Category Archives: facebook

News Corp Advertising Network. Under the Radar?

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Facebook’s targeted advertising was criticized heavily last week by bloggers despite Facebook promises to create a better user experience through better targeting of the ads.   I’m guessing users will hardly notice the change, and advertisers will continue to be underwhelmed with the performance of social network advertising although these ads will play an increasingly important role as social networking explodes and the number of page views on social networking sites like Myspace exceeds pageviews on any other site.

I think Myspace now has the top global pageview count which is why the new ad network from News Corp (Myspace’s parent company) is an important development.    It appears they will sneak in under the radar and avoid the heavy criticism levied against Facebook even though presumably they’ll also be working hard to target the ads to the specific Myspace user profiles.

A Slap in the Facebook?

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Facebook’s recent announcement of their new advertising platform – one that is better targeted to the information they have about Facebook users – has not been greeted very favorably by several bloggers who are basically suggesting this is a “sell out” of Facebookers.    Matt Ingram has a clever post noting how *annoying* this type of advertising might get and also how annoying it is that Facebook thinks you can really meet a person’s targeted information needs running ads for national brands.    Valleywag and even CNET were more blunt about this, saying that Facebook just “bastardized” it’s user base.    

Yikes – I don’t want to be a Mark Zuckerberg User Base Bastard!  

The idea that my use of Facebook means I “owe” Facebook something went out with the massive monetization of the web.  My eyeballs have value to Facebook that, as of last week’s launch of Open Social and the MS Facebook deal, appears to far exceed Facebook’s value to to me.  Unlike Matt I do like Coca Cola but I’m eventually going to go with the social network that gives me a piece of their action.  Is it greedy to ask for that? Maybe, but only about 1/1,000,000,000 as greedy as Facebook or Google. I can live with that level of greed, and I can live without Facebook, or Google, or any single online environment.  There are hundreds more where you came from, and don’t forget that you big internet players, or if I have anything to say about it you’ll become … small internet players. 

My initial reaction to the Facebook revolutionary-never-been-seen-on-earth advertising news was basically in the “so what?” category because I think this type of targeting in social network websites is overrated, and Facebook’s Coca Cola partnership is an indication I am right.   Are they seriously telling Coca Cola they are profiling for pop drinking? Youth?  Caffeine addiction?  Obesity?   That’ll allow them to filter out, what, 14 people from the  50,000,000 users of Facebook?   “Mr Coke we’ll only be running those ads on our the super targeted Coke drinking Facebooker user base of 49,999,986”. 

Hyper targeting of online advertising works extremely well when peole are searching for information about a topic, especially information related to purchasing a product.   Google’s built an empire with the profits from this approach which uses targeted pay per click advertising called Adwords (at Google search) and Adsense (at other publishing websites).    However intuition and some indications from current advertising failures suggest that Social Networking is not very fertile ground for high value advertising.    There are exceptions to this – at a recent conference I talked to a marketer of a very targeted national educational service who said Myspace offered him great ROI and a huge number of leads.   There, the demographic matchups seemed to overcome the tendency of people to simply ignore advertising while socializing.   

Open Social challenge – Guilt by Open-Social-Association ?

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Don Dodge has an excellent post today where he suggests the Open Social hype machine has spun out of control.    I don’t really agree with him because I think Open Social is a sincere effort by Google to create the truly open social networking many have been wanting for some time.    At the same time I would say there are a lot of challenges with Open Social, and it certainly was an aggressive move to kick Microsoft in the Face-book and take the winds out of the Microsoft Facebook partnership deal.    Google is remarkably good at being sincere, innovative, brilliant, and ruthless all at the same time.  In fact it’s become a hallmark of their success though they never seem to acknowledge the ruthlessness of some of their decisions – it’s kind of a collective delusion at Google that what’s good for the Google is good for the gander.   This is often true, but not always.

Back to Don’s interesting point:   What happens if a friend of yours – on whose profile you appear as a “friend”, goes over to a porn site which is using Open Social networking.   Does your smiling mug and name wind up appearing next to objectionable material?   Yikes – you could lose your job, wife, and family all in one fell Open Social swoop and you never even did anything !     

Although I can’t say be sure I’m confident this problem has been solved.  Probably via some form of content controls or content ratings for sites that are allowed to participate.  Will there be bugs in this?  Of course, as Don notes Plaxo already had a problem with their Open Social implementation, but on balance I think it’s still reasonable to see this as a social networking sea change, albeit one that will take some time to shake out.

Mark Cuban on Open Social v Facebook: He’s being lazy, not smart.

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Mark Cuban generally has great insight about the online landscape but I think he’s just being a lazy social networker to suggest that Google’s Open Social is too late to the social networking party – a party Mark seems to think is going to be run by Facebook regardless of what the other players do.

Don Dodge of Microsoft also seemed to be thinking along these lines when he noted that 50 million users is nothing to scoff at, and suggested the rumors of Facebook’s death have been greatly exaggerated (agree with that).    Mark also correctly points out that those 50 million are mostly “real people” with real profiles, sharing important personal information that would make most advertiser’s drool over the targeting prospects.

