Facebook faces reality?

This morning, I received a WSJ alert in my email, stating that Facebook is in talks with Yahoo! to sell itself for $1 billion after talks with Microsoft and Viacom. WSJ needs a login, but here's a link to check out:

http://www.techcrunch.com/2006/09/21/facebook-and-yahoo-in-acquisition-talks-for-1-billion

Facebook, a prototypical Web 2.0 company, has been in the news lately. I think it was last week that stories about user backlash surfaced. Facebook had added a couple of features that did not sit well with users, one of them being a new tracking feature. This prompted the founder and 22 year-old CEO Mark Zuckerberg to post a message to users:

http://blog.facebook.com/blog.php?post=2208197130

Then, I was quite shocked to hear that Facebook has opened up its service to all, meaning that you no longer need a ".edu" to be a member. (Read Om Malik's comment on this: http://software.gigaom.com/2006/09/11/facebook-goes-for-bigger-pond). This really surprised me because Facebook's strength lay in the exclusivity that protected the site, at least to a certain extent, from undesirable individuals that seem to surface on MySpace now and again. Sure, they need growth, but they had not done too poorly so far, what with 9 million users already and steady stream of high-schoolers and college kids out there.

But now, it's starting to make sense. There have been stories about Facebook wanting to sell before. Perhaps now, Zuckerberg and Co. are adding "value" to the business, readying for a sale. Little they may care about those who got them here, let the acquiring company worry about that.

Such an acquisition may not be such a bad idea for Yahoo!, whose stock needs even more help with the 11% decline two days ago.

http://biz.yahoo.com/ap/060919/yahoo_outlook.html?.v=10

Yahoo! has tried its hand with the social networking phenomenon, namely 360 360. But despite having over 300 million unique users, it's fair to say that 360 is not all that successful. Furthermore, Yahoo! as a brand is not hip and popular in thr coveted 18-24 demographic, so buying Facebook could all of a sudden make it a stronger player in the youth market. Yahoo! has had a decent track record of stitching companies into its portfolio and leaving them be. Perhaps the best example of this is Flickr, which still exists in its original format despite the existence of Yahoo! Photos.

If there is indeed any credence to this story, then I say Zuckerberg should sell before it's too late. I'm not sure whether the current users are going to be loyal with the significant changes to the business, which could devalue the company going forward. There are worst things than having several hundred million in your pocket at age 22.

Another POV on Massive's in-game advertising

Rory brings up some good points regarding Massive's business model for dynamically served in-game advertising. There are a lot of people in the industry (both gaming and advertising) who believe this is potentially the next cash cow, but I have serious doubts. To get a better sense for what's actually going on, we have to take a deeper dive into how this all evolved...

I was at EA, when we first began to sell "hard-coded" in-game sponsorships. It was a huge challenge. Game studios had to be convinced that $50M+ titles now needed to include real-world sponsorships that often generated <$1M in revenues. Without early ad standards, advertisers and agencies often had unreasonable expectations and the user-experience "realism" was compromised. At the time, a few of us felt that this might not be a scalable business model, but agreed that driving innovation was more important. We received good press, and EA's name was front page.

Since then, a few companies such as Massive and Double Fusion have taken the next step to create the technology and network to dynamically serve in-game advertising, much like how ads are served on typical web pages today. There are obvious benefits to taking this approach over hard-coding each and every sponsorship; but we need to realize that there is a very clear line here. What was flashy and innovative (namely, driving past a hard-coded McDonald’s restaurant at 100MPH in “Need For Speed”) is being replaced by rotating in-game banner ads. Sure, dynamically served ads are scalable, but the value proposition for advertisers also changes.

I’m sure the long-term plan is to dynamically serve sponsorships, but who knows when that will happen…

Facebook in Talks with Strategic Buyer

An article in this morning's WSJ suggests that the popular Web 2.0 site, Facebook is in acquisition talks with Yahoo! to sell the company in the ballpark of $1 billion. Though this valuation seems high, it is significantly more reasonable than the $2 billion dollar amount it was expecting from Microsoft in the recent past.

My prediction is that Facebook should pursue this sale with Yahoo! aggressively. They have penetrated the college market and are trying to find other growth opportunities by opening up the site to anyone with an email address. This move could dilute the user experience and sour their current dedicated user base.

Additionally, as the article reports, the current audience is young Internet-savvy students who are prone to switching sites. While the site is still hot, it is in the best interest of investors to exit.

It's time the Harvard sophomore hand over the reigns of the company to a Columbia MBA to help him exit!

Online book swapping

In an effort to boost the still small swapping market, new entrants such as Whatsonmybookshelf.com, SwapSimple.com and BookMooch.com are focusing their efforts almost entirely on books, primarily because they are easy to ship and have scant resale value.

