One of the most interesting new ones is qype.com, which models itself on the highly successful yelp.com of the US. Qype started last June as a pan-European site that claims 500,000 visits a month in the UK and is growing at 50% every two months. Rob Hinchcliffe, its UK community manager, claims people are moving away from “time-suck” networks such as Facebook towards socially useful ones that “help make our lives easier as well as fostering online networks and micro communities”. I was impressed that there were seven reviews of a local curry restaurant. From this week, he says, users will be able to post YouTube videos of restaurants or clubs they are reviewing. It also has a stripped-down option for small-screen phones in which you simply insert a street or postcode and what you are looking for.

Interesting contenders include welovelocal.com (which I have already reviewed); trustedplaces.com, which is building up reviews from users; and outside.com, which homes in on postcode data from local galleries to Burke’s Peerage (though typing postcodes into Google can be just as good). Mygamma.com, which has been nominated for a Best Mobile Social Networking award, looks promising but kept sending me back to a mobile gaming site, which was disconcerting.

Another one, gypsii.com, which has just landed a contract with China, was slow to load but looks interesting: you select where you are and it tells you how far other restaurants, interesting houses etc are with user-generated photos - though it had a disconcerting habit of producing restaurants thousands of miles away. Others include, touchlocal.com (where, in theory, you can read others’ views of local plumbers), toptable.co.uk, beerintheevening.com, plus, of course all the local interest you can find on our own Guardian sites such as guardianrestaurantbookings.co.uk. And all this is without mentioning Google’s as yet unrevealed plans to capture this space for itself.

Study:CMOs Must Evolve to Meet New Marketing Challenges

The growing popularity of interactive tools such as wikis, blogs and social networks is giving customers the ability to engage with firms as never before, and global marketers need to put customers at the center of their operations to respond to this new and challenging reality, according to an study of global CMOs conducted by the Economist Intelligence Unit and sponsored by Google.

The report, “Future Tense: The Global CMO” (pdf), finds marketers are increasingly able to reach out to consumers at all points along the value chain, not just at the moment a purchase decision is made. Because of this, global marketing of the future must engage all corporate stakeholders with consistent, constant and accurate messaging. At the same time, it must encourage and be able to respond quickly to customer feedback and involvement, pulling stakeholders closer to the corporate brand.

In terms of progress toward this goal, 56% of the 263 marketing executives surveyed agreed that their company is highly customer-centric and that marketing functions are interwoven throughout their operations.

The widespread dissemination of information is also causing marketers to adopt a broader role by engaging all corporate stakeholders beyond their traditional audience of customers and prospects, including investors, employees, government regulators and others. This often entails integrating marketing and communications into all aspects of the enterprise in order to gather, develop and use customer intelligence.

Regarding structure, the majority (55%) report that they do not see any change in their marketing organization in the next 12 months, while 28% see their organization becoming more centralized.

CMOs are also responding to the fact that consumers have many sources of information and are becoming more sophisticated in their purchasing decisions. “Now when you push a marketing message out there, something comes back. If it’s a great message, if it resonates and it’s real, the boomerang is going to be positive,” said Lauren Flaherty, CMO of Nortel Networks, an interviewee for the report. “But if it’s off message and it’s not genuine, or if it’s perceived as being disingenuous, you get slammed.”

Currently, CMOs view the most important media for meeting marketing objectives as conferences and events, consumer/business magazines, TV and trade magazines.

In contrast, a year from now, they anticipate that the top-four most important media will be conferences and events, TV, online content sites and consumer/business magazines. This reflects the growing influence of online media.

Global CMOs also continue to face difficulties in measuring effectiveness, ROI and relevance to the business, though they acknowledge that these areas cannot be ignored. Sales/revenue data, brand-awareness survey results and response and conversion rates are currently the most important measures of marketing effectiveness among CMOs.

The report
provides the following recommendations based on findings:

Balance global brand awareness with local market relevance: Centralizing global marketing functions, such as advertising development and production, can create economies of scale and save money, but they must be guided by the needs of the local market. At the same time, marketing budgets must be decentralized so that regional directors can make appropriate decisions based on market demands.

Integrate marketing with other corporate communications: Both the interactive nature of Web 2.0 technologies and the transparency of corporate messages among different constituencies require the integration of various forms of marketing and communications. Businesses can no longer segment audiences and messages as if audiences don’t talk to each other.

