broadstuff

Wired Magazine tells of one of the Facebook "naughty gift" groups starting to organise real life parties for Facebookers to get it on offline:

Some 2.6 million Facebook users have sent 33 million naughty gifts -- including thongs, whips and condoms -- to their friends since the app joined the social network's platform in August.

Like the site's own gifts feature, the items are merely iconic online representations of the real thing. But now Naughty Gifts' developers are hosting bicoastal bashes for app users to party in all their fleshy, costume-wearing glory. Events take place at New York and Chicago this Friday and in San Francisco next Wednesday

Naughty Gifts has 10x more members (no sniggering) than the competing Very Naughty Gifts on Facebook, this may be because Facebookers are a tad coy:

"The kids of MySpace appeared to be more deviant than their Pottery Barn Facebook counterparts," said the St. Petersburg-born developer, a member of several women's advocacy groups including the Massachusetts Women's Political Caucus. "Facebook users, much like Southern senators, kept their naughty sides under wraps and it made sense to make an app to bring out the naughtiness."

In fact, we've always wondered if a social net with one's real identity on show would ever be as popular for such activities as say on the anonymous Yahoo Groups or MySpace, as its surely a lot more risky being risque in public. Clearly the Naughty gifts people feel that they can set the libidos to roam free - but even here it would appear there are favourites:

The app's blow-up doll ranks as the most popular virtual gift. Demographically, Canadians and New Yorkers are amongst the biggest users of Naughty Gifts.

Make no doubt though, the endgame is shopping, not sex. Right now:

Users get a virtual budget of $200, refreshed daily, to send gifts. They can choose from 60 items, ranging from conservative ice cubes, boots and lotion to racier handcuffs, pearl necklaces and others that might give pause to those reading at work. Images of items can be proudly displayed on members' profiles, given privately between users or sent anonymously.

Now Habbo and Cyworld make you pay real $ for virtual kit, so why not get peopel to pay real money for getting virtual kit off? We suspect that the M for monetisation word is not far from their lascivious minds however, and its dirty capitalism rather than dirty deeds that will be the ultimate turn-on

So it would appear that not only Microsoft stumped up $240 for 1.6% of Facebook, but so did 2 Hedge Funds. The thing is, Microsoft at least got an exclusive global Ad deal to (hopefully) amortise their spend, but one wonders what offset benefits the hedge funds got?.

Take Microsoft's deal first...assume 40m Facebookers, divide by $240m and that's c $6 (per user) to make net out of over say 2-3 years. If you assume that Facebook's mean user base is actually c 80m over those 3 years then its an even more sensible $3 to claw back. (Note though that no sooner is the deal done, than it appears the growth estimates are being reduced - caveat emptor)

So Microsoft are pretty likely to be (about) whole on their $240m, and if ever anyone ponies up more than $15bn they make a little profit on the deal too. And there is definitely a value to keeping Google out awhile longer - so not a bad play by MSFT.

In fact, if you look at the Microsoft deal you should deduct some of what they spent and allocate that to an Ad deal (and a Keep Google Out fund), so their real valuation of Facebook is probably way less than $15bn.

But the Hedge Funds - what do they get by propping up a $15bn valuation? It is hard to believe they have put in c $240m for 1.6% of the company each without strings attached (to yank it out - Hedge Funds are usually traders, not investors - what gives)...if so, then they are probably demonstrating top class "top of bubble" dumb money behaviour.

(Update - this article implies the Ad deal is actually highly loss making - now if true that definitely shows irrational exuberance from MSFT as well - makes the hedge funds look relatively sensible!!)

Here's why...you have to believe some "interesting" things to believe a $15bn valuation. Allow us a small bit of back of blog-velope calcs

Facebook has c $150m revenues, and is valued at $15bn - thats 100x revenues. Poor old Google has revenues of near $15bn and only a measly 13x multiple to its market cap of $190 bn. Let us make the heroic assumption that Facebook is just a tad overvalued at $15bn now, and its all based on growth - thus has to "grow into" its valuation, and that is more likely to be at the 10:1 ratio level

To therefore believe that FB is worth $15bn you first at least need to believe that it will very soon achieve at least 10x current revenues (Google not exactly being undervalued). This is of course a simple calculation:

(i) You can choose to believe that they can increase user base 10-fold (a mere 1/2 billion - thats about all the citizens of Europe and US that can click a mouse)

