Saturday, August 06, 2011

Facebook & Zynga - This Won't End Well

Apologies if it seems I'm beating a dead horse here, as I know there have been a number of posts / comments about Zynga, but I just can't get over what I view as grim prospects for Zynga given its reliance on Facebook.

Our favorite social media site lays claim to 30% of sales Zynga receives through FB yet, according to a recent Bloomberg article, "substantially all" of Zynga's proceeds are a result of this partnership. That leads me to wonder why Facebook is being so generous? Only 30%? Hell, if it were my call, I'd squeeze Zynga for more. And if that happened, would there be any recourse? I can't imagine the game publisher really has any leverage in this fight.

Does anyone else feel that Facebook will inevitably push to renegotiate the rev-share terms? Or that such a situation will put even more pressure on a Zynga crew that already has to be feeling the heat given its high valuations? I just don't feel good about Zynga's chances here...

Check-ins

My wife and I visited a friend outside the New York City area this week. We were eating dinner with our a bunch of people and one of them mentioned checking in to the restaurant where we were eating at.

I asked one of them, "what do you use to check in to the restaurant?"

She replied, "Facebook."

I asked her, "do you use Google+ and Foursquare?"

She said, "What is Foursquare? And I have an account on Google+ but only have 4 friends."

I am pretty sure she has more than 4 friends on Facebook. She is a Facebook user, if Facebook keeps on adding features, I do not believe the other competitors will be able to compete with Facebook because it already has the users base. In my opinion, people typically check-in because they want their friends to know what they are doing/eating. If your friend is not on these other sites, why would you join? Does this mean Facebook is here to stay for a long while? Well, according to Facebook's statistics, Yes!! Facebook will be around for a long while.

Groupon Has 115 Million Subscribers

According to Mashable Groupon has grown 127% since the end of 2010, that is about 115 million subscribers today. This demonstrates that no matter how competitive the daily deals market is, people will go to where the deals are.

The SEC is questioning Groupon's accounting practice when they filed for IPO in June with a $750 valuation. The IPO is delayed until mid-September as the SEC and Groupon are trying to straighten Groupon's accounting. If the number of users is true, which we may not know until the IPO is finalized, then Groupon is a little over a 1/3 of the United States' total populations and bigger than some of the countries out there.

I wonder how many of these subscribers are active. I doubt that 115 million users are buying deals everyday, week, or month. This market will definitely be an interesting one to watch as other deals are popping up through different channels, like Google Wallet and Facebook affiliations with American Express.

Gmail Man: when Microsoft intenti

Gmail Man: when Microsoft (intentionally?) post an anti-Google video

Here is a video that Microsoft showed (realized?) to its employees. The video clearly denigrates Gmail – a product of Google – and its Ads system. For those who might not know, in Gmail, ads are related to the content of your messages. Google explains that their goal is to provide Gmail users with ads that are useful and relevant to their interests. For example, if you frequently email with your friends about cars (and you actually read those messages), Gmail might start showing more ads related to car accessories or about a local car vendor. Google says that by improving its existing ads it reduced the number it shows to users by a third.

Of course, this has already sparked some privacy concerns (which Microsoft uses in the video). In response, Google states that it is an automated system, and if people are really concerned about privacy, they can just turn it off (through Gmail’s settings panel). Google had already raised waves of privacy issues years ago when it first rolled out its ads in 2004 — and people obviously got over it.

According to Microsoft, this video was originally for an internal event but “somehow” ended up in the web (uploaded in Youtube). Legally, it is not a big deal since comparative ads are totally allowed in the US. But it’s interesting to see how threatened Microsoft (who owns Hotmail) must feel to use such practices. Anyway, I thought it was funny and wanted to share.

http://www.youtube.com/watch?v=eFCSp23xl40

Netflix should put ads

Yes, I strongly believe so. Netflix has millions of users who stream movies online everyday. Although it is a paid membership Netflix will probably not face a lot of resistance if it places one ad before every streamed movie, just one. This, on the other hand, could potentially be a serious source of revenue since the ads will deliver millions of impressions per month. It's just like what happens at the movie theater.