Adopt new media: Organizations should consider setting aside a specific budget for experimenting with the newest Web 2.0 technologies. The CMO should have the foresight to anticipate how different constituencies will respond to different events, messages and channels, and should be able to deal with the proliferation of new-media tools and expanded audiences.

Develop new skills, capabilities-and partnerships: CMOs must understand the fundamental business model, brand, culture, policies and values of the organization. Equally important in terms of adapting to the evolution of new media are partnerships with vendors whose expertise can be used to take new initiatives to market faster-and more effectively-than a company would on its own.

Champion innovation: The need for greater accountability for marketing expenditure is pushing global companies towards digital marketing campaigns with higher returns than traditional media. The interactive nature of the latest digital-media vehicles provides the opportunity to develop deeper insights into customer dynamics and allows the CMO to become the corporate champion of customer insight.

“The CMO of the future must be the chief proponent of close engagement with customers,” says Nigel Holloway, Director, Americas, Industry and Management Research, at the Economist Intelligence Unit. “Rather than merely pushing out the corporate message to consumers, marketers must draw them in so that they are regarded as helpful participants in the development of the brand.”

Title:       Google Wants to Facebook Friend You

Date:       May 12, 2008

Source:  Time Magazine

Theme:   “Google is getting into the “social plumbing” business.  The initiative is called Friend Connect giving every website a way to add a limitless number of applications and a means for those sites’ users to communicate among them selves”

Author:     Josh Quittner

Google Wants to Facebook Friend You

Thanks to a new Google project, soon any website can be its own Facebook.

Upping the stakes in its ongoing battle with the popular social network, Google announced today that it was getting into the “social plumbing” business — giving every website a way to add a limitless number of applications and a means for those sites’ users to communicate among themselves.

The initiative is called Friend Connect and it begins tonight when any site can apply to be in the Google pilot program (they call it a “preview release”) here. Note: that site won’t be live until Monday night. During the next few days, Google will choose one or two dozen sites to participate. Over the course of the next several months, the company will collect site, user and developer feedback on how the program is working. Then, if all goes well, in a few months Google will open up Friend Connect to any website or blog that wants to participate.

Here’s how it’ll work. (And forgive me for using my blog as an example; we need the traffic.)

My wife and I have a teensy blog that covers real estate and other stuff of interest to people in our hometown in Northern California. It’s hosted via Blogger, which happens to be Google’s free hosting service. (The Friend Connect program, however, is open to any website or blog — you’ll just have to cut and paste a few lines of code onto your site.) Anyway, when we first set up the blog, we chose from a short a la carte menu of standard features we wanted to add — things like “blogrolls” which recommend our favorites blogs, post archives, pictures and so on.

Once Friend Connect is up and running on blogs, however, we’ll be able to go to a page and choose from thousands of applications, and add them, free, to our site. (Here’s a list of some of the applications. As Friend Connect grows, expect the list of applications to explode; Google, like Facebook before it, is trying to create a “platform” for developers to make money by reaching an audience of millions.)

But users will have to sign in if they want to use all those cool new apps. How? Google’s using a standard known as OpenID, which many of the world’s biggest sites — from Google (of course) to AOL — utilize. So, for instance, sign into AOL, or your g-mail account, and you’re logged into Friend Connect. One of the advantages of this system is it makes it easier for users to take their friend lists with them. Having signed in, users can follow the activities of their friends on Friend Connect sites. So, in my real estate blog example, if I installed a Wall app (just like the one on Facebook) people could comment on stories. However, those comments would only be visible to their friends; if a user didn’t sign in, they wouldn’t even see the
Wall.

Better yet, as Friend Connect picks up steam, perhaps some applications developer will create a specialized app for all the real estate blogs out there (there are tons of them) and make it easier for, say, real estate agents and home sellers to connect with home buyers. Or, consumers searching out contractors in a specific area.

If Friend Connect works, the ramifications are huge, of course. It’s another smart move for Google, which would be able to serve up even more targeted advertising to users — and make even more money. Through a project called OpenSocial, Google has been working to fight back against Facebook’s closed network while mimicking, on the wide-open Web, Facebook’s core advantages — Facebook is a place where a user not only defines his or her set of friends, but the applications he or she wants to use. Those two things — your friend list and the things you like to do — create a pretty good idea of who you are, which is priceless to advertisers. Only five months in, 2008 is shaping up to be a pivotal year in the Web’s development. I can’t wait to see what happens next.

