, that guy who wore a skirt and mascara in college is a corporate lawyer now!

On the other hand, sometimes you want to do more than just accumulate “friends”, you actually want to network and do some online schmoozing. LinkedIn, which has been described back-handedly as “social media for grownups” and has been all over the news this week, is a site that focuses on career connections with a clean low-widget design and a plethora of helpful tools. This has helped them to become the number 4 site for social networking on the net according to Nielsen. Even more phenomenal is their 146% year-over-year growth, making them the fastest growing social network in the U.S…. check da chart:

(more…)

Facebook Opens the Door to Open Source

Written By Miguel Cancino | May 27, 2008 | Share This |

Profile Optimization

Is Facebook going open source? Today Techcrunch leaked rumors that Facebook will soon open it’s application platform, the aptly titled Facebook Platform, to cross-channel integration. In other words, applications created exclusively for Facebook will now be compatible with other social networks.

This concept isn’t revolutionary; Google, backed by MySpace and Yahoo, launched OpenSocial last November to provide an open platform for cross-network application development. Facebook, on the other hand, has notoriously been viewed as the “walled garden” of social networks, due to Facebook’s refusal to collaborate with other platforms. Thus, the switch to open source, though clearly reactive to Google, is significant, because it eliminates any competitive advantage that OpenSocial (and Google / Yahoo / MySpace) might hold over Facebook.

Given Facebook’s “walled garden” reputation, however, several key questions arise. For example, how truly “open” will the platform be? Which open source license will Facebook choose?

The answers to these questions hold huge implications for the potential value of an open Facebook Platform: the volume of people using an application, the potential demographic behavior collected, and the means by which users find applications may all significantly increase from cross-network distribution. For advertisers, that would mean better conversion rates and prices. For Developers, it means better application visibility and utility. Finally, for users, it would hopefully mean an end to applications that are meaningless outside of Facebook. That’s right, you heard it here first - SuperWall, SuperPoke RIP.

Begun, the Data Wars Have

Written By Drupad Sil | May 16, 2008 | Share This |

MySpace

In the last week, we’ve seen a host of announcements relating to data portability. MySpace kicked things off by revealing a data partnership with Twitter. Facebook followed with Facebook Connect, and Google got in the act with Google Friend Connect. Essentially, it’s an arms race between these three groups with two objectives: to get the most users to store their data centrally, and to build partnerships with popular sites to incentivize users to store their data with one site over another (basically, “look at all the other cool sites you can export your data to if you pick me”). In the spirit of data portability, one might have expected that the three sites would be ‘open’ (pun intended) to letting their users share data across the competing products. Facebook quickly corrected that little assumption with an announcement yesterday. From the Facebook Developers’ Blog:

“In the past, when we found applications passing user data to another party (for instance, to ad networks for the purpose of targeting), we suspended those applications and worked with those developers to ensure they respect user privacy. Now that Google has launched Friend Connect, we’ve had a chance to evaluate the technology. We’ve found that it redistributes user information from Facebook to other developers without users’ knowledge, which doesn’t respect the privacy standards our users have come to expect and is a violation of our Terms of Service. Just as we’ve been forced to do for other applications that redistribute data in a way users might not expect or understand, we’ve had to suspend Friend Connect’s access to Facebook user information until it comes into compliance.”

The above (innocuously posted under a heading of “Thoughts on Privacy”) represents the first salvo in what is turning into a battle over user data. Apparently sites that are partners in the OpenID initiative can be somewhat open, but not entirely open, leading some to question if these products represent the coming of real data portability. There’s an interesting post by David Recordan at O’Reilly radar on the topic:

“…MySpace said that due to their terms of service the participating sites (e.g. Twitter) would not be allowed to cache or store any of the profile information. In my mind this led to the Data Availability API being structured in one of two ways: 1) on each page load Twitter makes a request to MySpace fetching the protected profile information via OAuth to then display on their site or 2) Twitter includes JavaScript which the browser then uses to fill in the corresponding profile information when it renders the page. Either case is not an example of data portability no matter how you define the term!”

So, what’s Facebook’s motivation in doing this, other than drawing a line in the sand for its users and competitors? Why do they feel threatened by Google, which doesn’t have a social network of its own in the traditional sense? Michael Arrington at TechCrunch lays it out nicely:

“[MySpace and Facebook] know that to keep users happy, and to stop them from entering in all that friend data into other sites, they need to make their data at least somewhat portable. Not too portable, mind you. That means they’d lose control. But just portable enough. That’s why they are launching their products…

Google is a little different. They don’t have a social networking presence in the U.S., so they are trying to get in the middle between the guys with the profiles (like Facebook) and the sites that want the data. Their Friend Connect product does just that, and makes them an important data middle man. That position can later be leveraged intensely. In fact, in many ways Google can become the most important social network without actually having a social network. Facebook, of course, doesn’t want this. And that’s the real reason why they blocked them today (although the rumor is that the two companies are talking tomorrow about some sort of compromise).”

