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Internet trends

By | Advertising, Facebook, MySpace, Social networks | 2 Comments

Comscore has just published a review of internet trends in 2009 and it is jam packed full of interesting stats (link to download here).  I’m going to pull out just one here, but if you have a broad interest in how the internet is developing the whole paper is well worth a read.

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Fox Interactive Media includes Myspace, and AOL includes Bebo, so social networks are now prominent at the top of the charts, and they are growing fast too.  Facebook doubled in the last twelve months. 

Not all ad impressions are created equal though, and one of the interesting things about this list is that, according to Techcrunch, Facebook served up more page impressions than Yahoo last year despite showing only two thirds of the ads (excuse me the rough maths).  This is, of course, because social media monetises less well than Yahoo’s content, and as a result Facebook shows fewer ads per page served, and I wouldn’t mind betting their average CPMs are lower too.

Finally – take a second to reflect on how concentrated this market is – just about all the action is concentrated in the top five.  That said, it might be mis-leading to think of display impressions as a single market.

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The social network juggernaut rolls on

By | Facebook, MySpace, Social networks, Twitter | 3 Comments

For all the talk about Facebook’s value, the decline of Myspace and Bebo, and Twitter’s flattening website traffic you could be forgiven for thinking that social networking was yesterday’s story.  In fact, as the Nielsen charts below show, the truth is very different, and they actually grew faster in 2009 than they did in 2008 – both in terms of unique visitors and time spent on site.  (Hat tip to my friend Ian Delaney for the pointer).

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Facebook is of course the grand-daddy of them all.  Its 206m unique visitors in December is 67% of total social media users, although there are of course many people who use more than one site.

As Ian points out on his TwoPointOuch blog the other interesting thing about this data is that five hours per month on a social network isn’t very long.  American’s apparently watch 4 hours of TV every day, on average.

Web 2 winners start as free apps and become platforms

By | Facebook, MySpace, Social networks, Twitter | No Comments

I’m at the Le Web conference in Paris for the next couple of days and this morning I caught a panel chaired by Mike Arrington with the platform people from Facebook, Twitter, Myspace, LinkedIn, Ning and Six Apart.

The first observation is that these companies have been very successful in getting people to use their ‘platforms’.  There are now 50,000 apps built on Twitter, 60 million people use Facebook Connect every month, and the Ning numbers are also very impressive.

The second observation is that with the exception of Ning these companies all started as applications and have backed into a platform model over time.  Traditionally in IT the move has more been in the other direction – e.g. Microsoft started with the Windows platform and then moved downstream into applications afterwards.

I think the difference this time round is that the web 2.0 success stories built wildly popular free apps which generated the enablers for their platforms as a by product.  The social graphs are the main asset here, although Facebook has something akin to an authenticated identity system as well.

This, of course, is the ‘free’ business model in action, or at least it could be.  Make a popular service that is free to use and then find a way to make money in a related area.  Facebook have achieved this with their application platform and Twitter is saying it will make money by finding a way to generate cash that flows up and down the Twitter ecosystem.

I expect we will see higher and higher percentages of businesses that are able to sell something because of something else they give away.  In fact I interrupted writing this post to talk with a VC about just such a company.

There is a Techcrunch report on the whole panel here.

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Facebook and Twitter as social news services

By | Facebook, Google, MySpace, News, Social networks, Twitter | 3 Comments

The FT has a great article this morning entitled Friends, not editors, shape internet habits which charts the rise in importance of Twitter and Facebook as news filtering services.  When I wrote about the changing face of news provision on paidcontent last week one problem for traditional businesses I didn’t mention is that the role of newspaper editors in deciding what counts as ‘news’ is fast disappearing.  As the FT argues that role is now passing to our ‘friends’ on Twitter and Facebook.

It has been evident to most people for a while that the amount of content available to us is rapidly increasing as more and more people publish to the web and that we will need more tools than a simple search box to help us find our way through the morass.  This is more commonly called the information overload problem and feed readers, most notably Netvibes, were attempted solutions.