How are these sites any different to Amazon or Ebay or even used book-stores? The reason - they offer a better deal.

So what's the catch then? - these sites lack variety. Some sites such as Swapsimple are heavy on textbooks - fine if want textbooks (and actually find the one you are looking for), but what if you want Daniel Steele? Then you should go to Whatsonmybookshelf.

It will be interesting to see which site, if any, manages to become the most popular. Maybe there will be niche sites that develop selling only particular types of books.....

When "Opt Out" means You Want Out

During some research on the current state of on-line gift registries, we came across the site www.zebo.com. It seemed like an interesting site to explore but it was brought to my attention today that shortly after my friend logged in (through her MSN password), ZEBO blasted out emails to every single person in her contact book, as if my friend had sent the email. But my friend had never approved or sent the emails. This is a definite annoying violation and reason to have hesitation when joining and online community that requires you dish out personal inviation to be "in the network". While this isn't a pure 2.0 issue, it begs the question of privacy.

This actually reminded me of some similiar experiences people have had with Linked In. Haven't we all received emails from less than close acquitances, or even acquitances of distant acquitances to join their "Linked In" network? Sure that's the point of social networking but it just raises a flag when it seems personal information is not being kept private.
So while the default checked box that mandates a user "opt out", may seem like a smart move on the part of the marketer, it is simply not fair to bury it on the site so by accident somebody's entire address book gets spammed. And worse of the spams seem as if they are coming from a friend. Emails read "Hey friend, Debbie wants you to join XWZ and blah blah' Then followed but some jargon like "You got this email because someone who knows you sent you an invitation to join their online shopping community at ZEBO.com".
Guess again. Delete.

Chris Anderson speaker event in NY

Here's an opportunity to hear the person who coined the 'long tail' concept, editor-in-chief of Wired Magazine, and author of the book "The Long Tail: Why the Future of Selling Less is More".

He's speaking next week, Thursday 28th, at the New York Public Library. Tickets cost $10 for students.

Here are the details.

You can also check his blog for more information on Mr Anderson (Matrix anyone?) and his book.

TIME's 50 coolest websites

I found this list interesting not only because it lists a diverse set of industries, but also presents good examples of Web2.0, as quoted below:

Many of this year's choices are shining examples of Web 2.0: next-generation sites offering dynamic new ways to inform and entertain, sites with cutting-edge tools to create, consume, share or discuss all manners of media, from blog posts to video clips."

http://www.time.com/time/2006/50coolest/index.html

Worths a visit!

Long Tail of web advertising

In a story today (9/20) in the Wall Street Journal, Yahoo warned of weakening third-quarter revenues. The reason - weakening online ad sales largely attributed to the less than expected increase in ad spending by automotive and financial services companies.

The question is, does this bode ill for online advertising in general or is it just a bump in the road? The article presents comments which indicates that industry participants are generally confident of no imminent slide in revenues systemwide indicating that the slide at Yahoo may be endemic.

Is it possible, though, that the 'long tail' phenomenon as it operates in the entertainment industry may be relevant to online ad sales also. Too far-fetched to imagine that the incremental ad dollar spent online may, at some point in time, move away from Yahoo and mainstream portals/websites and find its way to those obscure websites lurking at the far end of the tail?

For now, people await the fourth quarter results - often the main revenue earning season for the online advertising industry - for further clues!

http://online.wsj.com/article/SB115868088020267584.html?mod=rss_whats_news_us

What is Web 2.0? Probably the easiest story lead out there...

Wired subset "Monkey Bites" took a user poll and came up with the winners and losers in the Web 2.0 world.

Thumbs up:
Flickr
Odeo
Writely
del.icio.us
NetVibes

Thumbs down:
MySpace
Squidoo
Browzar
Fo.rtuito.us
Friendster

My opinion is that the losers include out of favor social networkers, plus bad ideas. Fads and Bads. The good ones are user tools that have been subsumed (mostly) into Yahoo and Google - more features for the portals. Coincidence or trend?

Privacy vs. Exhibitionism

In an interesting op-ed piece, one writer decries the web as a newborn "ExhibitioNet"

People seem to crave popularity or celebrity more than they fear the loss of privacy.

With millions upon millions of people sharing their thoughts, photos, and videos, often of the most intimate moments of their lives, where's the fear of privacy violation that most pundits predicted would slow the growth of Citizen Generated Media?