Who’s right and who’s wrong in this specific instance is debatable. There are those who believe that Google is wrong for creating an app that shares data in such a way and supposedly has “stale” information. And there are those who argue that Facebook has no right to determine what applications can or cannot be utilized by users to share their personal data. Regardless of who ultimately compromises on this round, this type of skirmish is only indicative of the beginnings of a full-blown user data war.

Google Friend Connect Makes Any Site Social

Written By Drupad Sil | May 12, 2008 | Share This |

Connect

Last week we discussed MySpace’s move to position itself as a central web hub by allowing the portability of user data to a host of other social networking sites. Facebook quickly responded with Facebook Connect and its partnership with Digg, and today Google has revealed a similar feature, aptly called Google Friend Connect. From the release at the Google Press Center:

“Websites that are not social networks may still want to be social – and now they can be, easily. With Google Friend Connect, any website owner can add a snippet of code to his or her site and get social features up and running immediately without programming – picking and choosing from built-in functionality like user registration, invitations, members gallery, message posting, and reviews, as well as third-party applications built by the OpenSocial developer community.

Visitors to any site using Google Friend Connect will be able to see, invite, and interact with new friends, or, using secure authorization APIs, with existing friends from social sits on the web, including Facebook, Google Talk, hi5, orkut, Plaxo, and more.”

Naturally, in the end this move is all about controlling user data, despite what Google may claim about liking a healthier Web for everyone. We spoke to this a couple weeks ago with this post on Google locking in user’s files and preferences data, another form of control. This slew of announcements shows that these companies are rushing to be that one website that users choose to store their data at and export it from. Unfortunately for Google, they don’t have the millions of user profiles that Facebook and MySpace do simply because they aren’t a social network (outside of Orkut), but this may not as limiting as it appears at first glance. Michael Arrington at TechCrunch explains why:

“Google may be keeping a tighter reign on data, requiring third parties to show it directly from Google’s servers in an iframe. By contrast, MySpace and Facebook are sending data via an API and trusting third parties not to abuse it. That flexibility also allows those third parties to do more with the data, including combining it with their own data before displaying it.

But what’s clear is that Google wants to get in between social networks and the web sites that want access to their data. By controlling the flow through Open Social and the new Friend Connect product, they can effectively become a huge social network without actually having a, well, social network.”

It’ll be interesting to see which of the Big Three is able to become central for more people, but if Google manages to stay in between Open Social and end users, they may turn out to be the big winner, again.

Facebook: Worth Two Times Mozilla?

Written By Drupad Sil | April 29, 2008 | Share This |

Market Crash

Henry Blodget at Silicon Alley Insider unveiled the SAI 25 Live, an auto-updating list of the world’s “Most Valuable Digital Startups” as assessed by Blodget and his associates. More from SAI itself:

“Like public companies, the value of private change in real-time, but there’s no convenient way to track these changes… until now. We’ve created a real-time tool, the SAI 25 Live, that indexes the value of the SAI 25 companies to the NASDAQ. The SAI 25 Live updates the values in real-time (with a 20-minute delay). So if you’re jealous of all your friends at public companies who can recalculate their net worth all day, just check out the SAI 25 Live. This will tell you how much your stock options are worth right now.”

Now, there are a multitude of techniques available to perform valuations of public companies practiced by investors, ranging from the textbook (dividend discount model, earnings multiplier model) to the obscure (ask James Simons at Renaissance). However, they all have one thing in common: a heavy reliance on the availability of financial data, like revenue and profit numbers, free cash flow and balance sheet results. Unfortunately, these numbers are rarely publicly available for private institutions like those on the SAI 25 Live, leading one to wonder how accurate these valuations are. From the SAI 25 Live valuation page:

“Valuing companies is a subjective exercise, one that is highly dependent on information. In theory, companies are worth the present value of future cash flows, but since no one knows exactly what future cash flows will be (or the perfect rate at which to discount them), theory and a dollar will get you a cup of coffee. An additional challenge of valuing private companies, as opposed to public ones, is that detailed financial information is often unavailable or outdated. And many private companies are often early in their growth cycles and therefore haven’t reached mature profit margins.

Ultimately, of course, private companies are worth what any stock or asset is worth – what someone will pay for them.”