But as I noted over at Mark’s place:

Mark I don’t follow why you think Open Social is “too late”. Facebook only has 50 million people. Within a few years there will be billions of people with social profiles and even if Facebook opens up (as they must), a lot will choose to enter this from other social networks or websites that have “socialized” via the Open Social.I don’t see why Facebook should get all the social glory – they weren’t first to the table and they are by no means the last viable way to socially empower yourself online.

Dude…I just think you are lazy and don’t want to set up all those friends again for next year’s Dancing with the Stars.

[Mark has thousands of friends on Facebook and had asked them to vote for him during his recent performances on the TV show “Dancing with the Stars”.    He’s out now which, to me, is yet another tiny indication that social networking is still very much in its infancy.

The Social Network Reality Show: High stakes, big money, false rumors.

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The game is social networks.  The stakes are very high, and the news and rumors are flying fast, furiously, and inaccurately.   Here is the latest in the saga of Google’s Social Networking entry which, with Myspace’s participation, is the new Social Networking juggernaut (though it remains to be seen how all the participants will use it). 

More on the Open Social vs Facebook battle for the hearts and minds of developers and, far more importantly, users:

1)  After a 240,000,000 partnership with Microsoft the blogs (including here) lit up soon after suggesting that Facebook recieved another 500 million from two other private groups.   This was false.   It is very conspicuous in my view that the rumor rose and spread so fast, and that Facebook did nothing to quell that rumor.  This news is still shaking out over at TechCrunch which reported the rumor of the 500 million and now reports it was false.   Another example of how news at the speed of real time may not be news at all.

2) Google says Open Social is open to Facebook and all are welcome (I believe them).

3) Facebook says Google was not keeping them in the loop on Open Social (I believe that as well)

4) Facebook says they may join the Open Social movement, but suggest they have their own great stuff coming shortly.    I’m skeptical they can “out open” Google, though they probably could come up with some great new social networking applications quickly.  

However on balance I think Facebook really is in big trouble here.     Much of the recent hype – which was overdone anyway – assumed that Facebook would be the key beneficiary of the boom in social networking.   The reasoning suggested that although Myspace is  bigger than Facebook it was a “closed” environment, favored by a demographic that has far less value to advertisers.    Facebook, that thinking went, will continue to grow explosively, open up gradually, target advertising very directly, and become the dominant social networking platform. 

Then there was Facebook’s refusal to sell to Yahoo for a reported 1+ billion.  This was followed by big negotiations with many key players, culminating a (much overhyped) 240 million deal with Microsoft to cooperate, run MS Live searches, and drive some MS and Facebook advertising.    Then came the false rumor of 500,000,000 more in capital which for many seemed to solidify Facebook’s valuation of 15 billion – a somewhat sloppy projection of the Microsoft partnership price.

So, what is Facebook worth in an Open Social world where even Myspace is a Google partner?   No, the answer is not 15 billion.

Myspace to join Google’s Open Social. Facebook’s value plunges.

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It is a mildly risky but potentially brilliant counterstrike against Facebook’s rising popularity.  Myspace will announce shortly that they are joining the Open Social movement spearheaded by Google and which is now officially a social juggernaut of global proportions.    TechCrunch seems to have the latest on this breaking story.

If Facebook was worth 15 billion yesterday I’d suggest it just dropped by more than 50% in value.   Why?   Without Myspace’s hundreds of millions of users Open Social looked like it would be a third player in the field, struggling to catch up with the user bases of Myspace and Facebook and keep up with Facebook development.   But  not any more.  With Myspace, Open Social instantly becomes the key social network, dwarfing Facebook by any reasonable measure of prominence.   Can new Facebook partner Microsoft help sway onliners and developers to stick with Facebook’s “partly open” architecture instead of defecting to what appears to be a very open Google architecture?   No way.

Google Social Challenge – users do not follow developers, developers chase users.

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Tech is buzzing with Google’s plan to enter the social network space today with Google OpenSocial, a set of APIs that will allow rapid development of social networking applications across several sites that are working with Google now, such as Friendster and LinkedIn.   UPDATE:  and Myspace

At this point it appears Google Social will not allow better convergence of applications with Facebook, and it seems unlikely (let’s assume a zero percent chance) that Facebook and their new partner Microsoft are going to work hard to make the social network space a big, open, happy family run by Google via Google Social.   UPDATE:  Myspace just joined the Google Open Social Network.

Myspace is still the key player here with some 5x as many users as Facebook, depending on which metric you use to figure out traffic, users, subscribers, pageviews, or attention.

This will certainly lead to a surge of initial activity as developers chase the users of those sites – a user base that is substantial – Marc Andreessen says 100,000,000 users which would be more than twice Facebook’s user base.  Update – Google is now accessing far more of the key users than Facebook.   

  Can Google social resurrect Friendster?    Maybe, if the APIs are good enough that we can carry profiles in and out of sites seamlessly. 

I’m speculating here but would guess that the Google move is going to quickly shake up the Social space into three camps:  Two?  One camp?    Facebook+MSN, and Myspace+Google Social which will tie together thousands of existing and new social environments.    