(ii) You can choose to believe that they can extract 10x more revenue per customer somehow - say $37 per person pa (today's 40m people over $150m revenues is c $3.75 per person). That is more believable, but is still a stretch if its only Ad based. Social Nets have very low CPM, on say $1 CPM thats c 37,000 Ads the average person needs to see, or (assuming you log in daily) about 100 / day - thats 100 pages you have to read, every day, at one Ad / page (thats Google plus levels of usage daily by the way). If you assume that the old SocNet ratio of 1 real visitor to very 10 registered users holds here, its more like 1,000 pages per user per visit to be read - or you can be hopeful that CPM's go up 10 fold too

But its not totally impossible to imagine a combination - say 100m dedicated users @ $15 pa (Just the entire US clicking population clicking away on only about 20 pages a day, every day, at $2 CPM) gives an annual 10x multiple.

(Most big Socnets get about 500 - 600 pages visited a month - Facebook is about thereabouts, but one assumes this will go down over time as the users force less "one page per function" navigation on them)

Or, do it another way - Google makes around $4bn (ish) net, so Mkt cap of $190bn / 4bn gives us a market cap / net margin ratio of about 45:1 - ie $45 of market cap per $1 of net margin. Lets assume Facebook gets about that ratio. I read that Facebook is expected to hit c $30m net this year, which on $150m is a c 20% net margin, and at Google levels implies a value of c 1.2bn (yes, yes, I know higher growth is assumed - but 12x ???). Let us assume when it grows up, Facebook's vital stats look roughly like Google, so when Facebook is worth $15bn, applying say a 50:1 ratio means a net margin of c $300m, ie revenues of $1.5bn.

Deja Vu....

(I assumed also that there are no economies of scale, +ve or -ve from 50m to 500m users - in fact I'd assume it costs more to go to customers across the planet in multiple languages)

But, thats not the end of it - the problem in business case build here is the transitory nature of any one SocNet compared (potentially) to Google, especially as they compete, commoditise and more vertical Nets open up (and Google has yet to play its hand). At some point investors will run the ruler over the free cash flow line (cash out x number of years of cash out), and that is a whole 'nother different issue.

Google's 45:1 ratio is extremely high by any standards, but you could probably believe they will be around 10 more years in current fettle or better. Can you really believe a SocNet churning out $1.5bn of revenues (given what we have to assume about users, CPMs etc to do that) is going to be around at that level for 10 years?

Lets say its real life is 5 effective years (for simplicity we will assume the top and tailing years at the agreed DCF is 5 effective years ) - that means dear old Facebook needs to be hitting either a market cap: net margin ratios of 100:1 (twice Google) when it grows up, or its revenues and net margins have to be at c £ 3bn and c $600m respectively.

So, can you believe all that?

If so, you can invest your $240m for 1.6% of Facebook....

If you don't, then you are probably an Angel fearing to tread where the foolish money seems to want to rush in.

(And you know what they say about fools and their money.....

(A post-cursive thought - Google, to whom $240m is also chump change, were clearly not prepared to bid at these terms and conditions so implicitly they do not value Facebook as $15bn - and since they are no fools, maybe the Facebook Hype community ought to reflect on that)

SanDisk has invented a Flash-using black box that allows you to save PC videos and play them on TV. It costs $150.

All very good stuff, but if people just bought TVs with VGA input this would be unnecessary - I have a very good Philips flatscreen here that does this straight from the laptop or PC.

Reading techmeme this am over coffee, saw some interesting posts picking up on themes we've been tracking over the last few months.

Firstly, Nick Carr's note on the application of heavy maths from sewer contaminant analysis to the blogosphere network to define which blogs are real nodes (ie the "true" A list blogs) if you are looking at Tipping point impact. Somehow the analysis of blogs using sewer maths seems truly apt

The top 100 are listed here...must say a few surprise me, like Kathy Sierra's (she hasn't written for months), and no TechCrunch - but the methodology looks sound, probably needs a bit of tweaking though (We got into this whole area when we built the Zeitgeist-o-meter earlier this year).

Secondly, the first real shots in the "throttling war" from the Telcos who feel they are suffering from the "free rides" all the big bandwidth services get over their pipes. Deutsche Telecom is proposing a two tier internet, and proposing to charge a premium to bandwidth hogs. This one is not going to go away, as Telco's are not going to take the large, long term risks of serious capital investment in mo' pipes on the say so of flakey Web 2.0 co's with dodgy Ad-based models - they will want to see real money streams.

