Building the future in Mobility: Facebook

Continued from the blog: Facebook needs to change the game

• 500 out of 900 million Facebook users are using Facebook through mobile devices
• In March, the average Facebook mobile user engaged with the social network for more than 7 hours, according to comScore

Going forward Facebook is expected to capitalize on mobility through advertising as it prepares for its IPO. That’s stats provided above give a lot of head-down time to which Facebook has to respond. Mark Zuckerberg’s, top priorities going forward is to transform Facebook’s mobile and advertising experiences and further integrate online apps into the platform

The big question is how the company can make more money with advertising on mobile. You can bet Facebook will figure it out considering advertising is the reason Zuckerberg and other insiders are about to become extremely rich.

For users, more advertising on mobile is somewhat of a drag, but there’s utility involved as well. A lot of what we’re doing on and with our mobile devices is being tracked by scads of application developers and device makers who aim to improve their products and marketing activities because they know what we like, where we go and how we spend our money. Needless to add, Facebook wants that data, too.

The ads we’ll be seeing on mobile will increasingly be highly relevant and the time is coming when we’ll get offers and ads pushed to our phones the minute we step over a retailer’s threshold at the mall.

Facebook is “just getting started” with its mobile app. As Facebook collects more data, such as location and which friends “like” certain products mobile ads will be better targeted to users.

Facebook’s initial public offering is set for this week and media outlets are stirring up a frenzy, reporting on everything from whether the company is overvalued at $96 billion to which character traits propel Zuckerberg to give speeches to groups of big-shot investors wearing a hoodie sweatshirt. Facebook’s mobile future is also getting a lot of attention.

Facebook needs to now change its game

Zuckerberg and the FB gang have been great aat connecting 900 million dots. Its time they take the game to a different level- monetizing the dots.

A $95bn IPO may not be top of the mind for Mark Zuckerberg who is intent and focused on getting the social strategy for Facebook right. However, to many analysts and investors, the valuation is stretched and raises a spec of concern and doubt on the ability of the FB network to make money that is commensurate with the expectations.

Interestingly enough, a positive indicator that can provide FB the fillip is that Premium “Social” ads such as sponsored stories, “likes”, comments and other endorsement of brands’ activity have increased 26% y-o-y. Typically Premium ads make up for 25% of FBs ads. The concern area is a drop in CPC (Cost per Click) for the standard ads by an equivalent 26%. Overall CPC rates have gone up 23% across both categories. Another cause of concern is that Click thru rates have also gone down by 6%.

1. The dichotomy between standard and premium ad pricing trends reflects FB’s attempt to move away from keyword targeted “direct response” advertising – the so called plain vanilla marketplace ads towards getting big brands to buy “social” campaigns. The company’s re-orientation around large brands and away from the smaller ones may the driver of the difference and a definitive forward move to justify the stretched valuations in terms of revenues.

2. Facebook also needs to prep up its mobile presence. With 55% of Facebook users accessing the site from their mobile phones, the Facebook mobile become a key access point which FB cannot miss. The FB app on mobile today is just about a decent experience for sociaal networking. How Zuck can add the “brands” angle to this is the key challenge for FB. FB has been acquiring small time smart-ups expectedly to build on the mobile presence. But acquiring is one thing, executing is quite another. We havent seen much from FB in terms of exploring mobile for brands.  

3. The other interesting rumour doing rounds is Facebook search. Fundamentally different from Google in terms of generation of leads through social network anchors – likes, location, friends. That indeed is aa very interesting angle to search given that word of mouth and social networks are big influencers.

Facebook’s success ride has beeen phenomenal. Thats got it this far… a $95 bn IPO vaaluation. However, FB will have to change a few things around fundamentally if it were to justify a $100bn valuation and how it wants to poistion itself in the future. The ingredients are all there… how they mix them around and create the dish out of it.. is worth watching out for.

Search Battle Royale (Facebook versus Google) – Part I

Presenting a two post series on the future of search as Google and Facebook are evolving it each from its core sterngth perspective. This has been reproduced from an article by Drew Olanoff: Facebook versus Google- Who can win Search?

It’s a well-known fact that most people don’t get past page one of Google’s search results. This is why Google is doubling down on integrating a social layer into everything that it does. While algorithms can crawl the entire web to find relevant information, could the things that we share on Facebook become a better and more reliable data-set?

