Monday, November 26. 2012
Lots of angst today following this WSJ article, the key point being:
Overall the amount invested in consumer information services was off 42% in the first nine months as the difficulties of newly public Internet companies such as Facebook and Zynga cast doubt on the business models and valuations of social media companies.
Fred Wilson, always very interesting to read, argues it is driven by 3 main trends - summarised below:
The last point is in my opinion the crux of Fred's post, but he doesn't address the "why" it has shifted - and I think this comes down to the WSJ's point - the demand is falling because the returns (outside of the insiders) are as virtual as the products.
Those more wedded to the Consumer Web VC model disagree fervently:
Perhaps they are, but I would argue that the market is behaving totally rationally here - "Return On Investment" is still deeply unfashionable among the Consumer InterWebzerati as the profits are as virtual as the products, but it is becoming increasingly clear to investors that the current business model for the Consumer Web is a busted flush* - Freeconomic market grabs plus a great IPO/exit to the dumb money only works for a while until the dumb money catches on, and "everything sold through iTunes" is hardly better. Facebook in my view stopped the Consumer Web VC party bubble.
(*It always was, as we showed in 2008, but we underestimated how far greed and "mass dumbness" can go in pushing a market)
Friday, September 28. 2012
Two trends...firstly, and predictably, the minute there is a new social currency, there will be the attempts to inflate it for commercial gain - Facebook Likes being the latest example - CNN:
Facebook has begun a purge of fake accounts and "Likes" as part of a set of site improvements announced last month. The result has been lower numbers on fan pages, including some of the site's most popular ones, but no actual loss of real followers.
It was ever thus....but the more worrying trend to me is the increasing belief that systems that measure this are in some way measuring something valuable - Klout has just got significant investment from Microsoft and it will be linked to Bing - TechCrunch:
You’ll begin seeing Klout scores — the combined measure of a person’s influence across Twitter, Facebook and other social networks — show up in the search engine today. The initial implementation will show Klout scores for friends in the “People Who Know” section of the right-hand column, alongside other third parties already in there, including Twitter and Quora. Search for a hot topic like “Facebook advertising”, you’ll see people with socially-proven expertise showing up. Mouse over an expert’s name, and their Klout score will appear, along with their Klout-determined areas of expertise.
There seems to be a mass amnesia about the GIGO concept, in that these reputation systems' parameters are half bake...sorry, "currently imperfect", and are measuring an easily inflatable and unstable social currency, based on the actions of a relatively small number of noisy vessels. Still, no doubt there will soon be a Klout Engine Optimisation industry (if there isn't one already).
Hopefully these Index systems will become more discerning over time, but i don't think that's where the payoff is today. To me its just another example of the online forces inexorably driving Greshams Law of Information - ie bad information is increasingly driving out good on the "Free" Web.
Tuesday, September 25. 2012
Attended the McKinsey event on Social Business in London Social Media Week yesterday, overall I don't think I heard anything new (the mere fact that McKinsey is sponsoring a session and pushing out a big report tells you Social Business is now over The Chasm, and is something saleable to the blue chips, not an early adoption technology). Even the Elephant idea is old now, we used it in the first "Social Business" talk we did at the first London Social Media week 2 years ago Most of the "ahas" I got, had to do with other implementation lessons (here are some of ours, from our own experience).
The only thing that has changed is that the market now has an £800bn price tag attached to it (a lareg anmount from the rebadging of Enterprise 2.0, I'll warrant). Anyway, here are my notes on "aha's" and "oh really's":
- ROI is a hygiene factor. Early adopters are now getting benefits, but no one can cost justify it early up, so...
The conflict between IP and getting Social benefits
- Social media "theory" today relies too much on trust, fine in consumer systems but motivation to cheat is v high in business, the problem of how to police this dichotomy is still in infancy. "Most people are good" vs "yes but the few who aren't can cause a lot of damage" issues still not clearly addressed, still a conflict between open-ness and IP protection.