Facebook is obviously the key player to watch.  The stakes are about as high as they can get and I bet Marc Zuckerberg and his brilliant Facebook gang have corked the champagne bottles and deciding how to move ahead.   Prediction:  They’ll stay the course with moderatly openness and will reject Google Social.

Given that many have been looking for a ‘one stop’ social network stop is there room for more players in this space?   Certainly yes given this open approach.    It’s even possible (though I think unlikely) that enough users would insist on the new open standards that they could push Myspace and Facebook to line up with Open Social.   Update: Myspace is on board now.

Here’s a simpy *superb* summary of the emerging landscape by Google partner and web pioneer Marc Andreessen of Netscape and now Ning.   

San Jose Mercury News – A Cautionary Tale from Business Week

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There is a great summary at Business Week of the  remarkable rise and pending fall of Silicon Valley’s newspaper – the San Jose Mercury News.     They note that in many ways the Mercury News saw it all coming, but still failed to position itself to profit from the migration of offline info to online info.  

Although the article does not make this point, to me the failure supports the idea that paradigm shifts do not come from old systems evolving into new ones even when the old systems “get it”, rather they come from new folks thinking out of the old boxes and building the next generation of innovative solutions basically from scratch.  

Obviously new technology rests on the shoulders of old technology, but it seems reasonable to assume that the next big things are not going to come from the previous big things, they are going to spring up from the harsh, quirky, and shifting sands of technology and innovation.     I would suggest that IBM might be an exception to this notion but clearly Microsoft, then Yahoo and Google, now YouTube, Myspace and Facebook all fit this model of major changes coming more from scratch than from a slow simmering of existing ideas.     This also helps explain the challenges of Venture Capitalism in finding “the next big thing”, which may right now only be known by the glimmer in a college kid’s eye.

If so, who is next?

Facebook chalks up another $500,000,000 ::: UPDATE – NOT TRUE!

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 Update:  This story was FALSE.   Facebook had an MS deal but not additional capital

Facebook founders were still sipping champagne from their 240 million deal with Microsoft as they scooped up 500 million from two hedge funds yesterday.   I’m not clear yet if the valuation was the same but presumably this was all a related deal, and Facebook is now solidly valued at 15 billion.    WoW. 

That’s a lot of money, especially when you recognize that the value is all in people like …. me and you.   Facebook sold our eyeballs to advertisers for something like  $175  per user eyeball.   15 billion / 42 million users   Jeez – I think they are cheaper on Ebay!

[No, this really is not a legit metric – investors are placing huge value on Facebook’s team and future potential more than simply the users, though users are the key to any social network kingdom as the information serfs, and deserve more respect from the social network kings and queens and capitalists]

Marcus at PlentyofFish always has great insight about the relationship of ad revenues to success and to expenses.     Marcus notes that even with the  huge pageviews at Facebook he calculates the advertising to yield to be only  $0.10 per thousand views compared to the $15.00 per thousand Google expects to pull in at their site.     Marcus’ important point is that even as online advertising is exploding most of those revenues are going to the very top sites, most revenue comes from very low CPM advertising, and the number of sites dipping into the advertising pool goes up every …. second.    He doesn’t sound as optimistic as he used to, and that should be alarming for small time web publishing guys like … me.

Hmm – it would be interesting to calculate a theoretical upper limit to the total social online advertising market using:

Total number of online people x  hours spent online x pageviews per hour x  .10 CPM. 

Just off top of my head I get this for USA:

200 million x 2 hours online day x 30 views per hour = 12 billion pageviews per day
 x .10 CPM =   $1.2 million per day

Huh?   This is incredibly low, but I must be missing something here.    The .1 CPM is a fraction of what is normally negotiated so I’ll recheck that..

Microsoft loves Facebook

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Microsoft bought a 1.6% stake in Facebook today for $240,000,000.   Reported at NYT here.  This give a market value to Facebook of right about 15,000,000,000.   

WoW

I do think Microsoft is smart (and Facebook stupid) to make the cash outlay much smaller than most had thought, giving them an alliance and a powerful foothold without spending the “billions” that apparently would have been required to buy a big stake in the internet’s latest wonder site.

With *revenues* of about 150 million Facebook is now valued at …. wait for this ….. one hundred times revenues.    This is simply a spectacular and speculative valuation, even by internet standards where  even a Google is only valued at about fifty times earnings.   Note that if Google was valued at 100x their expected revenues over the next year their capitalization would be something in the neighborhood of 1.5 trillion dollars.    

Many will suggest that the value in keeping Facebook away from Google was so great that MS has won big, but I’d predict not much will come of this alliance.     Like many online regulars I’m already tiring of Facebook and looking for a completely open, portable social application.   To justify today’s value Facebook will need to grow pretty much like nobody’s ever grown before.    Sure, it’s possible, but I think this will go down with Google’s YouTube aquisition as good money after bad, because monetizing Facebook traffic will be far more problematic than Microsoft seems to think.

All that said, congratulations to the Facebook team who must be popping a few corks about now…. no champagne is good enough for this news.