The “Like” economy and Google

Internet in general has stood for one philosophy: Creative destruction of standards (Brittanica for instance) and the wisdom of crowds (Wikipedia amongst others).However, Google has been one constant through out last decade of Internet which can hence be referred to as largely iconoclastic.

Google with its venerated search algorithim and its links has reigned supreme throughout the last decade of Internet. But now, as we go from a Web 2.0 to a Web 3.0 economy, even the once invulnerable Google might be in trouble. With real identities generating enormous amounts of data, the linked and sponsored economy of Internet is now migrating to the “like” economy… or +1 as Google would have it.

The dramatic shift from traditional search to social media was underlined last week in a speech by Tanya Corduroy the London Guardian’s director for digital development. Eighteen months ago, Corduroy revealed, search made up 40% of the Guardian’s traffic and social only made up 2%. Last month, however, she acknowledged a “seismic shift” in the Guardian’s referral traffic, with Facebook driving more traffic than Google and making up more than 30% of the newspaper’s referrals.

In the wake of Facebook and Twitter dominated social spaces, Google hasn’t quite been just the spectator. In fact, Google now has 4 products that it has tried to rope in the “social” space – Buzz, wave, Google+ and now Search plus your world (SPYW). Each of these are evolution of how Google is trying to make the shift from the search algorithim to the social and collective criteria. Google has also made headway into 170 million customers through the G+ (as against 900 million in Facebook), but the fact that the average user spends a total of 3.3 minutes on Google+ is testimony of the fact that Google still has some distnace to cover.

The concern here is that in trying to catch up with “social” Google seems to be violating its own matra of “Do no evil”. Google’s announcement this January, that it intended to consolidate personal data across its different products and services — from Gmail to YouTube to Google + to SPYW to Google maps to traditional search – had one concerned technology writer suggest that Google will now know more about us than our wives.

As a fact, Google is as evil or as bonafide as any other company or organzation in this world, but there is a good reason to fear Google’s bloodlust for user data across it properties.Afterall, Google’s business model remains primarily the sale of advertising around its free consumer products. Thus, Google’s desire to intimately know us is primarily driven by its core business objective of — one way or the other – selling that knowledge to advertisers.

This threat was laid out chillingly by the Center for Digital Democracy in a complaint about its new privacy policy to the U.S. Federal Trade Commission (FTC): “In particular, Google fails to inform its users that the new privacy regime is based on its own business imperatives: To address competition from Facebook, to grow its capacity to finely profile and target through audience buying; to collect, integrate, and utilize a user’s information in order to expand its social media, social search, and mobile marketing activities …”. A number of governments and other citizen agancies are increasingly wary of Google. Antitrust litigations against Google is on the rise. FCC, WhiteHouse, EU have taken exception to Google’s privacy policies.

While its still early, 2012 looks to be the year when Google fortunes could begin to wane.With a global outburst against its privacy policies, anti-trust litigations piling up and decline in public trust, Google looks far from dominating the “like” economy like the way it dominated the “link” economy.

An infographic explaining the evolution and changes in Google’s search algorthim over time. Such tweaks and changes have helped Google stay ahead in the Linked internet economy.

Image Ckurtesy: Outrider

The building of the social media bubble

To quote Om Malik, Though VCs are doing fewer deals than they were before the recession really took hold in late 2008, the amount of money invested is up to prerecession levels. That’s good news for startups trying to raise money — at least in the short-term. But the valuations of some companies compared to their revenue might spell trouble for the future.

A quick look at the valuations reveals the stretch.

As discussed in an earlier post, the hype of investing in social network shares could be short-lived for the following reasons.

1.Networking businesses have still not demonstrated their ability to leverage their networks in order to generate returns. These networks do not have a proven business model

2.Social Networking companies form part of a sector that will constantly continue to attract capital and new competitors. This is more than likely a bubble that will eventually end.

3.An additional concern was that social networking sites were very often strong in a particular region and not in international terms. This makes it difficult for social networks to grow globally and achieve critical mass in local regions.

Are valuations in Social Media stretched? (Cue:Under-promise, Over-Deliver. What about Over Promising?)

Professional social networking site LinkedIn is raising the price at which it will sell shares in its forthcoming initial public offering (IPO). The new sale price values the firm at $4.3 billion rather than the earlier $3 billion. This comes in the wake of the fact that comScore reported 65% Y-o-Y increase, from 48 million users in March 2010 to 79 million as of March 2011 in traffic to Linkedin.LinkedIn made $15 million last year. It’s now worth $8 bln. That’s a P/E of 37+. Isn’t that a sign of bubble?