The F-Commerce

Facebook commerce is growing although many people (myself included) don't feel it. According to sortprice.com, their clients alone (1500) listed 3.8 billion of merchandise last year using their Facebook commerce solutions.

Facebook offers an ecosystem that is extremely attractive for merchants. 800 million users, a social graph, a deep knowledge of interests, etc. The question now is how to leverage all that. Facebook is moving slowly but probably surely.

Facebook probably needs to increase the visibility of its shopping apps including its marketplace and do more effort to push people to use them. After all, while it makes more sense for me to look for an apartment rental on Facebook since I use it everyday anyway and since there are social links that improve my trust I still use Craigslist.

Shopping and transactions generally could be a huge source of revenue for facebook but it needs a lot of work which should be done fast.

Let the consumers create the ads

A very interesting concept that is growing nowadays is how companies let consumers design ads for their products. Basically they leverage the internet to create hundreds of viral videos (created by anyone and everyone) and then let the ecosystem take care of the rest through YouTube and others.

A classical case is the Chevy Tahoe ad back in 2006. GM created the checyapprentice.com and asked people to create ads for the Tahoe and let them post these ads freely and point to them everywhere in the web. It was structured as a contest to create ads. The results were massive. The contest drew more than 30,000 entries in less than four weeks.

In a few more weeks some of the funnier videos created were attracting hundreds of thousands of views on YouTube. Not all of these were positive, actually many of them were quite sarcastic of the Tahoe (although the vast majority were pointing to its many advantages). The Chevy marketers however did not interfere or try to filter these out. They realized they were actually working to their benefit and creating awareness and a positive image of them being open to criticism.

This concept is completely changing not only how marketing material is distributed (from TV to YouTube) but also how the creative and the production are done. It is another signal at the power of the crowds.

P.S. The Tahoe racked up record sales after this campaign reaching 30% market share and reducing its time to sale from 4 months to 46 days. Also chevyapprentice.com -despite being a microsite- drove more traffic to chevy's website than google and yahoo.

Facebook Becoming More Advertiser Friendly?


It was announced this week that Facebook is exploring changes to one of its core features- the News Feed. Currently Facebook uses some black box technology/magical algorithm to determine what pieces of information actually get shown on a user's News Feed. But now Facebook is working to create an unfiltered News Feed, one that would show a user EVERY update ever made by any one of their friends. So if you have 400 Facebook friends and they each make 2-3 updates per day....well, you can do the math.
So why are the change? Apparently advertisers are unhappy with the current News Feed system because their Facebook posts are not getting seen by their entire fanbase, thus "limiting the impact of the campaigns". However, advertisers have been complaining about this problem for quite some time now and Facebook is only just responding. So why now?
I'm assuming this has been brought on by the rising threat of Google+, since the new social network features an unfiltered news feed and has gotten a lot of press for being more marketer-friendly (eventually). This theory was further reinforced when I read that Facebook was also looking to expand other features for advertisers, such as the "like" button options. Coincidence? I think not.
I'm not sure what the solution is. By having an unlimited News Feed, advertisers may be able to reach more people with their brand messages. However, if each of these people are then bombarded by 500 extra Facebook updates per day, these advertiser messages will probably get lost in the shuffle. Regardless of the medium, we always seem to come back to the question of, how does a brand break through the clutter? Perhaps, social media isn't the answer anymore.

Friday, August 05, 2011

Monetizing Social Media

More and more companies use social media for promotion and advertising: as of the report “The Social Shopper”, published in June 2011 by the Economist Intelligence Unit, 56% of retail companies use social media to promote merchandise (both existing and new) and 36% utilize the channel for customer service. Other uses include the offer of coupons and dialoguing with customers to better understand their feeling and preferences.

However, such companies are still trying to find a reliable way to monetize the channel, i.e. to determine the impact on the bottom line.

Objectives of the use of social media, as stated by companies, include increasing brand awareness, improving customer engagement and expanding customer base. Yet, retailers are still looking for a way to link social media to any increase in sales: basic metrics include number of fans or followers, but the majority of executives surveyed by the Economist Intelligence Unit declared that they are doing an average or poor job in effectively measuring social media impact. 32% said that monetization had actually occurred even if they weren’t able to prove it, but only 6% reported that they were able to monetize investments in social media.