Searching the social network could get a lot better in the near future. Facebook is rumoured to be working on an improved search engine which will help users better sift through the volume of content that members create on the site, such as status updates, and the articles, videos, and other information across the Web that people “like”. Facebook and Google have one thing in common, they absolutely love data. The only difference between the companies may soon be the way that the data is shown to us.

Google’s approach to search
Even if you’re really good at using Google, it’s hard to find exactly what you’re looking for sometimes. As it appears now, even with the launch of Google+, Google scours the web for content and then churns it through an algorithm that decides which content is more relevant. The social layer that it has instituted allows its users to validate what the machines have already decided. That’s placing Search before social, algorithm over recommendations. This works really well because people view information differently, and there really is no such thing as natural language search. If the Internet was “flat”, meaning it wasn’t indexed at all, relying on people to find the content that might be relevant to you is like pissing in the wind. Basically, the experience is going to suck big time.

On the other hand, when you want to ask people for recommendations, you don’t even know where to start. For example, if you want to eat dinner but are`n’t sure what type of food you want, Google doesn’t really help other than to give you a list of sites that have lists of restaurants in your area.

Basically, Google has an extra step if you want recommendations.

Continued here

Search Battle Royale (Facebook versus Google) – Part II

Presenting a two post series on the future of search as Google and Facebook are evolving it each from its core sterngth perspective. This has been reproduced from an article by Drew Olanoff: Facebook versus Google- Who can win Search?

Continued from earlier post

Facebook’s (potential) approach to search

By cropdusting the web with “Like” buttons, Facebook has a huge set of data and information curated by all of us, without the fluff that Google scrapes daily. Think of it as a super-fine set of information that has already been pre-screened by humans. Now if Facebook wanted to “improve” its search, it wouldn’t be as simple as making an algorithm that mimics the experience that we have today on Google.

With lists, subscriptions, likes, and location data, Facebook could let us perform a very direct query with a finite group of people. Basically, a set of our friends or colleagues would be our “search engine”. What would that experience look like? Well, I imagine that you’d type a natural language query and then drill down to whose data you’d like to use to perform the search.

For example, I wanted a taco, I wouldn’t necessarily type taco into an open search box like I would on Google. I’d choose a location or a group of friends and then search for “taco”. Based on where they’ve checked in on foursquare or Facebook, or things that they’ve liked, I could be given results to check out.

It’s not perfect, but it’s not bad either.

Who wins?

First, you have to remember to stop referring to these companies as one “thing” or another. Google isn’t a “search company” and Facebook isn’t a “social network”. They are both companies who want to change the world and make money. We all know that there’s big money in big data. These companies have different approaches to how they’re collecting and displaying the data, but at the end of the day, they’re kind of doing the same thing.
We’re watching a potential clash of the titans where two things are extremely obvious: Google is late to social, and Facebook is late to search. Sure, Facebook has Microsoft in its corner which could help them out a great deal, but as Bing stands, it’s extremely similar to the experience we have on Google today.

The next big step for search is outside of the box completely, with less data and more relevant results. The question is, do you trust regular people like you and I to decide what’s best, or do you prefer to let a bunch of machines try to figure it out for you. The answer is a mix of both, but who will do it better?

At the end of the day, we’re going to use what works best for us. Until Facebook makes a move, it’s still a Google world. However, Mark Zuckerberg and company aren’t going to sit back and watch the stream of data and dollar signs pass them by. It’s going to be an epic battle and it could be anyone’s game.

Facebook: Standing upto formidable expectations

Facebook’s mid May 2012 IPO is pegged at $103bn. Given that FB made $1 billion revenue last year, that 103X Facebook’s earnings. Assuming a 50% increment in revenues this year and an equal amount in the year next, It’s about 70X this year’s estimated earning and about 50X next year’s estimated earnings. To put that in perspective, it’s about 1/2 of Google’s market cap, Facebook’s revenue, meanwhile, is less than 1/10th of Google’s revenue and Facebook’s revenue, is about 1/3rd of Google’s free cash flow.

Apple and Google, both tech giants trade with the following multiples.