Signs of trouble yet?

In 1999-2000 Dotcom burst, overvalued dotcom – companies, which were not-profitable, went bankrupt and together with it millions of (invested) money and many jobs were lost! No one really knows if there is a bubble until after one pops. Nevertheless, there are many signs of froth. The valuations in Social Media are stretched a bit. Microsoft bought over Skype for $8.5 billion, Goldman Sachs has invested $1.5 billion in Facebook that has valued FB at $84 billion, Groupon is valuated for $15-$20 for its IPO listing. Such valuations are reminiscent of the dotcom bubble which busted 10 years ago.Twitter is being valued at $10billion and more. Zynga, creator of the popular Facebook game FarmVille, is worth more than $5 billion.Yammer, a system for sending Twitter-like messages inside businesses, recently raised $25 million, while investors reportedly signed a check for close to $30 million for a niche blogging site called Tumblr. GroupMe, a new group messaging app for cellphones, raised $9 million. Path, an iPhone app for sharing only photos on a social network limited to just 50 people, received $2.5 million. Its competitor, Picplz, scored $5 million. And those are just within the last few months. The trend accelerate over the last six to nine months. The valuation of Facebook has multiplied by a factor of 7 in the last 12 months.

Dotcom was different

Back in the ’90s, companies got funded for five times the amount that Tumblr raised and didn’t have anything close to a business model. People were getting $50 to $200 million a pop and it brought down an entire industry. The frenzy is as much the result of simple laws of supply and demand as the herd mentality. Thanks to the constantly falling cost of computing power, a start-up needs less money to get off the ground. More wealthy people are viewing investing in technology as a hobby, which has increased the competition. Investing in technology has become fashionable. It used to be that angel investing was the province of wealthy men. Now its become the province of everyone. Venture capitalists — hungry for growth and troubled by weak returns — are moving toward smaller investments, hoping to catch the next Facebook in its infancy.

Valuations and Companies will need to move with caution

There’s a lot of exuberance in the social media and technology. A lot of the valuations there don’t make a lot of sense.But, most Silicon Valley investors still see no signs of gloom and doom. Start-ups today have robust business models and business cases that make them viable. The Internet ecosystem has also matured. There is more to valuation than just eyeballs. It could be different this time! In 1999 when the bubble happened many companies did not have business models and advertising on the Web was very immature.2010 and onwards, the real challenge for start-ups flush with venture cash would be proving they were worth the investment or risk having to fold their companies.There may not be a big implosion, but down the road there will be a bunch of blood and tears. The music is going to stop and people will realize there aren’t enough chairs for companies to get the next round of financing. The High valuations though may be cheered for are long term liabilities on the entrepreneurs.The key question now is whether they can accelerate their revenue and earnings growth to eventually validate the valuations.

There are elements of the LinkedIn model – recruitment search – which reflect successful models elsewhere.The LinkedIn Valuation is, of course, just an appetiser for the big one – the prospective float of Facebook at some point in the not-too-distant future. How it is priced will provide a clearer picture of whether the possibly irrational exuberance around LinkedIn’s debut was specific to the dynamics of its offer or reflects the broader capitalisation of optimism about the commercial prospects for the major social networks.

A sound business proposition is the ability to under-promise and over-deliver. Currently the Social Networking valuations are very tall promises which make delivery (at such high order) a suspect. What we will need to wait and watch over the next 2 years is the ability of organizations to be able to spin the profits that the valuations oblige them to. If they cannot stand up to the expectations, then we all know that this is a bubble.We live in interesting times, dont we?

Harnessing the power of social networks: Twitter

Attributes of Twitter extend beyond just celebrity follower-ships and are largely untapped by the majority of Tweeple. This Presentation examines Twitter beyond celebrities and business engagements.

Facebook: Building a unique business model around socialization

The second of a four part series on the evolution of Social platforms as the future of Internet. Led by Facebook, Social Internet is already edging out Search/Information era (the Google Internet). Read Part 1 here

Facebook’s alleged revenue has grown from $275 million in 2008 to $635 million in 2009 to a rumored $2 billion this year.Google’s revenues topped $86 million in 2001, $440 million in 2002, and $1.4 billion in 2003, which is a very similar pattern to Facebook (of today).In 2010, Google’s annual revenues are expected to be $28 billion and Facebook is expected to be $2 billion. Facebook is expected to clock 72% CAGR over the next 5 years and is expected to hit $30 billion. Facebook will make this $30 billion through a diverse set of revenue streams that have people at the centre of the business and the proposition. Therefore Socialization is not just a revenue layer, it is the core, the essence of Facebook. For many consumers, Facebook is the Web.