A possible starting point for companies can be offering to customers the option of buying merchandise directly through social media such as Facebook, in order to demonstrate a direct link between social media and sales. Too few companies are doing that today, but this can represent the next step toward social media monetization.

Twitter advertising platform: first year valuation

One year ago Twitter launched promotion and advertising tools – namely Promoted Tweets, Promoted Trends, and Promoted Accounts, the first being ordinary Tweets paid for by advertisers in order to reach a wide group of users or to spark engagement from their existing followers, the second consisting in time-, context-, and event-sensitive trends promoted by advertisers which appear at the top of the Trending Topics list on Twitter, marked as Promoted, and the third working as “Suggestions for You”, i.e. suggestions for accounts that people don’t currently follow and may find interesting.

What’s the balance of this first year of offering? 600 marketers have taken advantage of the new tools, generating around 7,000 among Promoted Tweets, Promoted Trends and Promoted Accounts. Among them, RadioShack, CMT, ZUJI Australia and Unilever’s Magnum Ice Cream brand. These ad tools have proved successful for the majority of companies, but the penetration seems still low compared to the potential, and Twitter is not yet comparable to other social sites platforms.

So let’s briefly look at the main pros and cons of the tools.

The main advantages of Twitter’s Promoted Tweets, Trends and Accounts consist in an immediate “tech-savvy” reputation for companies, the possibility flawlessly integrate the ad into the social media content, and the opportunity for real time interaction with target customers.

On the other side, the major shortcoming of the tools is, first of all, that Twitter user base is still small compared to other social network, thus limiting the reach for companies and marketers; moreover, since Twitter platform is continuously changing and evolving, companies and marketers need to take it into account and be ready to manage all the changes in their advertising tools.

How can marketers and companies make the most of Twitter’s advertising platform, and what are the likely business results, will be the key aspects that will determine Twitter’s advertising tools success.

Venture for America -- the solution to getting top talent working in startups?

My co-founder and I recently won a White House award (see http://www.whitehouse.gov/blog/2011/08/02/harnessing-open-government-data-wellness-intiative for more info), and we had the opportunity to participate a roundtable discussion that highlighted an important challenge:

How do we (as entrepreneurs, professors, policymakers, and people in the private sector) encourage entrepreneurship in America? More specifically, how do we get America's top young minds to choose the career of a startup instead of the other prestigious options like working for Google, Facebook, McKinsey, Goldman Sachs, etc.? This question is important because nearly all jobs in the last 20 years have been created by startups, so for us to get out of this recession, we need to change some things to make sure the next 20 years we have even more top talent joining smaller companies (or starting their own).

It's hard to answer this question without looking at why top talent currently does NOT go join a startup...to me there are two main reasons:

1. Graduating students have loans and working for a startup, which not only pays a lower salary but also involves the risk of failure & therefore defaulting on student loans is very unappealing.

2. It is not as "prestigious" to work for a startup compared to working for the McKinseys, Googles, Facebooks, and Goldmans of the world.

One creative solution to this problem is a new initiative called Venture for America. Like Teach for America, VFA aims to forgive student loans for the 2 years a student works for a startup, and attach "prestige" to the students in its program.

Pretty cool, you can read more about Venture for America here:
http://www.fastcompany.com/1768081/venture-for-america-will-do-for-entrepreneurship-what-teach-for-america-does-for-education

Facebook Investor Roger McNamee Explains Why Social Is Over and I explain why I think he is wrong!

Check out this article on "why social is over"

http://www.businessinsider.com/roger-mcnamee-video-2011-7#ixzz1Sw5fSZ1A

The problems with this article are:

1. Although Microsoft is outdated and largely unimportant to consumers, it is still HUGELY engrained for enterprises/businesses. Think about CBS -- those of you who have an Apple know how disadvantaged you are in many of the classes (particularly those that involve financial modeling) since everyone in banking/consulting was trained on PCs. Finding that one TA who happens to know all the Apple shortcuts can be a challenging feat. Microsoft Research, Microsoft Legal, and Microsoft Finance/Engineering tools will keep Microsoft strong for a long time.

