Facebook’s Ambition Collides With Harsh Market!

What Could Go Wrong with Facebook? Everything! (No this isn’t paranoia)

Once hailed as the most valuable technology company to hit Wall Street, Facebook is now worth just over half what it was three months ago, with shares closing at $19.87. The company is suffering from a classic disease — it went public at too high a value. In an earlier post I had argued that FB will find the going very difficult in terms of managing expectations because of the stretch in valuations that it had opted for in the IPO. The challenge for Facebook, is to persuade the market that it is not a fad and that its managers have a blueprint for making money. Analysts have pointed out that Facebook has been slow to figure out ways to make money from mobile devices; half of its users log in on phones and tablets. Given its exceptionally high valuation in its initial offering, FB is under intense pressure to show that its advertising model can deliver the lucre that Wall Street expects.

From a $100bn blockbuster debut to a $42bn valuation in 3 months, Faceboook’s twist of fate, in many ways, reflects the tension between two moneymaking cultures in America: Silicon Valley and Wall Street. They are as symbiotic as they are dismissive of each other. They are equally focused on making money, but their approaches are different. Wall Street wants to see swift growth in revenue, given Facebook’s still high valuation of around $50 billion. Facebook says that it is building tools that will forever change the world — but have yet to reveal any details about how they plan to quickly increase profits.

Quoting Doug Purdy, the director of developer products on FB’s future- One day soon, the Facebook newsfeed on your mobile phone would deliver to you everything you want to know: what news to digest, what movies to watch, where to eat and honeymoon, what kind of crib to buy for your first born. It would all be based on what you and your Facebook friends liked. In effect it moves from the search or pull economics to push economics which is purely analytics based. (In fine lines- Facebook’s future would be built on Google’s grave).

In the technology business, few companies can keep the fairy tale alive forever- Facebook has had a run like no other in the present – but sustaining the momentum and managing expectations is a balancing game that Zuckerberg and Co. need to master fast.

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.

Google+ is not about “being social”. It is Google’s next level of Monetization

The Jury is divided on G+. However G+ is adding up numbers very very impressively.

My opinion about G+ is that it really mashes features from Facebook, Twitter, Skype, Stumbleupon,Tumblr well currently. What adds glory to the effort is the slick UI and UX. Interestingly most of the properties on G+ are Products from Google that are already available. So for now, it is old wine in revised packaging.

Going forward a lot of product developments are expected in G+ is expected in quick time. Surely LinkedIn type Professional networking is sometime soon. Gaming is yet another big piece. LBS would be yet another. Collective Buying is yet another.

Given all these features,G+ has good reason for traffic: Features and enhancements, engagements and experience layer over the basic layers of social networking, feeds, groups, chats, recommendations and discussions. There would be some missing pieces like social games which will also get integrated at some level. That will deliver the “stickiness” piece.

And then… Where there is traffic, Brands will have to be. The features in G+ support Brand conversations and other brand integrations possibly to higher known levels than that which is happening currently. Brands fancy that kind of experience, engagement and involvement with consumers.\

Thus G+ is Google’s best effort in terms of extending its competency of monetizing things from the search domain to the social domain. Prior to G+, Google had search results but no means of profiling who had done the search. With G+, Google leaps that lack of understanding in terms of profiles. End of the day its all about targeting users and profiling better, to monetize the effort.And no one monetizes better than Google does. With Google’s strength in native properties such as Search, Location, Mobile, Content, Media and Video; integration of chatter, conversation and networking will make this a huge next gen tool… possibly Google’s next Billion Dollar babe.

Evolution of App Stores (Part II): Putting the Brands perspective to Monetizing Apps stores

In the earlier post, i had written about the evolution of application stores. 1st Gen and 2nd Gen Apps stores were great in as far as apps in principle were concerned.But the real test of Apps stores is in the MONETIZATION bit. Millions of Apps and Billions of Downloads are great stats to convince USER ENGAGEMENT, but “it aint mean nothing” if it makes no money and Monetization is the key.

To provide an analogy, a radio station with great broadcast content and listener-ship is great from a user engagement perspective, but the station does-not make money unless there are sponsors. And then the monies can be used for better content, more broadcast rights, bettering the quality of the programmes etc. Sponsors use the radio station as another media channel to reach out to the listeners to create awareness and engage their consumers better. Majority of the listeners will not possibly not want to pay for the programmes directly, but don’t mind being part of the channel. The same applies for Apps as well.