Thirdly, a very interesting pair of posts around navigating Web TV on Current.com (from Read/Write Web) and on using Web Video well. Web video is such a new field that any best practice is very useful, and we have opined before that the navigation experience of web TV is the "EPG meets Search" arena, and feel this will be one of the key battlegrounds for Web TV players - and that no-one is anywhere close to cracking it yet (or more accurately no one is certain what customers will really run with).

Attended the Women in Games talk last night (part of the London Games Festival), its an area of interest to us in that it is such a clear area of arbitrage - these days lots of women have games devices, yet few in the mainstream games industry really write games for them. Hoped to get some insight into the whys and wherefores.

Emma Westecott, Senior Games Researcher at The University of Wales, Newport (and previously Producer on such titles as Starship Titanic) chaired a panel comprising of:

- Nicola Bhalerao, a senior software engineer at Rare and chair of WiG2008 with a focus on encouraging girls and women to engage with games programming as a creative and fulfilling career path.

- Matthew Jeffery - Head of European Recruitment, EA talking of the need to broaden the talent base of development talent and to attract a more diverse workforce.

- Helen Kennedy - originating member of Women in Games, active in driving the academic context of the event forward. Helen’s PhD is in Feminism and Play and she brings substantial expertise in feminist and gender studies to the event.

My take on it all was threefold.

Firstly, it became clear that the games industry was largely populated c 10 years ago by the sort of men who people like Helen love to hate (being un-PC in every conceivable way it would seem), and has remained so - and they haven't really had to change much because by and large their market was growing with them. Now however it is maturing and structurally an all male geek gamer industry is unable to make the stuff it needs to do to attract new audiences, so carries on making ever more expensive versions of what it already does.

Matthew mentioned most in-industry companies totally did not "get" the Wii (or Nintendo DS), and are now scrambling to catch up. Nicola made some good points about the difficulty of attracting women into games development, but I must note that the argument is not only for gaming - its the same issue with attracting women into anything related to the "hard" sciences.

(Postscript - interestingly, Nintendo - makers of Wii and DS has just recruited a senior Yahoo woman in the US)

Secondly there are a lot of Wii's and DS's now in women's hands, and these are the tools of choice - so for anyone who is going to break through, these (or similar devices) are the platforms to use. Point 1 above implies that the current industry is unable to structurally imagine itself out of its current box very easily, so now is the time for (women?) entrepreneurs to strike.

Thirdly, Women in Gaming seems like it has had what I would call "utopian hopes" thrown at it, I frankly felt uncomfortable with some of the feminist Agendas being bandied about last night. Its probably very un-PC to say this, but my take is that Gaming is just a business like any other, and will stand or fall on serving real (women) customers with what they want, rather than cleaving Gaming to any particular set of ideologies / sociologies.

In my view, given the opportunity, the best way to cure gaming of its (apparent) misogyny is to start up companies with different cultures writing games that women want to buy. That would rapidly start the established players changing their ways.

The billion dollar question, of course, is what do women gamers want. Research so far has shown a few general principles about what women like in games:

(i) creativity - do it yourself, or at least some say in defining environments
(ii) being part of a non-competitive, collaborative system (some wags argue that social networks are really just games for women
(iii) using simple, easy to load and use games systems
(iv) tend to like non-zero sum games (ie everyone wins)
(v) are more likely to play casual, Java and Flash-powered web games like Bejeweled5, generally passing on download-install-and-play “hardcore” online world games like World of Warcraft.

Now these are "high" probabilities, ie they do not cover the whole gamut of what women like by a long shot. To be honest, I suspect the best way to write games that women want is for women entrepreneurs to write the sort of games they would like to play.

A useful event though, and very necessary. Thanks also to Thayer Driver who co-organised.

...to paraphrase Ecclesiastes Law

(Ecclesiastes law is that There is Nothing New Under the Sun, and that All is Vanity).

It would appear (sez Jemima Kiss in the Grauniad) that GOOG, YHOO, and MSFT are all trying to buy a stake in Facebook at ludicrously overvalued prices (assuming you base pricing on something rational like, oh, customer valuation).