Of course, here Blodget is correct twice. Private companies are certainly worth what people will pay for them. Also, theory and a dollar will get you a cup of coffee, which is exactly the value of this analysis. The SAI 25 Live takes into account implied valuations in private financings (a terrible absolute indicator, but of some value directionally given an existing valuation), financial performance (nonexistent for most of this list), market share and market size (doable), and growth rate (dependent on revenue numbers, which are rarely reported and so must be guessed) making this list a poor indicator of anything other than relative valuations (Facebook is worth more than Ning, who knew?), and even there it can only be used sparingly (company X being worth Y times that of company Z on this list is probably meaningless). In the words of Erick Schonfeld at TechCrunch:

“Putting a value on private companies is hard enough for insiders and venture capitalists who have full access to the company’s financial statements. When outsiders try to do it, even well-informed ones, it is nothing more than a guessing game. But it is nontheless perhaps one of Silicon Valley’s favorite parlor activities.

Some of these valuations have more merit than others. Some have none whatsoever. For instance, 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-$8- million that Kara Swisher came up with. Splitting the difference between the two rumors is not exactly the height of financial analysis.”

Agreed. Some have even gone so far as to call it an attention-grabbing activity, like FakeSteve:

“To make it fresh and dynamic, they somehow yoked these made-up numbers to the NASDAQ so their made-up numbers change into new made-up numbers all day long. That way all these [employees] working for worthless companies will click on that list all day long…generating loads of stupid traffic for Alley Insider. And trust me, that’s the real point of this list. It’s a cheap ploy for ginning up traffic.”

Or for pulling financial information straight from the horse’s mouth. There are so many requests for data that could correct these valuations that it almost seems like a device for getting these companies to divulge their actual numbers straight to SAI. Regardless, it is difficult to accept a 25x revenue valuation for Facebook common stock, given that Google trades at between 10.5x and 15x revenue, which in itself is unusual. Also, Wikipedia, valued at $7 billion, is a nonprofit, meaning the assessment measures Wikipedia’s asset value if it were to change into a for-profit organization. This change would certainly affect its users, which in turn would affect the site’s operation, affecting the valuation.

Perhaps the best thing to take away from this is that it is indeed just an entertaining parlor game to perform these valuations. Serious investors should already be familiar with this.

Enterprise Web 2.0 Worth $4.6 Billion in 2013

Written By Drupad Sil | April 21, 2008 | Share This |

Forrester Research

Forrester Research today released a six-year Web 2.0 Market Forecast. From the report itself:

“Enterprise spending on Web 2.0 technologies will grow strongly over the next five years, reaching $4.6 billion globally by 2013, with social networking, mashups, and RSS capturing the greatest share. In all, the market for enterprise Web 2.0 tools will be defined by commodization, eroding prices, and subsumption into other enterprise collaboration software over the next five years; it will eventually disappear into the fabric of the enterprise, despite the major impacts the technology will have on how businesses market their products and optimize their workforces.”

A definition before we jump into the discussion. Enterprise 2.0 doesn’t include pure ad spending dollars spent on services like Facebook, Blogger, or Twitter, instead counting productivity tools based on Web 2.0 concepts. So, Facebook as a whole wouldn’t count, but money spent on the creation and syndication of a Facebook app or social network widget would.

According to the report, social networking spending will take up almost half of the total, coming in at about $2 billion, followed by mashups, RSS, and wikis, all three of which total approximately $1.6 billion. From Larry Dignan at Between the Lines:

“The top spending categories aren’t all that surprising. For instance, social networking is a decent substitute for knowledge management applications, a category that companies haven’t yet cracked. In other words, social networking could yield ROI. Mashups could also deliver faster time to market and it doesn’t hurt that giants like IBM are pushing them.”

So, what are some of the issues this developing market will face? Sarah Perez at ReadWriteWeb explains:

“For vendors specifically, there are 3 main challenges to becoming successful in this new industry, including:

1) I.T. shops being wary of what they perceive as ‘consumer-grade’ technology

2) Ad-supported web tools generally have ‘free’ as the starting point

3) Web 2.0 tools will have to now compete in a space currently dominated by legacy enterprise software investments”

There are even problems with the definition of Enterprise 2.0 itself. From Dennis Howlett at Irregular Enterprise:

“[Forrester’s definition is] an incredibly loose definition and one that could be applied to any number of technology components from CRM through to supply chain management and pretty much anything in between. The fact is that with so many definitions floating around, I’m of the view that Enterprise 2.0 does not exist except in the minds of those who are selling technology components. That’s not a recipe for success.”

What’s the bottom line? The big picture seems pretty clear: the flexible communication and networking tools created in the past few years will probably find paying customers in the form of big corporations looking to become more lightweight. The interesting questions are how quickly it’ll happen, how much internal resistance there will be, and how they’ll be integrated into existing internal applications.

Social Networking: The End of Web Search?

