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Social software

New study–percentage of population interacting with brands via social media doubles in eight months

By | Social networks, Social software | No Comments

The rise and rise of social media has been the biggest story in the startup world over the last decade, and one of the biggest stories globally full stop. I think that over the next ten years the story will shift from the rise of social media platforms themselves to how we use them to our advantage in just about every area of our personal and business lives. This belief underpins our strategy of investing in companies that help enterprises leverage social media which has led to investments in Conversocial (customers service over social media) and RadiumOne (social advertising).

That investment strategy received a boost this morning from new research from Fishburn Hedges which found that 36% of UK consumers have interacted with companies through social media, up from 19% eight months ago. This tells me that social media is rapidly becoming more pervasive and that there is still significant room for growth.

The research also found that 65% of the people who used social media to interact with brands believe it works better than call centres, and 40% of us believe that social media improves customer service.

They did sound a cautionary note though. Eva Keogan, head of innovation at Fishburn Hedges said:

Many people are currently enjoying the VIP treatment from brands on social media. As millions more catch on to this great route into traditional customer service channels, the challenge for brands will be maintaining the same level of service. Over the coming years, will Twitter become the next call centre? We are urging brands to think about this now, as there are some clear and simple ways to use these new customer service channels to great effect.

2,000 people took part in the research.

Facebook is driving the enterprise

By | Conversocial, Facebook, Social software | No Comments

The diffusion of social through society is going to touch all of our lives in many ways over the next five years and the software that enables it is one of our investment themes.  Our portfolio company Conversocial fits into this theme.  Its software helps enterprises take advantage of Facebook and Twitter to better care for their customers.

Marc Benioff is also a big believer in this theme.  It explains the huge emphasis that Salesforce put on their Chatter product and their recent acquisition of social media monitoring service Radian6, and he was on stage at the Web2.0 summit in San Francisco waxing lyrical on the significance of Facebook (from Techcrunch):

“I really think that Facebook is becoming a vision of what the consumer operating system is”, he said. “Everything I want, I’m beginning to see on Facebook”

and

“I’d like to be doing as many amazing things as Facebook is”, Benioff said, continuing on to say that Facebook is essentially driving the direction in which the entire industry is going, especially that of enterprise, which Benioff has been selling for some time now…. Benioff is quick to say that the social revolution is coming to enterprise software, that it is inevitable, and that those who don’t get on board are going to fall by the wayside. It is of utmost importance for enterprises (and let’s be honest, every company out there) to listen to their customers. And, as Benioff perceptively surmised, their customers — across the board — are on social networks, which is exactly where they should be interacting with them.

Facebook is going from strength to strength to the extent that it is hard to see where it stops.  I am starting to think it will evolve into a powerful global monopoly that it will end up being regulated as a utility.  That vision of the future implies a level of global policy co-ordination far in excess of anything we have seen to date, but then I think a globalisation of regulation, and eventually government, is inevitable if the world continues on its current path.

Social media changes what people say, and want, and expect

By | Conversocial, Social software | No Comments

As part of the preparation for yesterday’s post The art of social is starting to become a science I read a post from Joel Spolsky from back in 2004 in which he discusses how user interface of communications and networking services impacts what is said and how users behave.

Here are three of his examples:

1. Text messages

let’s look at a successful social interface. Many humans are less inhibited when they’re typing than when they are speaking face-to-face. Teenagers are less shy. With cellphone text messages, they’re more likely to ask each other out on dates. That genre of software was so successful socially that it’s radically improving millions of people’s love lives (or at least their social calendars). Even though text messaging has a ghastly user interface, it became extremely popular with the kids. The joke of it is that there’s a much better user interfacebuilt into every cellphone for human to human communication: this clever thing called "phone calls." You dial a number after which everything you say can be heard by the other person, and vice versa. It’s that simple. But it’s not as popular in some circles as this awkward system where you break your thumbs typing huge strings of numbers just to say "damn you’re hot," because that string of numbers gets you a date, and you would never have the guts to say "damn you’re hot" using your larynx.

2. ebay

When I first heard about ebay, I said, "Nonsense! That will never work. Nobody’s going to send money to some random person they encountered on the Internet in hopes that person will out of the goodness of their hearts actually ship them some merchandise." A lot of people thought this. We were all wrong. Wrong, wrong, wrong. Ebay made a big bet on the cultural anthropology of human beings and won.