Not only is Facebook serving up advertisements to its consumers and making dollars out of it, it is also engineering an open web eco-system with companies such as Microsoft, Zynga, Amazon and others. The virtual online currency, Facebook Credits is destined to become a tool of web commerce in days to come unless Apple and Google stage an upheaval. Facebook is thus creating a future stream of revenues and profits by creating a virtuous cycle of cross-promotion: targeted lead-generations and subsequent transactions feed into the next series of even-better-targeted lead-generations and subsequent transactions. The main challenge marketers have with the Internet till recently has been that there aren’t too many places where they can reach almost everybody with one single ad spend. Facebook fixes that problem. Facebook is more targeted, has better analytics, and engages its audience directly and interactively through social conversations— status updates, chats, photos and videos.

Facebook Advertising does not directly compete with the text advertisements of Google’s AdWords and AdSense. Instead Facebook is feeding from the TV ad spend dollars. Television advertising represented $60 billion in 2009, or roughly one out of every two dollars spent on advertising in the U.S. Five years from now, billions of dollars of advertising will be spent to direct consumers from one part of Facebook . . . to another part of Facebook, where they’ll be offered real items to buy for ourselves or others, premium services to subscribe to, virtual goods to procure and play with, and deals-of-the-moment available for immediate purchase (or miss out forever!).

Davide Grasso, Nike’s chief marketing officer, says Facebook “is the equivalent for us to what TV was for marketers back in the 1960s. It’s an integral part of what we do now.”

Facebook Ads employ demographic characteristics (Age, Sex, Locations and Interests), which corporate brand managers and television ad buyers have been accustomed to purchasing for half a century. By contrast, Google AdWords target on the intent revealed by search queries, is a new practice that has been less understood (SEO/SMM) amongst marketers though it has been rocking the ad revenues for 10 years now. Facebook has two more aces up its sleeve: Facebook Credits which is on its way to become the first global online virtual currency and algorithim search which would be Facebook’s answer to Google’s Adword and Adsense

Traffic, Stickiness and Engagement: Facebook steals the march over Google

Contd from earlier post about the debate of Searchability versus Sociability of Internet and Google, Facebook on a collision course.

Facebook has garnered more than 500 million users in six-plus quick years. Google, which is twice as old as Facebook, has over 1 billion searchers but these folks come to its search engine for a quick information fix. Facebook, with all of its content sharing and communications tools, is sticky. In August 2010, Facebook surpassed Google in total minutes users spent on the Website. ComScore said that the U.S. Web users in August spent 41.1 million minutes on Facebook compared to 39.8 million minutes on all of Google’s Websites including YouTube, Gmail and other properties. The low barrier to entry and stickiness make Facebook a tantalizing proposition for social media advertisers. Facebook will soon partner with Skype for VOIP integration, which would boost its communications quotient. Worth a reported $33 billion on paper, Facebook’s IPO will be the next hottest meal ticket when it finally comes in the next few years.

The notion that Facebook would surpass its search portal giants in minutes spent online has seemed like a foregone conclusion for months given the social network’s meteoric rise in users and the rampant sharing of links, photos, video and other content on the Website. Facebook’s 500 million worldwide users spend on average of 20 minutes or more per day socializing with friends, family and even colleagues. Google is a fact-finding powerhouse for searchers wanting a quick fix. The search engine handles more than a billion searches a day from its one billion users, numbers that could soar with Google Instant ramping up the pace of search on Google.

The idea that Facebook would best a search engine built to serve users results and send them elsewhere seems logical.But the idea that Facebook is also beating out an incredibly sticky video site in YouTube, a massively popular Webmail app in Gmail, and several other Web services is impressive and points to Google’s dilemma. Engagement is now clearly skewed to social network sites like Facebook, not siloed Web services such as Google search and e-mail. Facebook’s rise requires a social network answer from Google. While a lot was being guessed about Google’s upcoming social offering, Google CEO Eric Schmidt has hinted that it will bring an organized social strategy to the center of the Google consumer experience. Even while search, Gmail, YouTube, Google News, Google Reader and other Web sites attract millions of users, the services are largely separate. Even Google Buzz is its own social conversation service built atop Gmail.