2. HTML5, though great, is at least one year away from being the "game changer" Roger alludes to. Although we (and almost all tech companies) are now using HTML5, and it's awesome, all of the things Roger refers to were possible before (just more difficult). As more people adopt it and it becomes more of the standard it will allow for some really great improvements, but we're far enough away from that happening that a lot of value and money can be created in the mean time.

3. There are still tremendous opportunities in "social" particularly with social graphs that are currently unlit. Obviously I'm biased in thinking that Sportaneous solves one aspect of this problem and provides value in a location-based way...see this article in the Next Web for my perspective: http://thenextweb.com/location/2011/04/06/the-unlit-social-graph/ ...but I think dating sites are also "social" companies that provide tons of value and have lots of room for growth.

The $300 Million Button

This article (http://www.uie.com/articles/three_hund_million_button/) is crazy. It explains how one site was able to increase revenues by $300 million (as in Three Hundred MILLION Dollars) by simply redesigning its website to require a little bit less on its online purchase form.

Clearly, design matters.

Way more than any of us realize.

As many of us just finished advising a startup, and some of us are working on our own startups, I think this lesson should be kept in mind all the time. Decisions like whether to require more than an email address to log-in are NOT trivial and may cost your company lots of money.

My own reaction to that article was to budget in a top-notch designer (in addition to our back-end engineers) to pay when we raise our first round of financing...clearly hiring somebody is more important than just "aesthetics".

Marketing through LinkedIn

The other day in class we touched the point about LinkedIn being one of the top channel for company recruiting. Today I found this article about usage of the professional network, and I think it might be interesting and useful for all of us.

LinkedIn is currently the 2nd largest social network in terms of visitors, after Facebook, having overtaken Myspace a couple of months ago. In July Lab 42, a market research firm, released an analysis on LinkedIn users, aimed at better understanding professionals’ use of the site and improve utility of the network.

Some insights from the research:

  • 35% of LinkedIn members check the site daily, while 32% check it several times a week; in addition, 42% of users regularly update their profiles: on average, thus, users are really involved.
  • Users are largely interacting, not only viewing, the site, which means that they are interacting with companies too, not only looking at companies’ announcements or ads.
  • In terms of purpose for participating in LinkedIn, there are quite significant differences among users, depending on the job position. In fact, while low level employees mainly use LinkedIn to search for jobs and do networking with co-workers (24% and 23% respectively), mid level staff utilize the site for networking at industry level and also for more social purpose, i.e. to keep in touch with others (20% and 24%); finally, top level managers’ use of LinkedIn is principally directed to promoting their business, as well as industry networking (20% and 22%).

All this kind of information is particularly important for companies and marketers using LinkedIn as a tool to reach their ideal target: in fact, based on LinkedIn members’ demographics, they are able to target advertising or research to the demographic type that is more useful, based on information like education, location, job level, groups, etc. Moreover, LinkedIn offers the opportunity for companies and marketers to connect with their target through forums, Q&A, and groups.

It’s for sure a new source of insight for the marketing industry.

The Fine Line b/w Paid & Organic Content for Daily Email Sites

My startup Sportaneous just had an article written on us in UrbanDaddy (see http://www.urbandaddy.com/nyc/gear/14009/Sportaneous_Finding_Pickup_Games_on_Your_Phone_New_York_City_NYC_Application)
and the early results are crazy...we've had 200 signups in the last 2 hours since the article went live. We've had 4 games proposed on our platform, and received useful feedback from 3 new users.

The fact that we are not an advertiser for UrbanDaddy -- i.e. none of us paid anything for this article, and that the people at UrbanDaddy somehow found out about us on their own and wrote about us is AWESOME. It actually restores my faith in UrbanDaddy, which I had heard only publishes things that people pay for, which raises an interesting question:

How much do daily email sites (UrbanDaddy, Thrillist, DailyCandy, etc.) lose by accepting advertisements and paid promotions? I know in my case when I heard that UrbanDaddy only wrote articles about people who paid for these articles I lost faith in it and stopped opening up their emails. Now that my startup is featured, I know that they obviously actually feature organic content they source themselves, which has made me more inclined to use UrbanDaddy (and other sites like it) in the future.