3. Usenet

Usenet clients have this big-R command which is used to reply to a message while quoting the original message with those elegant >’s in the left column. And the early newsreaders were not threaded, so if you wanted to respond to someone’s point coherently, you had to quote them using the big-R feature. This led to a particularly Usenet style of responding to an argument: the line-by-line nitpick. It’s fun for the nitpicker but never worth reading. (By the way, the political bloggers, newcomers to the Internet, have reinvented this technique, thinking they were discovering something fun and new, and called itfisking, for reasons I won’t go into. Don’t worry, it’s not dirty.) Even though human beings had been debating for centuries, a tiny feature of a software product produced a whole new style of debating.

2004 was not only the year that Joel gave these examples, it was also the year that Facebook was founded, and since then we have seen a revolution in how people communicate with each other and increasingly with brands, companies and governments.

Reading these examples it becomes clear that when people are using Facebook and Twitter they will be saying (and therefore expecting) different things than if they were to pick up the phone.  Putting it differently, the old processes of communication won’t map cleanly onto communication using Facebook, Twitter etc. 

In the person to person arena this newness in the nature and content of discussion on social media, and ultimately the different behaviours of social media users, is what provokes the fear and distrust from other, typically older, parts of society.  Put simply they have no context by which they can understand what is going on, and worse, when they make the natural mistake of thinking about how those behaviours would have played out over old media the conclusions aren’t pretty.

For enterprises the implication is that the nature of engagement with customers changes.  A lot has been written already about the impact on brands and marketing – mostly focused on the need for brands to have integrity and engage in value added dialogue.  Going forward we will start to see similar changes in customer service and other enterprise processes like recruitment, and our belief that agile startups are best placed to help drive these changes is part of why we recently invested in Conversocial.  The interesting question now is how do we drive them fast.

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The future of social analytics

By | Enterprise2.0, Social software | No Comments

This is a great presentation on social analytics.  It touches on the importance of moving beyond capturing data in nice charts and graphs to understanding meaning and generating real insight – requiring the application of semantics and sociology.  Also interesting is the prediction that social analytics become a key plank in enterprise 2.0.  That makes sense to me, as to get maximum value out of social applications businesses will analyse what is being done and said to identify opportunities for people to improve their work and avoid problems.

Notes on business sustainability – Joel Andren on Zynga

By | Content, Social software | 2 Comments

Joel Andren posted a couple of weeks ago on Why Zynga couldn’t go public soon enough – in which he notes that everything is great at Zynga right now (revenues on a tear, Farmville is hot, Cafe World is getting there) but postulates that ‘their current efforts have probably reached their apogee without making significant changes to their ecosystem’.  Hence they should get out while the going is good and IPO.

I’ve got no inside track on Zynga buy Joel’s analysis is interesting and can (and probably should) be applied to most internet businesses.  He has a ‘customer ecosystem’ model into which he has plugged Zynga:

image And by way of explanation:

If a company is strong, it will have three of four squares rated green. Anytime a company has a red square it essentially means that their customer ecosystem is unhealthy.

I like this model a lot.  It is applicable to a wide range of internet businesses and has the merit of forcing you to look at every aspect of the customer lifecycle and I’m using it to help analyse an ecommerce company as we speak.

To comment on Zynga’s red squares:

  • We have seen the danger of Facebook dependence before when iLike was only able to sell itself for $20m.  This point is not lost on Zynga who are pushing their own site Farmville.com quite hard and would, I’m sure, love to be working in more social networks, and to be fair to them when the business was started it looked like Bebo and Myspace would have application platforms to rival Facebook’s.
  • Customer retention is a challenge for all games developers as it is difficult to get gamers to care about anything other than individual titles – which is why franchises are so important for the industry.  I thought Social were a little different as developers have the option to cross promote between their different games.  Indeed, Zynga even had a sort of in-game cross promotional ad network story for a while as a way to attract third party games into their orbit.  Not sure what happened to that.

I’m a big believer in the importance of sustainability, which is why I like this model, but since Joel wrote his piece Zynga has raised a further $15m from existing investors, including Kleiner Perkins and Union Square Ventures.  I’m guessing the picture isn’t all bad :).

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Putting the social media revolution in a 250 year context – Carlota Perez

By | Business models, Social networks, Social software | 4 Comments

Carlota Perez‘s Technological Revolutions and Financial Capital is one of the business books that has most influenced my thinking (Taleb’s Fooled by Randomness, Anderson’s Long Tail, and Johnson’s Emergence complete my list of top business reads) and at the weekend I finally got started on the re-read I have been promising myself for some time, and before I had even finished the introduction I came across a passage I just had to blog here.

First some background on the book.  Carlota’s central argument is that the economic history of the industrialised world is best understood as a series of 30-50 year cycles in which feature:

similar productivity explosions and bursts of financial excitement leading to economic euphoria and subsequent collapses of confidence …. later to give way, through the establishment of appropriate institutions, to a period of widespread prosperity, based on the potential of that particular set of technologies.