"Oft repeated Theories still to be Proven"
- We are in "A world where abundance is possible". Saying something isn't possible is a clarion call to developing world developers everywhere. But what is abundant? Is the abundant worth having? See my notes on the declining quality of what is abundant in my "Gresham's Law of Information" posts
Some Predictions from the Panel
Social Media Winners - Healthcare, Education, Consumer businesses, Electronics
Good news was I saw quite a few faces I haven't seen for ages. And a Free Lunch
Thursday, September 6. 2012
Now this is interesting - Reprieve:
Apple has for the third time this month rejected an iPhone app which alerts the user to a drone attack and to the number of people killed. Drones+ enables those concerned about the CIA’s illegal, unregulated use of these remote-controlled weapons to track the strikes to their handset.
Seems like Apple is squirmning a bit with such "difficult" content:
The reason the Drones are attacking over the Afghanistan border is because thats where the enemy is, and everyone knows that, but nobody wants to say they know that, as the ramifications of officially admitting it are just too uncomfortable for all parties concerned. And Apple is a business, biting hands that feed you is just not going to happen. But its two of the biggest modern trends at loggerheads - mobile robotics vs social media. On the flipside, within the US and other countries there is increasing worry about private drones being used as spies, in which case the various invested interests here would be in alignment.
New technology giveth, and it taketh away. One to watch......
Thursday, August 23. 2012
WSJ notes that many companies are still using the Freemium model, but its not necessarily successful:
If only they'd read us in 2008, when we explained why FreeConomics overall would fail. (I can tell you that presenting ^that^ paper in 2008 at the O'Reilly Berlin conference was "interesting" as Free! was at the time the latest prayer to a cash-strapped bootstrapping startups' needs. In 2012, maybe not so much controversy as to what does and doesn't work - as the article notes:.
Start-ups are attracted to the freemium model because it is "deceptively simple"—lure users with free services until they're hooked, then charge for extras, said Vineet Kumar, a professor at Harvard Business School, who is currently working on a study of the model.
Its that low takeup rate (in 2008 people were casting about numbers like 10% takeup, we thought 5% would be damned lucky) and lack of business customer interest that caps the Freemium strategy in any given niche, and if its a popular niche there is always the next entrant with a bit more VC funding runway left who will still be free when you are trying to charge. And as we predicted, the most likely way Freemium would actually work was via offset funding (Ads, Virtual Goods, Buy-through goods) - ie other revenue streams than the product itself. Successful Apps (which have the best Freemium profile - low setup cost, low marginal distribution cost, minimal support cost) just about all use offset funding of one stripe or another.
Anyway, here is a summary of the knowledge today:
In defence of Ad based Freeconomic advocates however, we were wrong (so far, anyway) when we foresaw that the biggest risk was in using Ad funding to fund the Freemium business - we pointed out in 2008, if you ain't paying for the free lunch, then you are the free lunch (or as it was better put later, users are not the customer). Needing to feed the Ad Monster forces the company into ever more risky data mining activities, and playing ever more loose with customer privacy. We thought that more companies would have had this aspect blow up in their faces by now, but we have been proved naive about how little reward people require in exchange for putting large amounts of their personal data online.
Tuesday, August 14. 2012
Yahoo (blue) and New York Times (yellow) stock prices vs NASDAQ (brown) from 16 July (Courtesy Google Finance)
When Marissa Mayer announced she was joining Yahoo on July 16th, Twitter was largely positive in its praise of her, but Yahoo's stock went down slightly - see graph above (on an announcement of flat results, on a day when the NASDAQ also went down slightly, so the Marissa Effect was at best neutral, maybe slightly negative)
Today, when Mark Thompson announced he was leaving the BBC to joing the New York Times Twitter was more sceptical ("UK Publicly Funded TV/Radio Broadcaster to be responsible for US Commercial Newspaper revenue" was typical) but the stock market price went up a bit.
In recent months Twitter has been hailed as a predictor of a company's future success, even it's stock price:
In the case of YHOO (Twitter +ve, Stock market slight fall) and NYT (Twitter sceptical, stock market slight rise) Twitter and the market are at odds. Be interesting to see where things are in a year or so's time. As the old adage goes, you can't buck the market......