Title:               Did Microsoft Overpay for it Facebook Stake?

Date:               May 9, 2008

Source:          NY Times

Theme:           “Microsoft also got exclusive rights to run banner ads on the site in the United States through 2011”

Author:           N.A.

Did Microsoft Overpay for Its Facebook Stake?

This week’s chatter that Microsoft may have approached Facebook to discuss a possible takeover has created quite a buzz. But maybe Microsoft should be inquiring about getting a partial rebate on its $240 million investment instead.

Microsoft’s October purchase of a 1.6 percent Facebook stake implicitly valued the social-networking Web site at $15 billion. Even at the time, some people questioned such an eye-popping valuation. But as the months have passed, the number is looking even more bubbly. And not just to us: Several Web sites this week have questioned the value implied by Microsoft’s Facebook deal. On Friday, PEHub’s Dan Primack suggested it might be “one of the worst venture capital deals of all time.”

First, a big caveat: It’s hard to gauge how much Facebook is worth using traditional methods, because it is not a public company and gives out little in the way of performance data.

One way to measure its progress is to look at how fast it is growing, and things look upbeat on that front. Facebook had 109 million unique visitors in March, according to Comscore. That is 2.5 times as many visitors as the same time last year.

Facebook’s founder, Mark Zuckerberg, said in a conference call to employees in February that the company had revenues of $150 million last year and expects to bring in twice that amount this year, or about $300 to $350 million, an increase that is roughly in line with the rise in users.

So it’s clear that Facebook has grown. But growth is only part of the story. It needs to make money, something that has eluded it so far. Mr. Zuckerberg has said he expects the company’s Ebitda, or earnings before interest, tax, depreciation and amortization, to be $50 million for the year. Subtract the $200 million in planned capital expenditures, and the company has a negative cash flow of around $150 million.

That would be just fine if it continues to expand rapidly, and the outlook for social networking remained stellar. But there are a few signs that things are slowing.

First, News Corporation revealed Wednesday that its social networking site, MySpace — which has more users and three times as much revenue as Facebook — missed revenue expectations and actually took in 10 percent less money than in the previous quarter. For a genre that is supposed to be growing like gangbusters, any contraction in revenue, even with a slowing economy, could raise questions.

But that’s MySpace: What about Facebook?

The Valleywag blog, in a recent post called “Finally, the Craplets on Facebook Begin to Fall,” described an apparent decline in interest in building and installing Facebook applications.

Why is this important? One reason that people have been so excited about Facebook was b
ecause it opened up its network to third-party developers to create little tools and games for its users to install and play with — even though many of those “apps” seem to have little purpose, and it has never been entirely clear how they would translate into riches.

Now, some see signs of app fatigue. The number of posts in the developer page on Facebook’s official developers’ forum is down 27 percent from January to April of this year, Jesse Farmer recently said on his 20bits blog. The usage of new applications also seems to be down.

Henry Blodget, the former Internet analyst, also suspects that Facebook’s star has fallen a bit since October. On his Silicon Alley Insider blog, he argues that Beacon — a Facebook feature intended to allow advertisers to exploit the connections between friends — has essentially “flopped” after generating fierce resistance from Facebook users.

Factor out some of these fancy features, and it may seem as if Microsoft overpaid (although we would add that $240 million is basically loose change for this software giant, which was prepared to spend $44 billion to buy Yahoo).

Which brings us to this admittedly rough comparison: Yahoo’s market capitalization is now about $35 billion. With about 506 million unique visitors in March, that translates to about $71 per visitor. Apply that same metric to Facebook’s 109 million unique visitors and the company would be worth $7.7 billion, about half the value implied in the Microsoft deal.

Fans of Facebook may contend that it would be folly to value this growing business based off its current performance and limited data. Its 40 million user profiles are a marketer’s dream and have yet to be tapped. Even if the number of users remains constant — which is highly unlikely — Facebook could make millions of dollars selling marketing data to third parties. Its user base is older and richer than other social networking sites, so it could potentially bring in significantly more ad revenue than its rivals.

And another point: With its investment in Facebook, Microsoft also got exclusive rights to run banner ads on the site in the United States through 2011. Maybe to Microsoft, that made it well worth overpaying for the stake itself.