This is no longer fringe behavior. MySpace has 56 million American "members." Facebook -- which started as a site for college students and has expanded to high school students and others -- has 9 million members. (For the unsavvy: MySpace and Facebook allow members to post personal pages with pictures and text.) About 12 million American adults (8 percent of Internet users) blog, estimates the Pew Internet & American Life Project. YouTube -- a site where anyone can post home videos -- says 100 million videos are watched daily.

The answer, I feel, lies in the nature of the internet and people's unfamiliarity with the consequences. While many of the young posters on MySpace extol their current drinking, sexual, and other like behaviors, they don't necessarily realize that this may catch up to them. A recent article, for example, noted that recruiters are now scanning MySpace pages, and have no qualms about rejecting applicants based on their supposed daily weed-smoking. (Whether these boats are true or image building is another question.)

With the possible implications of seemingly innocent posts with recruiters, potential dating partners, and the like now becoming apparent, will people begin to more actively manage their image online? And where does it go in 5 years?

The larger reality is that today's exhibitionism may last a lifetime. What goes on the Internet often stays on the Internet. Something that seems harmless, silly or merely impetuous today may seem offensive, stupid or reckless in two weeks, two years or two decades. Still, we are clearly at a special moment. Thoreau famously remarked that "the mass of men lead lives of quiet desperation." Thanks to technology, that's no longer necessary. People can now lead lives of noisy and ostentatious desperation. Or at least they can try.

Full text here.

Google Moving Sponsored Results Around?

I found an interesting article claiming that Google is testing a new function that moves sponsored results from the top to the side panel if a user does not usually click on the results. There's a controversy whether Google's new function actually helps advertisers and users by changing sponsored results around for users to obtain results that they might click on (thus generating more clicks for advertisers). Note that the results can be changed back to their original positions by clearing your computer's cookies.

I can see how moving sponsored results to common searches around will make users click on them more than when they keep getting the same top sponsored results which they seemingly do not find interesting or relevant.

New Ways to Trade Travel Secrets Online

There was an article in yesterday’s WSJ about a new website, www.tripmates.com, that is designed to enable travelers to share tips and secrets first-hand. While personal reviews have been standard on many travel web sites for quite some time, tripmates has taken it a step further. It has modeled itself after myspace and other social networking sites in the sense that it requires people to register for the site and post personal profiles. Info required ranges from favorite places to travel (which would be expected) to things such as personal music taste. It’s designed to let other users decide for themselves how valuable an opinion of a vacation spot, hotel or restaurant, etc. is based on the personal tastes and interests of the person providing the review. The site also allows for email communication between users. I wonder if Fodor’s, Let’s Go and the like will start experiencing a hit in guidebook sales, as they have already started to follow suite and add reviews and online forums to their websites. I for one, plan on checking out tripmates (or any one of the various user-generated travel review sites that are out there – gusto.com, travel.yahoo.com, realtravel.com, igougo.com, tripadvisor.com) the next time I travel instead of relying on the guidebooks, many of which have been mediocre at best in the past in their ability to point me toward hidden gems in distant cities. Fodor’s seems to think that the proliferation of these online travel sites “will only complement the branded content that professional experts offer.” We shall see.

Consumer-generated media? Not so fast.

From South Korea comes news of a new kind of corporate mudslinging. Last week, a 15-second video posted to YouTube showed a woman snapping Samsung's prized Ultra Edition mobile phone in half. The video quickly became one of YouTube's most watched, spawning the expected chain of outraged comments.

Grassroots consumer activism, right? Not so fast. As The Korea Times reported:

Youtube.com, a popular video blog service in the United States, said Motorola is responsible for the video though it didn't intended to circulate it.

The 15-second video clip entitled ``Samsung handset, easy to break at one try!'' has been circulating on the Internet since last week. It shows a smiling young woman snapping Samsung's 6.9-milimeter-thick mobile phone in two.

``The video has been removed at the request of the copyright owner Motorola, because its content was used without permission,'' the Web site said.

Samsung is furious about the video, claiming it was designed to damage its reputation.

A shining example of the power of Web 2.0, YouTube brings the power to the people, giving them the tools and means to contribute and discover content that would other wise go unnoticed.

But with the Internet awash with new types of content, is content still king?

In the words of pundit Jeff Jarvis, spoken at this week's VON conference, trust is king.

Links:
Watch the clip in question (the movie's not on YouTube, so click this link to download it)
Jeff Jarvis' blog

Social Networking: More Than Just Entertainment

Interesting article on how the Pentagon is using social networking and sites like Myspace and Friendster to fight terrorism. Similar to how they monitor phone calls, the government would use these social networking sites to link people, as well as cross-reference with purchase patterns, phone calls, etc. There are definitely some kinks to be worked out, but this could prove to be either very useful or an infringement on privacy...depending on your viewpoint.

http://www.newscientist.com/article/mg19025556.200?DCMP=NLC-nletter&nsref=mg19025556.200

So what do Sawyer, Jack, and Kate do in their free time?