Perez lists five of these cycles:

  1. The industrial revolution starting in Britain in 1771 based on Richard Arkwright‘s mill (or spinning frame) which revolutionised textile production
  2. The age of steam and railways starting in the UK in 1829
  3. The age of steel, electricity and heavy engineering when Germany and the USA pushed ahead of the UK, beginning in 1875
  4. The age of oil, the automobile and mass production, led by the USA and starting in 1908 with the Model T-Ford
  5. The age of information and telecommunications led by the USA and starting in 1971

Technological Revolutions was published in 2003 after the dotcom crash and sets out the internet as the probable sixth revolution.

When I first read the book in 2003/4 this thesis made a ton of sense to me given what I had seen of the rise and fall of the internet at that point.  Rereading it now it seems to make even more sense.

In the last couple of weeks I have written a number of hopeful posts about about the impact of social media on society, which all focused on the detail of how services and technology change the way we work and live.  I have written these posts in large measure because right now for many people it is easy to see the short term problems and challenges and difficult to hold onto the longer term vision.  The piece in Perez’s introduction that I am going to share with you now argues getting the most out of new technologies is always extremely challenging, not least at a societal level, but that we always get there in the end:

in the first decades of installation of the new industries and infrastructures, there is an increasing mismatch between the techno-economic and socio-institutional spheres …. the process of re-establishing a good match and creating conditions both for recoupling and full deployment of the new potential is complex, protracted and socially painful. [emphasis mine]

In recent years we have seen a decoupling of finance and industry (which is now being painfully fixed), a weakening of the social contract as income distribution has become too skewed (for which we are now debating potential solutions), and an insecurity about the impact of the internet generally and social media in particular on our lives and culture. 

For me this is the protracted and socially painful adaptation Perez describes, and just as we got through it in previous techological revelutions I think it is over-whelmingly likely we will get through it in this one, hopefully to witness another golden period like the late 1980s and 1990s or the 1950s and 1960s.  If I’m right then it could well be that social media help both with cold hard productivity and economic growth and also with the social side of the equation.

Enterprise2.0 – McKinsey reports it is starting to work

By | Enterprise2.0, Social software | 13 Comments

You know something is approaching the mainstream when it gets a write up in a McKinsey quarterly report, and so it is with Enterprise2.0, or as they would have it web2.0 in the enterprise.  They have been studying 50+ early adopter enterprises in this space for two years now and the write up shows that there is an even mix of success and failure, but growing consensus that there are real productivity gains to be had from increased employee collaboration using lightweight web tools.  Clay Shirky refers to this as an immense ‘cognitive surplus’ that can be tapped with participatory web services.

The article is well worth a read if you are into this space.  It covers many topics that we have discussed here before including the bottom up (edge-in) nature of these tools, the challenges for management in implementing them, the appropriate balance between central direction/encouragement and putting the user in control, the importance of building these tools into workflow, and how ego and public recognition are important incentives to drive adoption – and it does so with the structure and rigour you would expect from McKinsey.

I’m going to pull out just three things in this post.

Firstly – Adoption cycles – as regular readers will know I think time is everything in venture so it is interesting to note from the chart below that McKinsey believes that adoption is still limited and yet to reach the rapid growth phase.  That tells me the real excitement is yet to come for startups in this space, but that the likely big winners are probably already up and running and doing business.

Secondly – The technologies – in the table below McKinsey provides a helpful list of the technologies that we are talking about here.  The standout conclusion for me when reading this list is that they are not technically challenging to develop.  Thus for startups to have value in this space they will need to demonstrate massive growth and customer traction.  I think it is unlikely that we will see big ticket acquisitions for the sake of technology alone.  This is different to traditional enterprise software.

Thirdly – Market size – McKinsey has it at $1bn globally, which is, as they point out, paltry.  Further it isn’t clear if services are included in that figure.

Shared data services – examples from Thomson Reuters and Salesforce

By | Community, Innovation, Social software | 7 Comments

Last week I wrote that shared data services might be the next frontier for innovation.  That post was largely inspired by Paul Miller and I met him for a coffee last night to explore these ideas further.

This post is an attempt to make the abstract concept of share data services a little more real.  It draws on the conversation I had with Paul last night and some stuff I have been reading this morning.  I have two things to say.

Firstly an elaboration on the nature of shared data services – they are apps/services built on top of large bodies of existing data – news, facts etc..  For a startup to play in this space that probably means built on top of a large publicly available data set (e.g. from Twitter, or the CIA factbook, or I guess Wikipedia).