103X looks very very steep in that perspective and it is quite a challenge to keep the growth engines revving at such pace especially with decelerating revenue growth. Facebook investors are really counting on some massive cash flow growth in future years. Given that Facebook has registered profit and revenue decline in 1Q,2012, the valuation just proves that Facebook is going to have tough time meeting upto the market expectations of earnings.

To make matters a little interesting, Facebook‘s CEO Mark Zuckerberg has clearly said that Facebook’s business is designed to support its social mission, and not vice versa. Of course, Facebook appears to be just at the beginning of “monetizing” what will soon be more than 1 billion global users. Many believe that Facebook has grossly underinvested in its monetization over the last few years and that even a little more focus on this could produce huge results.In addition to the products it has already rolled out, Facebook could well launch other huge products in the future, such as a search engine that competes with Google, or a distributed ad network that competes with Google.With respect to both of those businesses, Facebook’s vast number of users and vast network of “like” buttons all around the Internet could prove to be major competitive weapons.

Facebook could also take on a position of being “user identity” on the internet – a quasi UIDAI. Facebook is quite really there in terms of making Facebook logins as the alternate logins in many other internet destinations. Leveraging social discoverability and making Facebook the generic on Internet is key for Facebook’s run through a successful listing and beyond.

With 500 million of the 900 million users logging into facebook from mobile, and smartphone phenomenon on the rise, Facebook looks very brilliently poised to take advantage of the huge numbers in mobiles. If Mobiles be the access windows of Internet, Facebook has a pretty strong position on mobile usage which should drive growth.

Just how the numbers would stak up is anybody’s guess out there.

Facebook’s smartphone Buffy isn’t a smart idea afterall

Why Buffy could be a problem child for Facebook?

Buffy: Chances are that this name would remind you of the Vampire Slayer, as it did with me when I first heard of it. Wonder who Facebook had on its mind as the Vampire for its first ever smartphone called Buffy. Possibly it’s a combination of Google, Apple, Microsoft, Yahoo, Amazon and more. HTC will be producing the Buffy which will deeply integrate the social network into its platform. So then, after all these years of going round and round mobiles and smartphones as the delivery platform for their social services, Facebook finally is all in!

Slowly but surely all these big players are beginning to acquire, buy or subcontract all elements of the delivery value chain – and become the Walmarts of the digital world. Walmart puts all the shopping needs behind one door for the customer. Apple wants the customer to buy one iPhone and spend all his time in its virtual app world. Google’s the same way. To compete, Facebook needed a piece of hardware. Facebook has the liberty to choose between Android, Windows Phone or even create a new OS (WebOS anyone?). Facebook would obviously opt to heavily customize the Operating systems and store fronts and Android is a readily available choice to do that.

Globally, smartphones and tablets are converging at ecosystems as these become devices to primarily consume data from the eco-systems. Amazon’s success with the Amazon Kindle Fire Tablet is a shinning example and given the success of Amazon, Amazon is thinking of a move into smartphones. Given that Facebook has a been building an apps based ecosystem and is becoming the de-facto web standard OS, Facebook nursing intentions in the smartphones and tablets is a logical extension of their clout to the physical world of devices.

However, as Facebook pursues building a smartphone, it risks alienating far more important partners – a lesson they should have picked up from Microsoft’s Zune fiasco. Arguably, the Zune is one of the most expensive failures that Microsoft has ever had, all because it betrayed its partners and then under-resourced the effort.

Is it really going to be able to promote a piece of hardware? Does it really want to go to war with Apple and every other device manufacturer? Right now Apple, Microsoft and others spend lots of time on Facebook, but they aren’t likely to continue if they view Facebook as a potential competitor. Facebook should be focused on building the best Facebook app for every major platform. Going into competition with these platforms and phone providers could alone turn them into the next Microsoft Zune or Kin. This may partially explain why Microsoft is thinking of building its own social network all of a sudden.

Facebook may be dreaming of the upside of being the next Apple, without considering the collateral damage and opportunity cost that is more likely to make them the next Zune/Kin. However, its equations with major platform operators is destined to sour with the hardware approach no matter how much parity Facebook provides to the deal.