Apps Stores Evolution

3rd and 4th Gen Apps stores

The key addition here is “sponsors”. Sponsors would use the apps as another media channel to reach to consumers and engage them more effectively. “More Effectively” reflects the ability of applications to profile its users better and thus a greater match between target audience and the sponsor message. On a very initial level, this could be ads and we all know how iAds, inmobi or Admob are able to advertise better to the consumer through ads in apps. Thats just the beginning.

Sponsors can use applications most effectively to engage with them through the awareness- inclination – decision making and purchase cyles and that will constitute Ads as a channel to engage consumers. Precision Support by engines and APIs having direct build up to context will be critical in terms of user discovery and experience.

Where’s the money honey?

Globally app stores are monetizing traffic through in-app and in-store subscriptions/payments.However, there is a larger picture that many of us are missing in terms of media capabilities of apps stores & how brands could use apps as a channel to engage consumers. Apps with their unique push capabilities and API sensitiveness can be a very efficient medium for reaching and engaging out to Brand users/consumers.

Under the constraints of consumer freetard-onomics, the answer to monetization problem lies in getting a key stakeholder who has yet not been a part of the eco-system: Brands. To me, Brands today and tomorrow will try establishing apps as a key channel to establish an engagement with consumers. This according to me will establish what i call the third evolution of Apps stores which would centre around Channel and User Centricity. Thus apps will increasingly go from just an app to enable branded life-style experiences around focussed groups of users. That to me is where Applications and Platforms will monetize.

The construct that i build hereis actually close in principle to the search legacy in Google.The difference here is that while search delivers ad-sense relevant advertising/message for monetization, Mobile App stores will have brand deliver experiences which are far more customized to the user. What would brands pay to have these experiences delivered to the user? You can start the calculations basis the broadcast media numbers

We would need APIs enabling the portfolio of services such as LBS. LAYAR, Search and Profiling engines, Shopping Carts, NFC and Analytics is more than adept at taking this Brands concept to fruition. To me this rivulet is the mother lode of monetization going forward.

Guardian’s Open Platform (Part 2): Where’s the money?

Guardian’s experiment with open source data has proven one thing quite clear that Public data is a growth media for an ecosystem to form. Public data on open source is a nutrient of a whole new eco-system and allow new things to happen. The key to monetization of the open systems in this case is building user centric apps which have a business model.
The applications build on the Guardian Open source platform is divided into three categories mainly differentiated by span of Guardian’s control and the revenue/revenue share model.

So then where is the money?

Guardian’s open platform gives API and Content Developers 3 tiers of access and 3 separate revenue models to choose from:

BESPOKE: Taking, Reformatting, and content augmentation with same access as that of Guardian. Allows custom access for licensing content and integrating rich applications. The revenue is a combination of sponsorship, media, fees, revenue share and downloads.

APPROVED: This involves taking the full Guardian article content, with an advert. Out of this Guardian keeps the ad revenue and the API developer keeps the rest of the page revenue.

KEYLESS: The API developer takes Guardian’s content and keeps part of the associated revenues. Thus there is free access to headlines,data,tags and meta data. There is no key required and partner keeps associated revenue from the page.

What this means for Guardian is that developers are able to access full content APIs on demand from Guardian with keys approved thus making the platform a place to do business with Guardian and engage its scale. Rapid scalability, reliability and performance are the core requirements.

The technology back end running the open source

To assist the developers, Guardian has the Microapps which is a third framework for integrating 3rd party apps into the Guardian platform. The Microapps helps developers integrate their solutions more easily and readily into the Guardian core and evolve the Guardian open platform to be the commercial future of the partners/developers.

Thus the open source platform would be instrumental for Guardian in terms of
• Moving away from content broadcast, and yet keep the growth engines running
• Partner engagement and open source contributions on journalism, data, software, applications, revenue and ads
• It would also support the developers and partners with data and APIs, scalability, reliability and speed.
Guardians enterprising effort build on open source is pretty much on its way to re-define media and thought behind media.