Thinking beyond simple feed readers whose primary function is to allow us to process articles more quickly I have felt for a while that tools which apply some kind of filter to the news are an interesting area.  There are, of course, a number out there already, some of which I use and some of which I don’t – Digg, Friendfeed, and Techmeme spring to mind immediately, but none of these seem to me to be the final answer.

Until recently I have been thinking that the elusive final answer would most likely be a structured site which allows you to input the sources you like and the people you are interested in and then applied some intelligent self learning filters to that stream of incoming content.

It now looks like the winning solution will be a much lower tech, less structured, more anarchic tool than I had expected, and it comes from Facebook and Twitter.  As you probably know one of the most common use cases on these sites is sharing links (see below) and we ‘friend’ or ‘follow’ people as much for the content they provide as because we actually know or like them.  On a personal level I barely use a feed reader these days turning instead to Techmeme, Twitter and occasionally FriendFeed, and within that Twitter is very much on the rise.  Similarly when I look at how people find this blog the referral logs are dominated by Twitter.

imageUsing Twitter and Facebook as gateways to find interesting content is more fun, more serendipitous and a bit less efficient for me as a user than the structured tools I had imagined, and they also benefit from a broader appeal given their simple design, ease of use and inherent flexibility.

There may be a general lesson for web apps lurking here – Craigslist is also a low tech, un-structured and anarchic solution as are delicious, Flickr, and Myspace.  I don’t know how far this argument goes though as the very biggest sites on the web are more structured – Google, Yahoo!, AOL, YouTube, Wikipedia – and Facebook combines chaos with a lot of structure.  Maybe it is only community sites that need to embrace the chaos, and it is for the other sites to figure out how to leverage those communities.

Ownership of the social graph less important than eyeballs?

By | Facebook, MySpace, Social networks, Twitter | 4 Comments

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The news this morning that Facebook will soon enable people to syndicate upadates from pages from Facebook to Twitter got me thinking that as social networks become more open ownership of the social graph is getting less important.

In the first phase of social networking everything was closed, meaning that if you wanted to network with your buddies you all had to be on the same URL for both publishing and consumption. It was this being closed that put the ‘network’ into social network and had investors theorising that as in traditional comms and more recently at Skype Metcalfe’s law would kick in making the big socnets much more powerful than the smaller ones leading to the creation of some huge winners.

The emergence of Myspace and Facebook validated this thesis to an extent but as these sites have become more open the network effects are getting weaker.

As a publisher I want to reach the largest audience I can and make my stuff available wherever people want to read it. When I write a blog post it goes out on RSS, and my status is updated on Twitter and Facebook with the title and a link back to the post. This takes advantage of my social graphs that are owned and resident in Twitter and Facebook without me actually going to these sites.

Moreover you can pick up those updates via third party clients without visiting Facebook or Twitter, consuming the content without delivering any value to the site where the social graph lives.

The same is true for my Twitter updates which I make without going to twitter.com and can be read on Facebook, via the weekly digest on this blog and in third party clients.

The upshot of all this that value doesn’t accrue to the ‘owner’ of the social graph every time it is used and hence the value of these sites is less about the number of registered members and more about the amount of time people spend on them creating and consuming content.

Facebook’s acquisition of Friendfeed makes sense in this light, as does the recent rush of investor interest in companies like Tweetdeck.

The game doesn’t stop here though – to generate real value you need to make your app/site sticky and find a way to monetise. ILike and Slide‘s falls from grace have shown us that.

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If Facebook was a country it would be world’s fourth largest

By | Facebook, MySpace | 4 Comments

There is an article in the FT today that asks whether Facebook is a “web phenomenon on the cusp of greatness or just a social craze?”, and as we’ve discussed here before the last thing any of us needs is for it to turn out to be a fad.

I think it is just about fair to say that the debate is still open, but what is definitively the case is that Facebook’s momentum is on the increase.

First take a look at these charts (courtesy of the FT)

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The graph on the left shows the traffic momentum is strong, and the pie chart on the right shows that Facebook is pretty much an all age site now (or at least all age up to retirment).