I know that Ben Lerer touched on this a little in class, but I'm curious what everyone thinks...is it worth it to include paid promotions/advertisements in the form of a "daily email"? Or does this form of promotion/advertising come too close to the unique value proposition of a daily email site (i.e. sourcing and presenting originally found products or services)?

Outsourcing Your Branding Needs

More and more, brands are directing customers to their Facebook and Twitter pages, rather than to their traditional branded websites. These "outsourced" websites allow customers to interact on more of a real-time basis, and can also view ads that are linked off of each page. These sites also allow brands to have more of a two-way relationship with customers, where they can see what's being said about them. As dollars move from traditional online marketing to social media, digital agencies and marketers will have to remain agile and understand how to best meet the needs of their branded clients.

Article: http://www.nytimes.com/2011/08/04/business/media/promoting-products-using-social-media-advertising.html?_r=1&ref=technology

Digital Marketing Starts...When??

Yesterday, a headline from an AdAge blog caught my eye: "25% of Toddlers Have Used a Smart Phone." Not only that, a third of Gen Y moms have toddlers under the age of 2 who have used laptops. As millenials start becoming parents, one would assume that this statistic will only increase. This is pretty shocking, and will have a big impact on society's developmental milestones for children. Additionally, this brings up many questions about the ethics of digital marketing. Brands like General Mills and Kraft have gotten in trouble before for marketing to kids through games on their websites; is it only a matter of time before brands start marketing to babies?

LinkIn Going Strong - Is That Sustainable?

According to an article in the New York Times, LinkedIn has nearly doubled its revenue and seen over a 50% increase in both its membership and page views since going public in May. As the company heads forward, it plans to focus on its team, technology, and products in hopes of realizing LinkedIn’s full potential.

Some seem skeptical whether the company can continue to yield such growth and revenue. Currently, the company makes its money from advertisements and premium subscriptions as well as the selling of recruiting services to corporations, plus its been argued that Monster and CareerBuilder are creating competition for LinkedIn. What do you think?

First of all, I think there is huge potential for LinkedIn. As long as the company harnesses its momentum and innovates, it will stay afloat, if not thrive. However, I think the key to this is going to be innovation. LinkedIn needs to create technology that supports and fosters "real world" professional networking even beyond what it’s already doing. Also, the company needs to remain proactive within the field. I can see them branching out and providing services beyond the job and networking environment, tapping into and facilitating professional development series and creating an international dialogue for certain industries.

As far as the competition, I can’t help but think of the MySpace/Facebook battle on this one, although on a smaller scale. My husband got his first job out of college, six years ago, through Monster and I don’t think he would use its services again – not because the company slacked on it’s job, but because LinkedIn is providing a more organic and personal approach to job searching and career building than any of the other services, which proves to yield more success in finding a satisfying job.

I guess we’ll just have to wait and see.

Drawing the Line

Twitter's revenue model has always been a big question mark, and Promoted Trends are one big part of the equation to try to eliminate that question mark. Companies are able to pay for branding associated with certain Promoted Trends. This feature has come under fire recently, however, as certain Trends have become inappropriate and even offensive. For instance, the Discovery Channel paid for Shark Week spot and at one point trended #reasonstobeatyourgirlfriend. In the past few months, there were also several other examples of brands backing out because of trending topics in bad taste. Twitter currently edits out obscenities, but how they will draw the line beyond that remains a big question. And because that question exists, many brands are holding back from buying space.

China Mobile Marketing

This Monday, Rovio-the company behind red hot Angery Birds and Madhouse-the top Mobile Advertising network in China announced their strategic partnership of mobile marketing in China.

China is the second largerst market for Angry Birds downloads just after the United States, which indicates the large potentical for mobile advertising among 900 million mobile users.

Madhouse will enable and deliver advertisements to Rovio properties across China which also includes fully customized marketing solutions tailored to the needs of brand advertisers.

With this partnership, I think Rovio will success in China with its products specialized for China market as well as customized mobile advertising for Chinese mobile users.