Thursday, July 26. 2012
Tanking Facebook Share price to Q2 (Courtesy Yahoo Finance)
The second quarter earnings report is out, Q2 2011 vs 2012 quarter revenue growth is 28%. While that's impressive, its not nearly impressive enough for an On-Track-for-a-$100bn valuation. To really persuade people it is a $100bn company in embryo, the growth in the user base has to be higher and ARPU must grow - but ARPU has remained about the same - so the stock price has tanked to c $26 at close (and down to below $25 on after-market trading) , giving around a $60bn valuation (And that is still high in my view on current performance*).
As we have said in the past, to get that valuation things have to go spectaculalrly well.
Most interesting thing in my opinion is the huge CAPEX spend - nearly $1bn in the first half of 2012, equal to the total CAPEX in 2011- what ARE they up to?
*The thing that amazes me most about the Facebook share price in the last 3 months is the climb up to $32 before the all-too-predictable precipitous decline. There is clearly more than one born every minute.
Wednesday, July 25. 2012
As we wrote some years ago, being a 3rd party application on someone else's platform is always uncomfortable, especially if you do what the main platform also does - like, say, providing access to Twitter's datastream. There is a relationship not akin to that of the pre-conjugalated male spider - you are useful for now, but at some point the jig-a-jig is up and you are going to get eaten.
So, news out yesterday that only about 23% of all traffic is not from native Twitter systems is no surprise.....Benjamin Mayo collected 1m tweets from a random sampling of tweets across a 9-hour period, approximately 9am to 5.30pm on the 18th July:
The best way to avoid being eaten is to be bought, as TweetDeck managed about a year ago - at the time they were reportedly about 20% of Twitter traffic. Now they are a mere c 1.96% of all Twitter traffic...a 90% decline in a year.
There is a lesson there....
(Update - @tentonipete (Joel Williams) reminds me that the 20% number for Tweetdeck 2011 traffic share is of all 3rd Party client traffic only, not all traffic - so it actually therefore now has c 1.96% of c 23% of all traffic (best case, assumes they are still counted as a 3rd party not 1st party client in which case its 1.96% of c 25%), ie about 8.2% - still a c 57% decline in a year! I suspect the Twitter share of all traffic has also risen in the last year as more Twitter-first-party mobile device clients became available!)
Tuesday, May 15. 2012
Gizmodo on Yahoo's long and lingering strangulation of Flickr, as a case study of what happens when you get Bought by a Behemoth - from:
three years ago, of course Flickr was the best photo sharing service in the world. Nothing else could touch it. If you cared about digital photography, or wanted to share photos with friends, you were on Flickr.
The site that once had the best social tools, the most vibrant userbase, and toppest-notch storage is rapidly passing into the irrelevance of abandonment. Its once bustling community now feels like an exurban neighborhood rocked by a housing crisis. Yards gone to seed. Rusting bikes in the front yard. Tattered flags. At address, after address, after address, no one is home.
How? I found this quite interesting as I've done this role from both sides. Gizmodo argues there were 3 main mechanisms:
Firstly - the Incoming Conditions set the scene
When a big company gobbles up a smaller one, often only a fraction of the money is handed over up front. The rest comes later, based on the acquisition hitting a series of deliverables down the road. It's similar to how incentives are built into the contracts of professional athletes, except with engineering benchmarks instead of home runs. Corp dev sets these milestones. They reflect the reason for the acquisition, and how the company—in Flickr's case, Yahoo—can leverage them.
Secondly, Integration takes precedence over new features
An acquisition integration team begins working immediately to make sure they are met. Typically, they're very engineering-based, designed to integrate the smaller company's product into the enormous corporate machine. And because payment schedules are based on achieving those CorpDev terms, it means both companies have a vested (pun intended) interest in putting those milestones ahead of new features.
Thirdly, Big Companies don't feed the small growing businesses - its not in their DNA
"The money goes to the cash cows, not the cash calf," explains one former Flickr team member. If Flickr couldn't make bucks, it wouldn't get bucks (or talent, or resources)
Gizmodo argues that as a result of being resource-starved, "Flickr missed boats - on local, on real time, on mobile, and even ultimately on social—the field it pioneered. And so, it never became the Flickr of video; YouTube snagged that ring. It never became the Flickr of people, which was of course Facebook. It remained the Flickr of photos. At least, until Instagram came along. The Flickr team was forced to focus on integration, not innovation".