Comments

May 9th, 2008

What people fail to realize is that this is a strategic investment not a financial one. Microsoft is not a venture capital firm and doesnt need to see the same returns, they only need to insure that the 240M sees the same IRR as the rest of their cash and cash equivalents do, possibly only 6-10%. That goal could easily be achieved through liquidation preferences and or other financing terms that would guarantee them a certain rate of return which Facebook’s current operating and financial would support, but still be considerably below the 15B valuation.

— Posted by r goldberg

May 9th, 2008

One reason there are lesser facebook apps is app builders are too busy adapting existing facebook apps to Myspace and Hi5 using the Google Social API. Two top games are now on both myspace and FB(triumph) and dopewars online is on hi5 and FB.

A lot of people used FB more for gaming than for social networking which anyways is much better on myspace.

However the new Fb features like live chat, and steps to counter app spam seem to be working, and its only till they get the ad monitization right, which even google found some time to think over (and is still thinking over for you tube etc)

FB application buiders need to generate money too, and they can do that if they run application across multiple social networking sites. My guess this sector is ripe for mergers and consolidation. The 71 dollar per user figure for yahoo and 140 dollar per user is just plain nuts considering how fast websites like myspace and yahoo become old from hot and happening.

May 10th, 2008

Most of you do not understand how venture valuation works. $15 billion valuation doesn’t work exactly the way most of you are thinking about it. For instance, if Facebook sold tomorrow for only $1 billion (one billion), MSFT would make money on their investment. How’s this, you ask?

It is called a liquidation preference. Every venture deal has it. This means that in the event of any sale (other than a public offering), all of the investors get their original investment back first according to the liquidation preference, and then the remainder of the sale price gets divided pro rata according to the percentage ownership.

So if Facebook sold tomorrow for $1 billion cash, the investors would receive all $450 million of the cash that they have invested, and the remaining $550 million would get divided based on the percentage ownership (MSFT would receive about 1% or $5.5 million in addition to their original investment.)

Now, what do you think the chances are that Facebook would sell for less than $1 billion? Close to nil. So the risk of losing principal is very little for MSFT. In addition, they got the advertising rights.

Please remember to factor in that all venture investors have liquidation preferences when thinking about valuation. A company can be sold for less than its post-money valuation with the investors still making a profit.

Title:               Social media’s future looks bright, apply sunscreen

Date:               May 2008

Source:          CNet

Theme:          “Social media is in the spotlight as from a consumer perspective, it’s causing a shift in how people spend their time online and how they relate to media”

Author:           Stephanie Olsen

Social media’s future looks bright, apply sunscreen

MOUNTAIN VIEW, Calif.–At an Internet conference here Wednesday, venture capitalists and entrepreneurs tried to predict the future of the social-media business. Guess what? It looks a lot like the Web business model we have now.

Why the prognostication? VCs and executives are all trying to figure out how they can build the next Bebo, a social network that sold to AOL for $850 million. But because those deals are few and far between, especially in a shrinking economy, executives are taking a much more practical stance on the kinds of companies necessary to deliver social-media sites to the next level, or beyond “pokes” and “hugs.”

Promising companies are new advertising networks, e-commerce applications, payment systems, and infrastructure providers for social networks, according to executives here at the Dealmaker Forum 2008.

It sounds like a rehash of what went into Web 1.0, with a social twist.

Social media is in the spotlight because from a consumer perspective, it’s causing a shift in how people spend their time online and how they relate to media. All those involved, from advertisers to entrepreneurs to major media companies, are trying to figure out what it means to their business and how they should take advantage of it. What’s more, many social-media companies are still figuring out how to turn a profit.

The definition of social media can vary depending on who you talk to. But in general, the term refers to any media (text, photos, video, etc.) that has a social element built around it on the Web. Examples can range from Flickr for sharing photos, to user-generated encyclopedia Wikipedia, to Muxtape for publishing music playlists, to Facebook for “poking” and staying up on friends.

“It’s really an evolution of media from a one-way direction to a highly interactive model, where people are developing relationships around content. That drives engagement…and creates a whole new opportunity for business,” Mike Jensen, director of technology group at Credit Suisse, said during a panel discussion at the one-day conference.

That said, later in the panel Jensen likened some of the high-ticket acquisitions in social media to “drunken sailor” behavior. He didn’t name deals. But Google, for example, paid $1.6 billion for YouTube and CEO Eric Schmidt said only recently that the company still hasn’t figured out how to make money from the video-sh
aring site.

One opportunity for new business is in e-commerce.