Secondly, these highlights from recently released engagement stats on FB (courtesy of Inside Facebook) tell a story of a community that is on the rise in terms of depth and richness as well as size:

  • 30 million users update their statuses at least once each day (13 million did per month at the beginning of the year)
  • 8 million users become fans of Pages each day (up from 2.5 million per day at the beginning of the year)
  • 10 million videos are uploaded each month (up from 4 million)
  • 900 million photos are uploaded to the site each month (up from 700 million)
  • 1 billion pieces of content (web links, news stories, blog posts, notes, photos, etc.) are shared each week (up from 15 million per month)
  • 35 million active groups exist on the site (up from 19 million)
  • 2.5 million notes created each month
  • 30 million users access Facebook each month through a mobile device

Given all this, and that with a population of 240 million Facebook would be the fourth largest country in the world I’d say that Facebook should be able to lay the ‘social fad’ accusations to rest pretty soon.  Then if they could just start making money they could answer the business sustainability question….

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A bad day for Myspace

By | Facebook, MySpace, Social networks | 7 Comments

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May’s Comscore data, reported yesterday on Techcrunch, has two pieces of bad news for Myspace:

  1. After passing Myspace on a worldwide basis last year Facebook is now also larger than it’s main rival in the US
  2. Perhaps more worrying for Myspace owners News International the site is also now going backwards, losing 700k unique users in the US in May

I would be a lot happier if Myspace was still moving forward.  The criticism that social media businesses are fashion based and are all ‘here today, gone tomorrow’ is getting harder to argue against.

Growing a consumer internet business – the LinkedIn lesson

By | Consumer Internet, Exits, Facebook, MySpace | 6 Comments

Consumer internet is not a very popular place to be right now – the advertising market is difficult (although I sense getting a little easier) and the profitability challenges of Facebook and YouTube, plus the history of Bebo post the AOL acquisition and Myspace post the high point of their Google search deal, have left people wondering how much value there will ever be in the sector.

I’m a big believer that there is value to be had, a faith that comes from the utility these various services provide, but at the same time these are very real concerns and it is clear to me that we need to go about building these companies in a slightly different manner if we are going to create sustainable businesses.  In particular a focus on revenues and profitability seems to make sense.  As I’ve said before for all but the very hottest consumer internet brands I think profitability is going to be a pre-requisite for a good exit, at least for the next couple of years.

However, if you are aiming big I still believe that the best way to get to revenues and profits is to focus on building great product, achieve your first million users and then start layering the revenue on top of that.

LinkedIn is perhaps the premier case study for this model of a consumer internet company and I’m going to finish this post by pulling some quotes from a recent interview with Reid Hoffman.  You can read the full version on CNN.

Firstly – he started LinkedIn in 2002, the post internet bubble downturn:

I have a strong belief that starting businesses during an economic downturn is the exact right time to do it because it gives you runway. It’s harder to raise capital, but if you can do it, it gives you an advantage.

Secondly – they set themselves a big but achievable target that was based around product and audience, not revenue:

We had this initial challenge of, "How do you get a million people?" The first challenge was getting enough people so that functions like searching for people or sharing information had enough people in it to be valuable. The year 2003 was all about tuning and viral growth.

I’m a huge believer in getting a million people, getting them engaged, and then building a business model on top of that. I knew I wasn’t planning on really trying to work on a business model until later.

Thirdly – they did get round to revenue pretty quickly and with paid for products that were pretty obvious and I guess conceived of from pretty early on:

We launched three revenue streams in 2005. The first was job listings. The second one we figured would help us get to profitability fast: We launched subscriptions, which was enhanced communications and search capability. People need to talk to people they don’t already know in order to get the job done. That’s the plural majority of our business today.

We had originally not even thought about doing advertising. But two things persuaded me to launch advertising as well. One of them was that our demographic was so good. The second one was that we began to realize we could build unique business products.

This strategy isn’t for everyone – you need to have the resources to cover the early period (Reid used the money he made from Paypal) and you need to have a business that genuinely has breakout potential – but if those criteria are satisfied then focusing 100% in the early days on getting the product right is the best way to create value.  The downturn doesn’t change that.

Facebook, OpenID, data portability and the future of socnets

By | Facebook, Identity, MySpace, Social networks, Twitter, WAYN | 8 Comments

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ReadWriteWeb broke the news a couple of days ago that Facebook is going to allow users to log in with their OpenID credentials granted by other sites, such as GMail, AOL, Yahoo, or dedicated OpenID providers.  You’ve probably seen this on other sites and the main benefit of reducing the number of passwords you have to remember (and making it easier to change).