Facebook commands more attention and consumer time, and that puts them in a powerful position with marketers who want to reach those consumers

This isn’t a crisis for Google because they still have considerable engagement and terrific marketing offerings such as AdWords, but Google will want to leverage its strong brand and the 39.8M minutes people spend on Google properties each month to create what they have not yet created: A single, cohesive place to engage, share, play and learn. It is expected that Google Me would be instrumental in doing some bit of that for Google. But wont that be getting late in the day to make any serious impression on Facebook?

Twitter adds media and content beyond its 140 characters to spice it up

A picture is worth a thousand words. The Hudson Plane crash was first reported through Twitpic on Twitter by Janis Trums even before other major news and media channels weren’t even aware of the crash. That was the coming of age of the social media phenomenon: Twitter

However, Twitter’s 140 odd characters has sometimes proven to be a restraint on what much and how much is to be said. Thus it is not surprising that Twitter’s 140-character limit on “tweets” is being tweaked to include pictures and video. Although a number of third-party programs which access Twitter’s output via its database can already link directly to pictures and videos on other sites, the site itself has so far held back from allowing anything beyond text-only hyperlinks to appear in users’ streams.

Twitter now finds itself in the footsteps of the biggest social networks Facebook and MySpace, which have made themselves essential to their hundreds of millions of users by becoming a channel for multimedia content.

Twitter is aggressively adding features to itself to make it a more useful and media rich source of information and sharing.
1. The Twitter Logo has been Tweaked a little bit (with more features on the Tweetie Bird)
2. Twitter has also created a single streamlined timeline which features Mentions, Retweets, Searches and Lists (on the left of the screen).
3. The right of the screen includes trending topics, the follow and the unfollow lists and favourites etc.
4. Twitter has established partnerships with DailyBooth, DeviantART, Etsy, Flickr, Justin.TV, Kickstarter, Kiva, Photozou, Plixi, Twitgoo, TwitPic, TwitVid, USTREAM, Vimeo, yfrog, and YouTube to enable embedded photos, content and videos directly on Twitter.
5. When you click a Tweet, the details pane shows additional information related to the author or subject. Depending on the Tweet’s content, one may see related content such as @replies, other Tweets by that same user, a map of where a geotagged Tweet was sent from, and more.
6. One can Click a @username to see a mini profile without navigating from the page, which provides quick access to account information, including bio and recent Tweets.

World Cup 2010: Magnification Social Media Style

One of my earliest recollections of big sporting event was the Mexican Wave in the 1986 FIFA world cup at Mexico. That was the year of Maradona. 24 years later, its Vuvuzelas inside the stadiums and its Social networks outside it. The magnification effect that social media has on such large scale events is on a mind boggling state.

So far Audiences around the world have been audiences. Now they are playing the games, teams, themselves and others as much as the players are. The Number of fanpages in Facebook, the levels of participation and the frenzy; the Twitter groups, World Cup apps for Smartphones are beginning to come of age and the decibels levels dont seem to abate any soon.

Already the number of tweets weighed Twitter down when the South Africans scored the first goal of FIFA WC 2010. Just to prove point, the equalizer from Mexico also had Twitter down.

The rise and rise of Facebook

Social Media is fast coming of age, given that Facebook has eclipsed Google as the biggest referral site on the Internet. The “friend-casting” of information has helped propel Facebook into a major force in directing traffic around the Web according to traffic analysis firm Compete. This is just another sign of how the “social web” is becoming an increasing dominant force in terms of driving traffic flows on the Internet making it a big threat against web giants such as Google, MSN and Yahoo. 13 percent of the traffic to major web portals like Yahoo, MSN and AOL came from Facebook. Traffic from Google generated just 7 percent, which Compete said actually put it third in traffic sources behind eBay, which accounted for 7.6 percent. Facebook’s prominence positions social media as Internet’s next search engine.

In an earlier post, i had blogged about Google and Facebook on a collision course with Facebook entering the web mail space, while Google integrating Google Buzz on GMail.

Stumbled across a set of stats on Facebook’s increasing influence.