(Current betting says deal will value the company at c $10 - $15bn with c 40m users, thats c $250 - $375 / user)

Whats with these heavyweights paying astonishing prices prices for ephemeral businesses? The history of Social Nets is that they are here today, gone in 5 years time, and a New New Star emerges every 2 years or so to cream off most of the real actives- how in heavens name can any business case work with these timescales, users and numbers?

Or is this just the MegaNetCo's equivalent of the Yacht races? Whoever overpays most for their Web 2.0 startup wins....

Its clear that at a tactical level they all believe that ownership of a piece of Facebook will propel them to some new state of financial grace, though just how monetisation works is still (very) unclear.

However, at a strategic level this seems to be much more of a dotcom mania moment. Its taken EBAY c 3 years since it bought Skype to admit it was being darn silly. On this reckoning GOOG should admit it was a tad enthusiastic re YouTube by 2008, and the Facebook acquirer by 2010.

(ooops...I meant 2 years re eBay)

One of the great books of the 1920's was Irrational Exuberance...and another was "Where are all the Customer's yachts"

Shareholders, you have been warned.....

Postscript - NYT says deal is $240m for 1.6%, valuing Facebook at $15bn. Sounds like a bad case of Deal Fever has gripped all the players, as the NYT reported:

“We are now stepping outside what is typically a business decision,” said Rob Enderle, the founder of the strategy concern Enderle Group. “This was almost personal. I wouldn’t want to be the executive that’s on the losing side at either firm.”

The theoretical rationale is that:

Google appears to be building a dominant position in the race to serve advertisements online. Fearing it might lose control over the next generation of computer users, Microsoft has been trying to match and in some cases block Google’s plans, even if that effort is costly.

I didn't understand the eBay rationale for Skype at the time (though, nor, it seems, did they ), and we thought the YouTube price was way too high considering Google's video asset base, and this seems like at best buying Ad space with maybe a chance to take a profit if anyone ever pays more than $15bn....(in fact, I wonder how much of the $240m was actually for the stake rather than the Ad deal - implicitly MSFT may have valued them far less than $15bn)

Do you really want friends and family to know where you are all the time?

This has been a question doing the rounds for about 5 years since GPS technology made it practical on a cost/performance basis. I recall an early day market research panel where everyone thought it was wonderful that they could see where others were, but (shuffle of feet) many were less keen to be seen at all times themselves.

Its become an issue recently as mobile phones can now do this fairly ubiquitously - see this report in the NYT for eg) and this raises some major privacy issues - from the NYT article:

Kyna Fong, a 24-year-old Stanford graduate student, uses Loopt, offered by Sprint Nextel. For $2.99 a month, she can see the location of friends who also have the service, represented by dots on a map on her phone, with labels identifying their names. They can also see where she is.

One night last summer she noticed on Loopt that friends she was meeting for dinner were 40 miles away, and would be late. Instead of waiting, Ms. Fong arranged her schedule to arrive when they did. “People don’t have to ask ‘Where are you?’” she said.

One may ask why the friends weren't polite enough to tell her of course - but the article goes on to meatier stuff.

Ms. Fong can control whom she shares the service with, and if at any point she wants privacy, Ms. Fong can block access. Some people are not invited to join — like her mother.

“I don’t know if I’d want my mom knowing where I was all the time,” she said.

Some situations are not so clear-cut. What if a spouse wants some time alone and turns off the service? Why on earth, their better half may ask, are they doing that?

What if a boss asks an employee to use the service?

These were the issues that were being brought up 5 years ago. Parents were very keen on monitoring children, as you can imagine - and the kids far less keen. Also adults just did not like the idea of others having an expectation of knowing where they were all the time, and as the article above notes there can be "interesting" implications if you turn it off.

Interestingly, the devices being researched at the time never really took off (to my knowledge anyway).

It is a good time to be South African.......



.....normal Broadstuff content will be resumed when the Castles are all gone.

....actually forgot to turn this from draft to publish on Sunday, had to do it Monday...too many Castles

Yesterday Simon Torrance of STL and I ran the Digital Home event at the Telco 2.0 Brainstorm event. In essence it was broken into 3 sections, focussing on the silver surfers, eHealth and new business models:

(i) The Digital Home and Silver Surfers - we had very good talks from speakers in the Telco, Advertising (Ogilvy) and Media (Sky) world about the opportunities for serving the 55+ community. We will write these up in more detail later, but the thing I am left with after this - as I am whenever I look at the demographic thing - is that I just don't understand the focus on youth - there are far less of them, and they have far less money. It's almost as if the entire Ad/Media complex is stuck in a 1960's timewarp when that is where the boomer generation were young, but that big bulge is 50+ now.