This past weekend WSJ had a very interesting article about how Blogging is completely redefining fiction. The article, entitled “Rewriting the Rules of Fiction” describes how writers are using the Internet to “re-write” fiction, TV shows, and movies. Amateur writers are answering questions such as, “How did Harry Potter’s grandparents die,” “What do Sawyer, Jack, and Kate do in their island leisure time,” and “Did Dr. Grey have lipo-suction?”

This is definitely a good example of interactive media and Web 2.0. Suddenly, everyone has a venue to express his/her own opinion. Creativity flourishes due to anonymity. Suddenly there is a “Trekie” for every form of literature and media.

I found it very interesting that people would actually spend the time to document their fantasies about their favorite fictional and TV characters. Although I have sometimes considered myself to be an inspirational writer, personally, I do not think that I would ever have the incentive to participate in blogging about fictional characters. However, this form of media has truly offered a local for young writers to be creative.

Here is the link to this article:

http://online.wsj.com/public/article/SB115836001321164886.html?mod=technorati

Madonna & RHCP at YouTube

Warner Music Group (WMG) and YouTube announced today that they entered into a partnership agreement. It is not surprising that the suffering music industry tries to profit from the popularity of the user-generated video portal. Not only is WMG's music video library available via YouTube, but also does Warner allow users to re-use material from Warner artists, e.g. Red Hot Chili Peppers, in uploaded video content. It seems tht some music firms have understand the signs of the times. Others, like Universal Music Group, haven't. The latter just threatened to sue YouTube for copyright issues. I guess some never learn to adapt to changed business conditions.

Napster is dead! - Long live Napster

Let me get that right: Napster, the once illegal, then "sued-to-death" and thus bankrupt comany, who's remainders were later bought by Roxio, just hired UBS as a financial advisor. According to Chris Gorog, CEO of Napster, the bank shall advise Napster on possible "strategic alternatives" - including a potential sale. The range of opportunities covers partnerships as well as takeovers.
Hello? Quite surprising to hear that a company like Napster, reporting quaterly before tax losses of $9.6m at a revenue of quarterly $28.1m, tries to sell itself off. Isn't it?
Maybe not! If you consider that the heat is going up in the online music market with Microsoft launching Zune and Nokia accquiring LoudEye. Most likely Apple's iTunes will get some heavy competition soon. Maybe we will see a takeover battle just for the sake of access to customers.

See the story here.

Warner Music Group and YouTube

According to this article from the New York Times, it looks like Warner Music Group has taken an approach opposite to that of the Universal Music Group and has actually struck a licensing deal with YouTube. Under the deal, YouTube will find copyrighted material using special software and will offer the owner a 50% share of the advertising revenue for that particular clip.
Congrats to Warner Music for trying to work with the changing business model instead of fighting it.

Web 2.0 Dating

OKCupid is an up-and-coming dating site. It differentiates itself in two ways: 1) it’s free to use and 2) it allows users to create their own ‘tests’ that help them screen suitors. For example, a woman may require all interested men to answer questions that she creates. Answers to these questions will be used by the woman to screen suitors. In a sense, this woman and her suitors are collaborating to create content that supports both of their objectives.

OKCupid is hoping that this collaborative testing tool will improve their matching. However, it remains to be seen whether or not people are good at creating relevant questions about themselves. Either way, they have found a new way to leverage the power of the Internet.

www.okcupid.com

A Microsoft 'Me-Too'

Today Microsoft launched Soapbox, a service that is positioned to compete with YouTube according to a recent article. Despite there being no indication of differentiation, it seems likely that any "me-too" service launched by a large portal is destined for moderate success. Portals drive traffic to destinations and as time passes more and more people seem to use these services.

Taking a step back, this doesn't seem so uncommon. it seems that aside from Google (although Google will likely move in this direction), the common strategy that is being leveraged amongst the large Internet portals is the conservative 'me-too' approach. These companies continuously copy each other and new innovators (unless they acquire them). As the cost of developing technologies continue to decline and more time passes are we going to have four nearly identical Internet domains? Will differentiation fall by the way side? Will Microsoft be the only incumbent with a unique adjacent business?

Furthermore as these companies offer increasingly sticky services (such as photo management), it would seem that customer lock-in will become more intense. If it weren't for the increasingly integrated browser, these companies could be headed for a stalemate.

Maybe there is a management consultant out there who could align incentives within these organizations such that they encourage those with new ideas to stay in house and breathe new blood into the R&D efforts.