In times to come, media will need to evolve into a two way communication path and Guardian will be referred as a case study, as a pioneer of new media.

Amen!

Guardian’s Open Platform (Part 1): Coming of Age (Driving Innovation to stay relevant in Media)

RIP, Print Media!

The proliferation of Digital and Social Media and Google have had an adverse impact on the print media by means of replacement.Communication is two way, immediate and Twitter has now added a dash of “conversation streams” to the news and print.

In this context, Guardian’s effort to move from being just a broadcast publisher to a platform and use content , search and open source to build a new business model around news and media is noteworthy. The transition from news and journalism to news, data, video, audio, content partnerships, innovation, conversation, comments, keywords, podcasts, recommendations, hashtags and live blogs is a case study.The bottomline is about Guardian’s evolution to a platform and not just a publisher.

This platform approach is about changing the perspective from “bringing the data and apps from the internet” to “enabling partners to build applications using proprietary content and services for all digital platforms”. The idea is “experimenting in combining the experience and knowledge of a large media network with experience, opinions and expertise of people who want to participate rather than passively receive content and news”.

Guardian’s open platform is thus its suite of services enabling its partners to build applications with Guardian. The platform has three parts to it:
Content API: A service for collecting and selecting content from the Guardian for re-use

Data store: A directory of useful data curated by Guardian editors.The developers can take this content of the newspaper as the raw material for building new businesses. This raw data is useful in profiling demographics and trends and data catalogues,

Politics API: Database of candidates, voting records, constituencies, election results and live data on election day. The data here is again freely available for use and analysis. Developers innovate on this data and develop interesting tools such as the voter power index for the recent British elections which lets the user know his vote’s woth basis his marginality and constituency size.

Thus Guardian has been making interesting use of Public data to make its own media eco-system and allow “open ssource” innovation to take over.The emerging trends point to change in public participation space aroud public data. Public data can create new economies, improve procurement processes and through evolutionary pressure in the marketplace increase the usability and user centricity of applications that access Government services. Guardian is stepping as a facilitator for consumers of these services to provide an environment where Consumers can get better and access to newer things, mediated by the ingenuity of the developers

Part 2: How the open source makes money?

When will Twitter start generating money through the advertising medium?

Twitter is the million dollar baby and the trillion dollar question is “When will Twitter start generating money through the advertising medium?” . Towards this, I reproduce Biz Stone’s (Founder, Twitter) version of commercial usage, revenue generation, and advertising which he had posted on his blog.

Source: Does Twitter Hate Advertising? (Blogger): May 20, 2009

When we speak publicly about how Twitter might become a profitable business, we talk about the idea of commercial usage and then explain that we’re still exploring what that means—that’s true. We also say traditional web banner advertising isn’t interesting to us which is also true. However, to say we are philosophically opposed to any and all advertising is incorrect.For a long time, we’ve said that we think there are interesting opportunities related to commercial usage. Businesses and individuals are getting value out of Twitter and we may be able to enhance that. We’ve just begun exploring in this area—early ideas include account authentication, management tools, and discovery mechanisms. We’ll keep you posted.The idea of taking money to run traditional banner ads on Twitter.com has always been low on our list of interesting ways to generate revenue. However, facilitating connections between businesses and individuals in meaningful and relevant ways is compelling. We’re going to leave the door open for exploration in this area.Do we hate advertising? Of course not. It’s a huge industry filled with creativity and inspiration. There’s also room for new innovation in advertising, marketing, and public relations and Twitter is already part of that. In fact, next month I’ll be attending and speaking at the 56th annual international advertising festival, Cannes Lions 2009. I’ll let you know how it goes.

 

Essentially, Biz Stone speaks about expanding the value in Twitter (related to commercial usage). Twitter is largely exploring the value that it can create and add to individuals and businesses as a meaningful, relevant and compelling way to make monies. Traditional banner ads are dismissed as a low priority activity which is low in the list of “ways to generate revenue”.

Twitter’s first step at monetization of social networks

Monetization happens to be a tag in my blogs because of the simple reason that i have written a lot about “How to monetize social networks?” in ample.

