Category Archives: Web 2.0

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.

Google v Microsoft over Facebook

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Henry Blodget over at Silicon Alley Insider has a thoughtful post today predicting that Google will beat out Microsoft in the Facebook sweepstakes, and that the real winner here is Facebook founder Zuckerberg who will walk away from any deal with a jaw dropping, market driven valuation of Facebook.     Blodget notes that even if Microsoft spends enough to win the Facebook bidding war Google wins again because Facebook will simply milk Microsoft’s cash cow leaving them with little in the way of a superior online MS environment.

I think this last point is particularly relevant, and poses one of the key threats to Microsoft’s long term viability.    Unlike Google and even Yahoo, new companies don’t appear to see a Microsoft aquisition as much more than a big payday.   It’s not clear to me that Google does any more for the companies it aquires than Microsoft does, but I do think the perception is that Google will inject innovation and enthusiasm where Microsoft will just absorb you into their failing online collective.    I don’t think these assumptions are, on balance, valid, but I think they are part of the equation when new companies and their generally young, inexperienced founders are courted by the big players.

TechMeme Secrets

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TechMeme has rapidly become one of the key techno watering holes in the blogosphere thanks to how it helps sift through tech blogs and posts to winnow out those getting maximum buzz.     Todd recently suggested he thinks a lot of SEO firms  are gaming techmeme, especially by post plants from A list bloggers – the implication is that they are paid for this.

He’s largely wrong about this and has given *way* too much credence to the always inflated claims of SEO companies (his inspiration for the post was a small SEO firm in Honolulu).

Of course Tech blogging, and most of the web for that matter, and much of the offline world, have been “damaged” with respect to objective quality content by various tactics that come about as the inevitable result of content monetizing.

But take a look at the prominent TechMeme posts tonight – it’s clear that these are generally spawned from sincere interests and not “planted” as part of advanced SEO tactics. Do any plants happen? A few, but in SEO you have to balance the chance you’ll “sneak in” a good plant against the greater chance that you’ll permanently tarnish the blogger’s reputation cause a scandal (Wal Mart’s Edelman fiasco), or simply spend a lot of time and money for a marginal result. The best SEO strategies rely more than ever on getting legitimate content and placements.

Now, Robert Scoble has a great video post today that is a lot more interesting because he’s trying to reverse engineer TechMeme, something a lot of people in tech are interested in for several reasons.   Robert also manages to feed the new little Scoble during his impromptu 2am advanced tech blogging lecture, which is really a fun statement about how far social networking and life/work integration has come in the past few years.

I hope Gabe responds to Robert to clear up some confusion though he may want to keep the TechMeme algorithm top secret, following in Google’s footsteps.

Some key points by Robert as he speculated about the TechMeme algorithm:
Tech blog database of perhaps 10,000 blogs.
Blog rankings (see TechMeme leaderboard) used to reflect their authority and thus “weight” the power of outbound links from  those blogs.
Reciprocal linking is not as heavily weighted as one directional outbound linking.

Robert suggests an experiment to test some of his ideas and I hope he does it, though Gabe may simply shut down that post or (if he wants to mess with his TechMeme folks) manually override the algorithm so it does funny things that lead to wrong conclusions.  Scoble’s Breeeport experiment was fun a few years ago, and this stuff can be a great way to bring more transparency to the mysteries of content ranking.

Bad News for Good Newspapers

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Nick Carr summarizes a study in the UK that suggests more perils for news organizations as they move online.    The online editions appear to be “cannibalizing” the offline edition readership.   A university study looked at how online news readers are less likely to buy a newspaper from the same company they read online.

If this proves true across the newspaper landscape it presents newspapers with the twin challenges of needing to beef up the online portal to keep up market share even as their total advertising revenues are tending to go down.   Offline readership generally gives a better ad return per reader, so even as online advertising increases that extra revenue is not likely to keep pace with the offline losses. 

Pearls before Twine

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update:  I think I was in a bad mood on this – not fair to be so hard on a new company without even trying it.   Sorry Twine, I hope you … ROCK! 

Twine is the new social network applications just “launched” at the Web 2.0 summit in Silicon Valley.   Like Paul Kedrowsky   I’m skeptical before I’ve even had a chance to test Twine.   (I will test it and review as soon as I get an invite…).

No, this is not fair but I’m getting sick of applications priming the buzz machine with hyperbole before they have even put out the application to enough people that you can figure out if it’s “Web 3.0” as Twine claims it is, or just another overhyped social application that needs widespread adoption to be useful.   

My favorite 2.0 observer, Tim O’Reilly, has a detailed review of the Twine demo after which he wonders if they’ve succeeded.    Note to Twine – if you can’t convince people in a demo that you are great you probably have some work to do, and you might even suck.

Now I really feel like an Assclown 2.0 to be so critical of what is clearly a thoughtful and potentially great application from Nova Spivak, a very clever Web 2.0 fellow. 

But I think I’m suffering from Web 2.0 stress syndrome where the hype, lies, and video clips are overwhelming me with irrelevant stuff while I try desparately to winnow out the good stuff from the bad.   We need an automated routine (aka ‘search agent’) that  does the preliminary winnowing of content and organization of other stuff and my stuff for us.  Now THAT would be web 3.0 and THAT would be worth my time as well as the time of all the moms, pops, and kids out there who are the backbone of the new web.   Silicon Valley often spills out silly companies and ideas as if the other 99.9% of the global population is clueless or irrelevant.   Theoretically Web 2.0 was to change that and make people, not computers, the center of the internet universe.   But sometimes I wonder if the Silicon folks have even paid any attention to that change.  