Facebook & the four degrees of separation (Vasudev Kutumbakam)

Vasudev Kutumbakam (The Whole world are descendants of Vasudev (the Hindu God Krishna)). Facebook revisited this premise and has taken it a step further by actually measuring the degrees of separation between two unknown individuals. In the 1960s, social psychologist Stanley Milgram’s “small world experiment” famously tested the idea that any two people in the world are separated by only a small number of intermediate connections, arguably the first experimental study to reveal the surprising structure of social networks.

With the rise of modern computing, social networks are now being mapped in digital form giving a hugely scalable, accessible, immediately personal and almost idiotically simple networking platform.

The idea of ‘six degrees of separation’ — that any two people are on average separated by no more than six intermediate connections — was first proposed in 1929 in a short story by Hungarian author Frigyes Karinthy, and made popular by the John Guare play and movie, Six Degrees of Separation. The idea was first put to the test by Stanley Milgram in the 1960’s. The idea was first put to the test by Stanley Milgram in the 1960’s. Milgram selected 296 volunteers and asked them to dispatch a message to a specific individual, a stockholder living in the Boston suburb of Sharon, Massachusetts. The volunteers were told that they couldn’t send the message directly to the target person (unless the sender knew them personally), but that they should route the message to a personal acquaintance that was more likely than the sender to know the target person. Milgram found that the average number of intermediate persons in these chains was 5.2 (representing about 6 hops). The experiment showed that not only are there few degrees of separation between any two people, but that individuals can successfully navigate these short paths, even though they have no way of seeing the entire network.

While 99.6% of all pairs of users are connected by paths with 5 degrees (6 hops), 92% are connected by only four degrees (5 hops). And as Facebook has grown over the years, representing an ever larger fraction of the global population, it has become steadily more connected. The average distance in 2008 was 5.28 hops, while now it is 4.74.

Interestingly enough, the study also proves that individuals are both well-connected in the sense that you can reach anyone from anyone else in a relatively short number of hops, but at the same time, they are very locally clustered, with the vast majority of connections spanning a short distance. The study, found that 84% of all connections are between users in the same country. But this isn’t the only dimension along which people tend to cluster. The study concludes that People tend to have a similar, albeit typically smaller, number of friends as their neighbors, and tend to be about the same age. Somewhat surprisingly, even for individuals aged 60, the distribution of their friends’ ages is sharply peaked at exactly 60.

Facebook’s mobile ambitions could pose a threat to Microsoft, Google and … possibly Apple

A stat that caught my eye was that every 8th minute on the internet is spent of Facebook. Increasingly, Facebook is becoming the connective tissue between users, websites and apps, and the social circles.
Facebook is increasingly becoming the sort-of web equivalent of an operating system, including its own application platform. This whole web OS thing seemed like it was going to be Google’s role, but right now, Facebook seems to be making bigger strides.

To take it a notch higher, Facebook intends on becoming more of a mobile platform, and not just an app or service. Towards this Facebook has acquired the HTML5 “app delivery network” Strobe. To have maximum value, Facebook needs companies building on top of it in mobile the way they do on the desktop web.

In doing this now, Facebook can have the effect of running both Google and Micrsoft obsolete.The more that Facebook and the Mobile web consume the user’s time, attention, and effort for communication and entertainment, the less will be the need to be using a device that runs Windows, which is the old way of organizing apps and web resources. In other words, Facebook is actively making Windows irrelevant.

Google with its Android platform is the next stop for Facebook. Whether it acquires WebOS as its medium for challenging Android or build its own platform on the Android, Facebook has the capacity of taking weaning users away from Android. And Facebook has decent enough traction amongst device makers, app makers and others in the eco-ssystem to give Android a run for its money.

This also takes Facebook a step further from challenging Apple at its turf. Presently, Apple makes money from selling hardware — iPhones, iPads, Macs, and iPads. All those apps — including Facebook, the most popular iPhone app of all — are there to grease the wheels and sell more hardware. Facebook is currently not in the business of hardware but all this then takes it to a position, where the next step could be making own hardware and voila! we have a direct Apple competitor.

New Revenue Models Augments Social Gaming.

India’s gaming industry is set to grow from Rs 4 billion in 2007 to a projected Rs 14 billion in 2011. India’s Social Gaming Revenues would top $1B in 2011.