Dave McClure, an angel investor at 500 Hats, believes the future of the business will be in so-called social commerce, or the intersection between online shopping and socializing. Netflix might be an example of early social commerce because it encourages members to recommend movies to friends. But he envisions social commerce going much further.

“Social commerce is where (the business is) headed. Companies that have mined enough social graph data and can combine shopping to it–whoever figures that out, they will be set,” McClure said during a panel.

“Social commerce is where (the business is) headed. Companies that have mined enough social graph data and can combine shopping to it–whoever figures that out, they will be set.”

–Dave McClure, angel investor, 500 Hats

Early companies in this arena are ThisNext and Kaboodle, which sold to publishing conglomerate Hearst Corp. for a reported $40 million. Kaboodle and ThisNext offer services that connect people with similar shopping tastes, or offer recommendations from that data.

Jason Oberfest, vice president of business development at Myspace, said on a panel that, in the future, he believes a “significant portion” of MySpace’s revenue will come from leads generated for online retail sales.

Oberfest added that the industry also needs companies that specialize in payment processing for social networks so that people can more easily purchase real or virtual goods. That business isn’t being served by PayPal or other existing players, he said. “It’s a big area of need,” Oberfest said.

Much of the hype in social media has gone to application makers like Slide and RockYou, which have amassed valuations as high as $500 million. But most of the smaller widget makers aren’t going to be lasting companies, according to Charlene Li, a senior analyst at Forrester Research. “You can get viral quickly, but let’s track and see how long that app stays around,” Li said.

Instead, she said, more developers should be working on applications that provide utility to people, rather than just entertainment. For example, spin-offs of Twitter for health care or emergency workers could hold promise, she said. Li even touted Dogster, a social network that helps dog lovers arrange play dates, as a hit in the arena. An executive from the company was in the audience and suggested that the company was for sale.

Sergio Monsalve, a venture capitalist at Norwest and former executive at Photobucket and eBay, said companies like Affinity Labs are also highly valuable. Affinity Labs, which sold to Monster Worldwide in January, builds social networks for specific communities, such as nurses or teachers. Sergio said even though that company isn’t a household name, it generates $20 million to $30 million in revenue inside Monster.

Advertising redux

Another major area of innovation–or rehash–is advertising, which is the economic engine of most social-media sites. Thanks to social networks like MySpace and Facebook, companies are armed with much more data on people’s habits, preferences, and social behavior. Executives believe that data, if used right, can build the next advertising giant.

“To take Bebo to a billion dollars, you have to automate it…and build a (Google) AdWords for social networking,” said Jim Scheinman, entrepreneur in residence at Charles River Ventures and an early employee at Bebo.

Still, social networks have long been challenged to sell their inventory to mainstream advertisers for several reasons. For one, advertisers are squeamish about putting their brands next to a user-generated video of high-school band practice, for example. Another reason is that salespeople from social networks don’t speak the same language of metrics that traditional advertisers and agencies speak.

“The promise for this space is that you’ve got this engaged audience–people spending 20 to 40 minutes talking to each other in a way they haven’t before–and if you put these ads in front of them, what do you call it and how do you sell it to agencies?” Scheinman said.

Early companies in this arena include social-ad networks Lookery and SocialMedia Networks.

MySpace is seeing early success for its advertising service called hypertargeting, which lets advertisers reach customers by their behavior on the social network. Oberfest said people are responding more positively to those ads.

Seth Goldstein, founder of SocialMedia Networks, an advertising platform for social networks, said that he envisions an open system from Facebook or MySpace that would allow companies to look at a person’s social graph, or collection of their friends. Then the company could extract who is most influential to that individual in areas like travel or movie recommendations.

“If I can select the right person to have influence over you, I can choose that person to send you a message,” he said.

Nicolas Kardas, senior product manager at Microsoft’s Windows Live Platform group, said despite the forward twist on social media, the business models aren’t that different than those of years past. It’s just that with social networks, companies know much more about the consumer, and that information delivers the option of a much bigger premium for advertising.

“It’s better targeting for advertising. But from a business standpoint, I haven’t heard anything new than what I heard before,” Kardas said.

That isn’t slowing the competition in social networking and media. For that reason, venture capitalists expect more consolidation and buyouts in the market.

“I think big media companies will continue to be aggressive in this area. But in my mind there will be a lot of carnage,” Credit Suisse’s Jensen said.