Twitter’s first attempt to monetize its huge and unique base of tweets is an interesting one in terms of the effort being a coordinated one between itself, Microsoft and Federated Media. Essentially the idea is to collate the tweets of business executives and other insightfull and business related tweets for interested people to follow. In essence it is following the top business executives on Twitter. It is called Exectweets.com . The website is essentially a collection of tweets from top business heads on Twitter like Virgin’s Richard Branson, eBay’s Pierre Omidyar, Digg’s Jay Adelson and Kevin Rose, Twitter’s own Evan William and yes, Facebook’s Mark Zuckerberg amongst a whole others.

The partners are fairly interesting in the terms of background competencies. While Twitter, champions conversational media, Federated Media is versatile in the conversational mode of advertising and Microsoft is one of the largest users of online advertising. Thus the Twitter promoted website exectweets.com may be an online branding/advertising solution for Microsoft. The neat part is that Microsoft is able to address its cream audience: the business executives through this venture. Twitter would in the back end have a revenue arrangement with Microsoft, though the details are missing at this point of time.

Business heads who want to get into exectweets.com, as a branding opportunity, need to follow@exectweets and the team at exectweets would decide whether to add the twitter stream to their website or not.

Thus this is a convergence of social media vehicle with a very precise audience and a large marketeer. One interesting alliance and effort to follow up.

VAS: Increasing penetration and revenue

Covering a Linked in Discussion, on Increasing penetration and revenue of VAS services in India.

http://www.linkedin.com/answers/product-management/positioning/PRM_PST/437353-22685324?browseIdx=57&sik=1237453659425&goback=.ach_PRM.abq_6_1237453659425_n_o_PRM

How to Increase penetrations and Revenue for various VAS services?

Given the present scenario, getting a bigger wallet share for VAS services from the consumer seems to be the biggest hurdle? How can the consumer be incited to use various new VAS services that come up? Is tariff discounting or offering Free Try n Buy the only way to let the consumer have a feel of the service?? 

Hi Anoop 

Your Q seems to have generated a healthy round of discussion and here is my take adding to the muddle 

I come from a Marketing related view guided by two basic tenets 

1. Supply and Demand 

Music, H/Bollywood, Games, Ringtones, Singtones, Cricket is what most of the VAS revenue is based up on (Currently). There is a healthy demand for this but supply is manifold leading to commoditization. Hence the need for innovation in VAS! (Think Medicine, Think Train Ticketing/ Think Fitness/ keep thinking..) 

2. The Age old Construct of the 4Ps. 
We have a Product/Service and currently we are trying to push mass usage through Tariff discounting (Pricing Strategy). A few Opinions beforehand have already mentioned Retail Push (Place) and Cross Selling/Up selling and Consumer Education(Promotions). Even more, we have spoken about Profile and Behavioural based Targetting (a very high order mechanism) 

My take on the VAS markets in India : 

1. We need more stakeholders in the ecosystem. Currently it is only the VAS provider and the Operator. Hence the scope in VAS development and deployment remains limited. 

2. The Indian Consumer is averse to Credit Card and Mobile Payments. I am not surprised about VAS ARPU of Rs.25 (as cited by Rahul). 

3. We are limited in content.Games + Music + Entertainment form 36% of VAS applications in US. The next 36% is Books, Utilities, Education, Lifestyle, Productivity, Travel, Fitness, Sports etc. Social Networking as VAS content has also been less exploited. 

Point 1,2,3 (More Stakeholders, Wider content, Paying Mechanisms) lead me to the end of my argument, which i will elucidate with an example: 

How about partnering with VLCC for beauty tips, reserving apointments, reminders etc etc? 
How about partnering with Apollo hospitals to provide a range of services on a VAS platform? 
Tie ups with Local Gyms to disburse mobile services to its members? 
Taxi services and Train/Flight Booking via VAS…. 
The possibilities are endless if you take the unconventional route to VAS and application monetization.The business model would be a win win win design for the consumer – Telco + VAS – Solution provider. 

Would consumers pay? They already do… and a minor addition in terms of taking services mobile will not hurt them if they are hung up on VLCC, Apollo and the likes… 

End points: 
1. Dont invent new needs and delivery mediums, instead tap the consumer needs at the right places and occasions 
2. There is a fundamental need to move away from Telco VAS provider (Duopoly mindset) to a tag along/second fiddle mindset with the solution provider. 

Hope this is somewhat leading to the right direction.