Social gaming already is big business in Facebook and the top social gaming companies are making anywhere from $60 million to $ 1 billion per year on Facebook Games.

The stickiness and the traffic generated by Facebook games is the engine driving the social games economy

Of the 33 million Indians registered on Facebook (these form a third of the India’s internet population), an estimated 40% indulge in Social Gaming. That’s 13.2 million Indian’s engaging on Facebook as a portal. And a large and influential mass of people to be discounting for any brand based activity. Interestingly enough, Entertainment related brands which are more relevant to digital media are beginning to make their presence on Facebook. Two interesting instances are

1. Launch of Don2, the social game on Facebook in parallel with the Don2 movie featuring Shahrukh Khan, Priyanka Chopra, Lara Dutta, Kunal Kapoor amongst others. To leverage on the huge popularity of SRK, and the legacy of the Don movies, the Don2 game involves dark and gritty 2D art style gaming with Photo-realistic representations of locations, characters from the movie, weapons and vehicles, Interactive mini-games with multi-layer gaming to unlock special items, weapons and missions with friends, Leader-board system, Global and social ranking. The games include Real and virtual goods received as gifts which could be used as virtual and real monies. The gaming model closely resembles a mash up of Cityville and Mafia Wars. In the true social essence the initial draws will be based upon Facebook Ads, post which the viral effect kicks in, which is fortified with awards and other meet and greet events.

2. Another global launch that is also being worked out through Facebook is the launch of Enrique Iglesias’s new Album through context relevant advertising through the Facebook’s No.1 game: Cityville. The effort is to drive traffic to the Album’s facebook page including the exclusive video and audio snippets of the album’s numbers. That’s a seamless way of integrating awareness, trial, likes and recommendations about Enrique’s new album across 73 million monthly users of Cityville. Earlier we had Lady Gaga’s Gagaville lord over Farmville for the same set of purposes.

These events are particularly interesting as means through which Social Games are evolving from just being a game to a engagement-led and experiential media for brands to talk to its customers. There would be more such integrations as we go forward. If at all, this medium underscores the importance of traffic and stickiness as pre-cursors to revenue generation mechanisms.

Social TV: New Avenues, Multi Billion Opportunities (Part II)

In an earlier post i had written about how “social” was changing the idiot box TV to a smart social TV. Taking that dicscussion forward, there are broadly three arenas where social TV is quickly gaining traction, and all three have the potential to become billion dollar businesses by themselves.

Interactive Television @ Interactive Advertising

Microsoft XBox showcases Interactive Advertising

Advertisers have for long being wanting to bridge the gap between TV Ad viewership and the stimulus based engagement/action around the brand commercial. The key was about bringing interactivity to TV commercials and tagging commercials. The commercial is just the starting point of a conversation around TV but it is not the be-all end-all as more and more novel methods of engaging the consumer through the TV, Web and Mobile medium are being innovated upon. Interactive Social TV is about helping customers find relevant programming by leveraging their social graph. In other words, this becomes a real-time feed to broadcasters on viewership, likes, customer responses and other real time user stimulus.The key here is interactive advertising which enables users to experience the brand better. Advertisers, programmers and distributors have dreamed of enhancing the customer interactivity because billions of dollars are at stake. Information of users, who have interacted with a commercial and who took action on it is key to greater ad-TG convergence. Until now, the only real metric has been TV ratings, and the promise of interactive TV has never reached scale.

A primer to smarter viewership choices: Social TV

Social TV guide: Matcha.TV

Social TV guides will empower viewers to make smarter choices and discover shows they never knew existed. By measuring what the users watched, what they liked, what their friends and social networks have recommended and what’s trending overall, social TV guides will make surprisingly-accurate suggestions. Facebook integration and back end behavioral recommendation algorithms is thus a path into the future of smart TV viewing, viewership and customer relevant targeting.

Second screens will augment the social TV experience
According to a recent Nielsen research, iPad owners spend more time in front of TV with their tablet than any other activity. Given that Tablets are predicted to increase its penetration, tablets and smartphones are becoming important second screen alternatives to augment customer experience. Second screen apps are thus becoming a natural extension of TV programming, both live and on demand. The second screen adds another path of interactivity for viewers who aren’t tagging, checking in, or clicking on TV commercials.