The other benefit is that your OpenID account can carry some of your data, for existence your contact list.  The ReadWriteWeb speculates that Facebook has taken this step because it will enable them to more quickly provide utility for new members, thereby improving retention and increasing their growth.

I think this could change the face of social networking.  We are already seeing a shift towards tools that allow you to interact with multiple socnets from one place (our portfolio company WAYN now allows you to interact with Twitter and Facebook from within WAYN, and Tweetdeck and Friendfeed operate as social media dashboards) and data portability via OpenID could accelerate this trend.

I’ve long thought that we have multiple social graphs and most of them we just ignore, getting little value from the data they contain.  The longlist of my social graphs includes email, mobile phone, Facebook, Twitter, Friendfeed, LinkedIn WAYN and this blog.  If contact lists become portable via OpenID then tools that allow me to consolidate and manipulate each of these for their different purposes would be very valuable.

For example if I was using the new Plans feature on WAYN to organise a night out it would help if I was offered a list of people I might like to invite based on those who I call and email most often, whereas if I was organising a work oriented cocktail party a set of recommendations derived from my LinkedIn activity would be more useful.

According to this vision of the future socnets are less like portals and more like messaging hubs, with a variety of different modes for input and viewing content (including games and videos).  Right now the trend is towards consolidation – the larger guys are growing fastest, with Facebook and Twitter leading the way – but the logic above would lead you to expect that trend to go into reverse.  If things do pan out this way then tomorrows successful social media sites will be the ones that do one thing really well – Flickr for photos, maybe MySpace for music, maybe WAYN for making plans.

Right now data isn’t nearly this portable, as one of the commenters on the ReadWriteWeb piece points out Facebook is only really open on the way in – getting data out is more difficult.  Contrary to what I might have expected a year or two ago the trend is increasingly towards greater portability though – hence this post.

“The current days of the internet will soon be over” Rupert Murdoch

By | Content, MySpace | 6 Comments

Speaking on an a conference call with shareholders and analysts today Rupert said (from CNN):

We are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning.  We have been at the forefront of that debate and you can confidently presume that we are leading the way in finding a model that maximizes revenues in return for our shareholders… The current days of the Internet will soon be over.

In other words he believes that users will soon start paying for the online versions of his newspapers, or rather more of them will.

Yet on the other hand Paidcontent, now owned by the Guardian ran an article today entitled Why raising the paywall may be an impossible dream.

At the moment it seems the two sides to this debate are irreconcilable.  On the side of free we have the fact that everyone has gotten very used to not paying for web news over the last 15 years and all the (now familiar) arguments about the ease of making copies and long run pricing trending to the marginal cost of distribution which in this case is zero.  Also, in the UK the existence of the BBC funded by the annual TV licence makes it even more difficult for newspapers to charge online. 

Then arguing against free we have the newspaper industry saying if they don’t charge they are toast – in effect saying that they have to innovate or die.

Some newspaper sites are already charging of course, not least the FT and Murdoch’s WSJ, and I suspect that with some clever thinking online audiences could be charged more effectively – for example by insisting on payment for parts of the site or for more timely news.  As pointed out in the paidcontent article that will be much easier for niche publications that more general interest papers like Murdoch’s The Sun, for which equivalent free alternatives are abundant.

If getting more people to pay is one challenge the other is doing so without alienating the majority who are happy ad supported customers.  Joshua Benton of Harvard puts it like this:

I suspect within any readership there is a small slice — maybe three percent — that is willing to pay. News organizations are going to have to find a way of getting money from that slice without driving away everybody else. I don’t think you can afford to put a lock and chain on the front page.

We are now entering the sharp end of this debate.  When Murdoch is making statements like the one I used in the title to this post you know that the rubber is about to hit the road.  Back in 2005 when he did the MySpace deal he showed himself to be ahead of the pack in his understanding of the web, maybe we are about to see that again.

Update:  More details on this from the FT here – apparently the WSJ is strongly considering per article charges, aka micropayments.