And secondly some examples of live shared data services:

  1. Salesforce yesterday released a customer service application based on shared data – it is called Service Cloud.  It seeks to capture ‘crowdsourced pools of [tech support] knowledge’ from around the web and make them readily usable by commercial customer service teams.  Service Cloud includes plugins to online forums, Facebook, Google, Amazon etc. and also offers access to  proprietary data resources like the corporate intranet, IM and email history.  They then make it easy to share portions of the knowledge base with partners – presumably for mutual enhancement. Screenshot below.

  2. Paul blogged yesterday about the Thomson Reuters Calais service which makes content shareable, intelligent and machine readable by the application of structured metadata.  The service is intended to be a building block for other shared data services.  Their example application is SemanticProxy which is really only another building block.  SemanticProxy translates the content of any URL into its machine readable semantic representation in RDF, Microformats or HTML.

Hopefully this makes an abstract topic a little more real.  It has certainly helped me.

Update Steve Gilmor talks more about Service Cloud here.  I particularly like the way he calls it a ‘Sams Club for data’ and the way he ties it back to Cluetrain – a link I hadn’t thought of.

The social media bandwagon continues

By | Social networks, Social software | 8 Comments

I fully expect the next year to be very grim – and that will impact the social media sector as much as everywhere else, maybe even more.  Time Warner’s announcement yesterday of a $25bn goodwill writedown was partially attributed to slowdown at AOL and we can expect more news like this.

But the fundamentals for social media remain strong – I picked the following Forrester chart up via the blog of Ted Shelton, CEO of The Conversation Group.

The chart shows that the percentage of people who are engaging with social media is increasing – across the board.  More people are actively creating (bloggers etc.), more people are commenting, and so on (you can find the definitions of each category in the presentation behind this link).  Perhaps the best stat is the one at the bottom – the number of ‘Inactives’, that is to say people who don’t engage with social media at all, has fallen from 44% of the US population in 2007 to 25% in 2008.  Just about everybody who is online now interatcts with social media in some way.

In summary the message here is very clear – engagement with social media is increasing rapidly. 

Shifts like this lead to value shifts and hence value creation – every time.  It might not be this year, and the monetisation mechanism may not yet be clear, but it will happen.

Social media: data versus interface

By | Blogging, Business models, Facebook, Google, Social networks, Social software, Yahoo! | 15 Comments

Yesterday I wrote about ambient intimacy as a first response to Tim O’Reilly’s post about why he loves Twitter.  Today I’m going to tackle his contention that the value of social media sites lies in the data rather than the interface.

He describes it thus:

In many ways, Twitter is a re-incarnation of the old Unix philosophy of simple, cooperating tools. The essence of Twitter is its constraints, the things it doesn’t do, and the way that its core services aren’t bound to a particular interface.

It strikes me that many of the programs that become enduring platforms have these same  characteristics. Few people use the old TCP/IP-based applications like telnet and ftp any more, but TCP/IP itself is ubiquitous. No one uses the mail program any more, but all of us still use email. No one uses Tim Berners-Lee’s original web server and browser any more. Both were superseded by independent programs that used his core innovations: http and html.

What’s different, of course, is that Twitter isn’t just a protocol. It’s also a database. And that’s the old secret of Web 2.0, Data is the Intel Inside. That means that they can let go of controlling the interface. The more other people build on Twitter, the better their position becomes.

Intuitively I buy this.  The data is what gives Twitter it’s vibrancy and is the hard bit to re-create.  The interface though, is important ad based for monetisation – you need the real estate.

Tim points out that Facebook is becoming a ‘ghetto’ populated by a bunch of other apps (not least Twitter, which is the source of 60% of Scoble’s friends’ FB updates), but they are at least generating some revenue from that traffic.

When I think about the web businesses which have been most successful to date they have all owned the interface to good effect – AOL, Yahoo!, Google, and now Facebook.  All of these have great data at their core – everything great at Facebook stems from their social graph data and Google is in many ways all about data – but monetisation comes from the real estate.

By contrast no-one has made much money directly from the protocols Tim likens to Twitter: TCP/IP, telnet and FTP.

So it seems to me that owning both data and the interface is ultimately the best route to building a big and valuable business.  I get that the way Twitter has encouraged people to develop their own interfaces by having a very open API has been a big driver of growth for them, but I wonder if the trade off with monetisation potential is worth it.

All of this is a very narrow shareholder driven view.  From the different perspective of changing the world rapidly then the protocols listed above have had more of an impact than the successful companies I mentioned, and Twitter’s extremely open strategy is spot on.

What do you think?  This is a new area for me, and very interested to hear your views.