Yahoo Mash – Yahoo!, don’t forget about Yahoo! Mash

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Yahoo’s social networking tool “Yahoo Mash” offered up a good first entry into the social networking space by a major player.    But I’m noticing how it seems to be languishing after the initial positive buzz, and I think this is because Yahoo’s taking too long to go out with full bore, full online network promotion.  

Yahoo Mash offers some features I really like compared to Myspace and Facebook.  It’s an open architecture meaning that you can mashup mash with modules that show pictures or RSS feeds like this blog.   I think my favorite thing about Yahoo Mash is the way the comments stream from profile to profile, so you don’t have to keep bouncing back to a single spot to remember what you said to somebody.    I’m not enough of a social networking person to know if this is a real innovation or not because Myspace and Facebook also have some features that cross pollinate across profiles, but somehow Mash feels more like a “social networking” experience to me, even though I with it had the kinds of business networking features you find at LinkedIn.  

If Yahoo Mash is just working out kinks and getting ready to scale up to full release soon that is fine, but if the idea is to scale the project *slowly* over a year or so I think they are making a big mistake.  Why?   Because social networking is an explosive phenomenon both in the sense that it has quickly become a key online activity across all users but also because it seems to me that social networks don’t gain momentum gradually, rather they become “in fashion” as did Myspace and Facebook and grow quickly and explosively.   Facebook is still in this growth mode while I think Myspace growth is tapering off (I’m too lazy to go look at graphs to see if this is true).  

Disclaimer – I’ve got some Yahoo stock.  Not enough to prejudice my views, but perhaps enough to make me unreasonably optimistic. 

Scoble : More friends than he can click a mouse at

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Robert’s got neat ideas about online “friends”, pointing out that the best definition for online friend is NOT the same as for offline “let’s have dinner” friends in real life.   But he’s complaining that Facebook is poorly engineered because it limits people to 5000 friends.   Over at Scoble’s blog several are correctly pointing out that he’s such an exception to normal use it’s not fair to expect Facebook to change for the few huge social networkers like Robert.

Uh-oh….I hope he doesn’t bump ME off his friends list now…

Dave Winer, meanwhile, is proclaiming that “Facebook Sucks”, noting that their image, video sharing, and some other features are inferior to the alternatives.   It’s an excellent point though Facebook may be opening up enough to allow integration with pretty much *all* other stuff, and if they do they deserve the praise now heaped upon them in almost nauseating fashion.   Thanks Dave for the reality check.    I wonder if anybody will heed it.

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Paid Content has a great article about online advertising and how the concentration of online advertising in the hands of so few websites is becoming a problem. 

They note this remarkable stat from Zenith regarding distribution of online ad revenue:

So the big problem is not that ad spending is drying up, it’s that the bulk is concentrated in a few sites. Citing the IAB, Reuters points out that the top 50 websites in the U.S. took in more than 90 percent of the revenue from online ads in H107, while the top 10 sites sucked up 70 percent of internet revs for the same period. 

They also quote Zenith as suggesting that even as late as 2009 online advertising will remain a fraction –  under 10% – of the total global ad spend of some 495 billion.     I’m skeptical of that estimate – very skeptical – because online ROIs remain vastly superior to offline, though this advantage is not as obvious as it should be because so much of the spend is done in foolish “old media” ways with large, expensive, poorly targeted campaigns.  As PPC campaign sophistication improves, people continue to move online, video continues to move online, and advertisers increasingly continue to insist on positive ROI we should see online buys approach offline – I’d wildly guess there will be online / offline ad parity by 2015, though interactive TV and video clip advertising may blur the distinction between a TV ad and an online ad.

Facebook is not worth $100,000,000,000.00 ?! What is this, the 1980s?

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Jason Calcanis has an excellent post noting that Facebook madness has become so absurd people are now seriously suggesting that a company with 100 million in revenues could be worth 100 billion.   

Ha – only a year ago knowlegeable people were scoffing at the notion that Facebook  is even worth a billion dollars.   Although Facebook has grown a lot in this past year and has distinguished itself as a brilliant Web 2.0 juggernaut powerhouse in social media, the hype is almost nauseating.  

Unless, of course, you own a piece of the action….

Bubble investors better pack a a golden parachute, because it seems with all these low revenue sky-high valued companies it could all get very ugly very fast. 

Fred Wilson at 30,000 feet – brilliant!

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What a GREAT blog post from Fred Wilson as he flew to Portland!  He rapid fires 30 things including his thoughts on the bubble 2.0  (maybe about to pop, maybe not), and most importantly offers up this billion dollar company idea:

 15)    Why hasn’t anyone been able to aggregate all of my comment activity across the entire web and turn it into a feed that I can put into my lifestream on Tumblr? There are a bunch of companies working on it, but I don’t think anyone has nailed it yet. And I am not just talking about blog comments, I am talking about ratings and reviews on Amazon, Yelp, Menupages, Digg, etc, etc.

Fred, I don’t get this either because the technology is definitely in place and although I think this would take a pretty substantial server infrastructure – to cache and search a lot of content regularly – it seems like the payoff would be the best social networking environment out there. 

I’m saving up my money so, someday, I can be a cool VC guy like Fred and ride coach class even though I don’t *have* to ride in coach.  Kudos to him for that.   Frankly, I have a feeling the people back there are more interesting anyway.