Written By Drupad Sil | April 17, 2008 | Share This |

Faceboogle

An article by Glenn Derene at Popular Mechanics made waves today with its first sentence: Search is dead. The thesis, formulated during a discussion with an anonymous venture capitalist, is that search engines of the future will not be used for pure information gathering and consumption, but rather will index users’ online footprint data to tailor customized results. These results will go beyond just utilizing browsing history to deliver results, as Google and Yahoo already attempt to do, but will also incorporate information from Web 2.0 applications, like a Facebook friend’s movie recommendation, for example. In Glenn’s words:

“But what may turn out to be the strongest signal of all is the footprint you make with your online identity. Consider how much information you voluntarily provide on your Facebook profile. Now imagine if you could combine that with your Netflix renting and Amazon buying habits. Then throw in the suggestions of your friends and the pages you visit the most often. All those various sources of information about you are currently stored in different locations—on your computer’s browser history, on your Facebook page, on the servers for Netflix and Amazon—but just imagine how accurate a search could be if every time you had a query, the mass of data about you that exists on the Internet could inform the results.”

While the idea is not entirely original, it predictably has spawned a great deal of debate. One counterargument was posed by Greg Sterling at SearchEngineLand:

“And while it’s very true that word-of-mouth has moved online and people care very much about what their friends and other contacts think about things, those “recommendations” are not a substitute for search. Indeed, I recently spoke the other day to one of the founders of Socialight, an internet and mobile-social network. One of the interesting things the company has discovered through experience is that people don’t just care about their networks’ recommendations. It turns out — and this is common sense — that expert and top-down editorial content matter equally and in some cases more than what their friends may think.”

Alexander van Elsa points out a couple more issues on his blog:

“Why would such an attempt fail half of the times (or something in that order)? Because it doesn’t take human behavior into account. There are at least two barriers that can hardly be overcome by any computer algorithm or data hog system. First of all, on-line I’m not who I really am off-line. On-line people can have multiple identities, lie about themselves, provide us with profiles that look better than real life… Secondly, a computer algorithm can hardly interpret my mood of the day. Depending on how I feel, what I have experienced earlier, what I’m about to do in the future, the coffee I had for breakfast, etc, etc, I might be looking for different things when I type “I am looking for a car” in the search bar. Chances are that by taking into account my profile information, social graph, interactions on Facebook or any other social network, the “social search” algorithm will be way off.”

While most people will agree that search giants Google, Microsoft, and Yahoo are here to stay for a while longer, there’s no denying that a search engine that could seamlessly combine information and expert recommendations from the web with the preferences of your circle of friends would be an attractive proposition. Perhaps Udi Manber, Google’s vice president of search, phrases it best:

“Search has always been about people. It’s about getting people what they need. The art of ranking is one of taking lots of signals and putting them together. Signals from your friends are better, stronger signals.”

 

International Social Networking: Facebook in German, LinkedIn in France

Written By Sepideh Saremi | March 3, 2008 | Share This |

facebook.gif

Two interesting developments in social networking localization: Facebook today released a German-language version of the site, and LinkedIn has entered the French market in a bigger way by signing a deal with popular job listing site Apec.

Facebook’s German translation took less than two weeks, thanks to 2,000 German-speaking users that contributed translations and then voted on the best German words for Facebook terminology like “poke” (that’s “anklopfen” in Deutsch). Application developers will soon be able to use the same crowd-sourcing to get their apps translated. TechCrunch reports a French version is on the way soon.

LinkedIn’s deal with French job site Apec is not about translation but lets LinkedIn use Apec’s API to get Apec members signed up on LinkedIn. Apec will get a referral fee for each new user LinkedIn gets, and LinkedIn gets more global by invading Apec via application.

And speaking of translations, and French, and social network globalization, this very interesting map (in French) shows popularity of social networks in different parts of the world. Facebook is fourth in Europe, so perhaps a German translation will bump it up soon. LinkedIn does not appear on this map.

Fake Facebook Profile Lands Moroccan Man 3-Year Jail Sentence

Written By Sepideh Saremi | February 26, 2008 | Share This |

facebook morocco fouad mortada

Moroccan computer engineer Fouad Mortada, pictured here, created a fake Facebook profile for a Moroccan prince. Fake profiles are nothing new to Facebook; do a search for any popular celebrity on the site and you’re bound to find a profile or ten.

But Moroccan courts have misinterpreted the just-for-fun profile as something malicious - impersonation and identity theft - and thus have ordered Mortada to pay a $1,000 fine and serve three years in prison. The blogosphere is up in arms, and rightfully so: the prince and Moroccan government should have gone a less litigious route in protecting the Moroccan prince’s personal brand, by asking Mortada for ownership of the profile rather than throwing him in jail.

Searchviews: Week in Review

Written By Sepideh Saremi | January 18, 2008 | Share This |

searchviewsLogoLarge.gif

In this edition of the Week in Review, the Facebook news keeps coming, MySpace tries to wrap its arms around the whole child online safety thing, and it might start costing more to watch video online than just to buy it in a store.

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