(ii) eHealth - again some great presentations which we will write up later, the real aha here is most of the technology is available, the issue is getting a bunch of parties with totally different motivations to actually work together.

And this is where something started to get very interesting for people who are interested in how Social Networks will play out. A presentation from Cybermoor about the Alston Moor healthcare started it rolling.

In essence, in the UK anyway, getting collaboration between government, corporates and health service has been hard, despite the massive service and financial saving benefits potentially obtainable. However, the threat of closure of the local hospital shifted mental models enough for collaboration to begin, but what was really interested was that the outcome - the aggregation service - was operated by a not-for-profit Social Enterprise (Cybermoor) because this was the only entity which was sufficently trusted by healthcare providers and patients.

We then kicked off the "revolutionary business models" session and the OnseNet (Our Net) story emerged - for those not aware, this is small a part of Holland (Nuenen) which has hooked up nearly all its citizens to a big broadband pipe. OnseNet is owned by its customer as well, and yet again it has worked because it is trusted by the people, and the government felt it could invest in infrastructure owned by such an entity. OnseNet took 75% of the local Cable operators customer away, as well as reducing costs of distributing various social services.

After that we had Alcatel-Lucent going through how its MyOwnTV platform worked in the town of Lommel in Belgium, where a community TV/triple play service has been piloted for a year (2006/7) - yet again, the community nature helped its implementation and made the (user and community) generated content and services more trusted, and relevant.

Finally Intel took us through their ideas for the "Contract PC" - essentially PC rental rather than PC purchase, and it can be subsidised by various players (possible pre-loaded by the service provider) to reduce costs, so the c 1/3rd of people in the UK who do not have PC's can get them. Its a good start to teh conversation, and I can imagine other approaches (now the One Laptop project is selling into the OECD too)

To be sure, none of this stuff is easy, but as readers of this blog over the last year will know we have been very concerned about how trust and privacy will really work in social nets once they are scaled up from more than toys for early adopters, and these examples seem to be very interesting and point in some interesting directions.

By the way, I found out later how hard it is to have a sensible conversation about this stuff, as it tends to cut straight across the current political divide - I was trying to explain this at an event later and was rebuked and told to "leave my politics at the door". (I was talking about the cost benefits at the time, I think he was a Labour guy but I'm sure a Tory would have been as upset by the social enterprise nature of ownership)

I was gobsmacked and couldn't think what to say at the time.....but thats what blogs are for so here goes:

Politics? This isn't about f*cking Politics - this is about Economics, and Social Policy, and our Future - its about how to be able to afford to live a good lifestyle as well as compete with very large countries who are not spending anything on social services and whose wages are a fraction of ours. Its about embracing the opportunities of the next comms revolution.

Clearly one of the main requirements for these sorts of debates is to be able to get them aired in apolitical environments, where minds are held wide open.

(PS politically I've been Green since the time it was nerdy rather than cool, if anyone wants to know)

From TechCrunch

The platform wars are over. Long live the Web. That was the basic message delivered by Jeff Huber, Google’s vice president of engineering, in a ten-minute presentation at Web 2.0 a few minutes ago. His talk was nominally about widgets (which Google calls Gadgets).

What we see is applications fundamentally changing. Just like the model for content changed from monolithic sites, now applications are going to be feeds and containers.

A lot that you have heard here is about platforms and who is going to win. That is Paleolithic thinking. The Web has already won. The web is the Platform. So let’s go build the programmable Web

The Mosaic moment of Web 2.0? Not really, two things are different:

(i) We all already know Open Wins, from Web 1.0. Well, we did, anyway - its just unevenly distributed in the early days, to paraphrase William Gibson.

(ii) We already knew that it was just a matter of time before the AOL 2.0 Wannabees woke up to find someone would play the Open Card 2.0

One assumes (of course) that Huber's Web as Platform is not just a Googleterm for "Google Closed Platform".

So, more like a Santayana moment then.....its sort of sad that all these closed platforms are trying to reinvent 1995, but c'est la vie I suppose.

(Though one benefit of the closed social nets is that they have forced the debate about privacy and data ownership forward quite a bit - probably unintentionally, of course)

Back to the Future!