Statistics
Company Figures
• More than 400 million active users
• 50% of our active users log on to Facebook in any given day
• More than 35 million users update their status each day
• More than 60 million status updates posted each day
• More than 3 billion photos uploaded to the site each month
• More than 5 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each week
• More than 3.5 million events created each month
• More than 3 million active Pages on Facebook
• More than 1.5 million local businesses have active Pages on Facebook
• More than 20 million people become fans of Pages each day
• Pages have created more than 5.3 billion fans
•
Average User Figures
• Average user has 130 friends on the site
• Average user sends 8 friend requests per month
• Average user spends more than 55 minutes per day on Facebook
• Average user clicks the Like button on 9 pieces of content each month
• Average user writes 25 comments on Facebook content each month
• Average user becomes a fan of 4 Pages each month
• Average user is invited to 3 events per month
• Average user is a member of 13 groups

International Growth
• More than 70 translations available on the site
• About 70% of Facebook users are outside the United States
• Over 300,000 users helped translate the site through the translations application

Platform
• More than one million developers and entrepreneurs from more than 180 countries
• Every month, more than 70% of Facebook users engage with Platform applications
• More than 500,000 active applications currently on Facebook Platform
• More than 250 applications have more than one million monthly active users
• More than 80,000 websites have implemented Facebook Connect since its general availability in December 2008
• More than 60 million Facebook users engage with Facebook Connect on external websites every month
• Two-thirds of comScore’s U.S. Top 100 websites and half of comScore’s Global Top 100 websites have implemented Facebook Connect

Mobile
• There are more than 100 million active users currently accessing Facebook through their mobile devices.
• People that use Facebook on their mobile devices are twice more active on Facebook than non-mobile users.
• There are more than 200 mobile operators in 60 countries working to deploy and promote Facebook mobile products

Is social media a marketing hyperbole? (Part III)

Dell is one of the few companies which have driven the social media to their advantage. While such examples are widely acknowledged and appreciated, working out such examples and such business models is tricky.

However, driving social media to one’s advantage isn’t as easy across. The beauty (and the problem) with social media marketing is that it’s a new field. As of now it’s more of an art than a science. I think we just need to see marketing guess/test/refine to find the perfect balance of advertisement and engagement. Also it is important to have the relevant engagement strategy. More often, companies are planning social media for the heck of planning it without a core idea of what they would like the social media to achieve for them. Until a good mix is found we probably will see approaches flounder… when was the last time you clicked on a FB ad?

2009 was also an year of experimentation with Social media launched to drive brands towards perceived relevance. Budgets for most parts were borrowed from other divisions to fund largely experimental programs. In many cases, these Social media programs were introduced without a relevant and integrated strategy and in 84% cases the ROI was not even monitored. In 2010, executives are demanding scrutiny, evaluation, and interpretation. Even though new media is transforming organizations from the inside out, what is constant is the need to apply performance indicators to our work. They want measurable results from social media but the exact implications of social media still evade CMOs.

53% CMOs are unsure about return on Twitter
50% are unable to access the value of LinkedIn.
Source: Bazaarvoice 2009

Most importantly, about 15% believe there is no ROI associated with Twitter, and just over 10% cannot glean ROI from LinkedIn or Facebook. This may be because of a direct disconnect between social media activity and a clearly defined end game. CMOs must establish what we want to measure before we engage. By doing so, Marketing Organizations can answer the questions, “what is it that they want to change, improve, accomplish, incite, etc?”

Quoting Brian Solis, Social Media expert, principal of FutureWorks and author, observer of Social media trends:
The debate over measuring social media investment inspired many brands to cannonball into popular social networks and join the proverbial conversation without a plan or strategic objectives defined. At the same time, the lack of ROI standards unnerved many executives, preventing any form of experimentation until their questions and concerns were addressed.

In 2010, we’re entering a new era of social media marketing — one based on information, rationalization, and resolve.
Business leaders simply need clarity in a time of abundant options and scarcity of experience. As many of us can attest, we report to executives who have no desire to measure intangible credos rooted in transparency and authenticity. In the end, they simply want to calculate the return on investment and associate social media programs with real-world business performance metrics.

Over the years, our exploration and experience has redefined the traditional metrics and created hybrid models that will prove critical to modern business practices and help companies effectively compete for the future.

Thus 2010 would be the year when Social Media Marketing takes on wings but the flight would need a well charted plan, a clear intent and dimensional details of what the Advertisers want to do in the first place. The greater the clarity on these aspects, the better the focus and the definition, the greater the efficiency for the marketers from social media. Unless it is backed by a strategy, intent and proper metrics, a hyped-up approach to social media will only make it a marketing hyperbole.