Same Old Same Old Tale. Google and Jaiku (remember that - Twitter's competitor once), Facebook and Instagram?
And yet, and yet. I knew some of the Corp Dev people, at Yahoo at that time, I'd even worked with a few before - they knew their stuff, they knew how to structure deals that didn't strangle the growth businesses they bought. And strategically the company was on board big time - as the article admits, in 2005 Yahoo made a number of innovative acquisitions, not just Flickr:
It's hard to remember, but back in 2005, Yahoo seemed like it had its game on. After losing out on search dominance to Google, it snapped up a bunch of small-but-cool socially oriented companies like Flickr (social photos), Delicious (social bookmarking), and Upcoming (social calendaring). There was a real sense that Yahoo was doing the right thing. It was, to some extent, out in front of what would come to be widely known as Web 2.0: the participatory Internet.
And looking back at Flickr stories on Broadstuff at the time, Flickr was patenting "Interestingness" algorithms in 2006, and soon after it limited the number of friends one could have, and tags per picture. These did not go down well at the time, we reported, so blaming errors on Yahoo Management only may be a bit simplistic.
Anyway the article then argues that Flickr failed in two ways:
Firstly, they didn't understand Community:
"By the time we were looking at Flickr, Yahoo was getting the shit kicked out of it by Google. The race was on to find other areas of search where we could build a commanding lead," says one high ranking Yahoo executive familiar with the deal. Flickr offered a way to do that. Because Flickr photos were tagged and labeled and categorized so efficiently by users, they were highly searchable.
I don't fully believe that fully, I saw some of the business cases soon after purchase, and spoke to some of the people. The Yahoo guys in Corp Dev understood all about Community. I am prepared to believe that - as in any large Corp - that not everyone else did. The question is how influential were they - bear in mind at the time Yahoo had the biggest existing "Web 1.0" social network, Yahoo Groups.
The other problem, says Gizmodo, was when Yahoo moved Flickr to a single sign on - the idea was that signing onto Yahoo got access to all Yahoo's services plus all the other new sites thay had bought, and levearged Yahoos existing multi country sign on acpability, something that Flicktr would otherwise have had to build. But this upset the Flickr uber-users:
Although Flickr grew tremendously with the huge influx of Yahoo users, the existing community of highly influential early adopters was infuriated. It was an inelegant transition, and seemed to ignore what the community wanted (namely, a way to log in without having to sign up for a Yahoo account). This was the opposite of what people had come to expect from Flickr. It was anti-social. And it very much delivered a message, to both users and to the team at Flickr: You're part of Yahoo now.
So - simplify the product experience, integrate it with many other services, massively increase the user base - a Good Result, surely? No, this is Not a Success because you have pissed off your small cadre of original users.
But in reality, all products have to go through that phase when they cross their Chasms (remember Digg?). I know it could have been done more sensitively (and was done in fact for other Yahoo acquistions), but I think the real problem is noted further down in the article - Social 1.0 got blindsided by Social 2.0
By mid-2008, a year after the RegID debacle, it was clear to most everyone that Facebook was the big up-and-coming social network. What had been a plaything for college kids and high schoolers was suddenly the network your mom, your dad, your gym coach, and everyone else you'd ever met was sending you friend requests from. Microsoft was pumping money into it, and it was fast approaching 100 million users.
Now, remember Yahoo tried to buy Facebook at about this time, so again its clear they knew how the land lay. They knew what was coming. But the Flickr community (and staff) were 1.0 hippies, and as Flickr had it had already had its Liquidity Event, it was no longer the place to go for the hottest talent:
"Flickr wasn't a startup anymore," explains [a Yahoo] engineer, "people didn't really want to work that hard to turn the entire product around. Even if they had, Flickr [was] very techie hipster, many didn't use or like Facebook and considered it bland, boring, evil, poorly designed, etc., and were certainly not ready to fast follow it. Emphasis was put more on how things looked, and felt, rather than on metrics and on what worked.
But what finally killed their market leadership was not following the Great Mobile switch:
"Flickr was not empowered to build its own iOS app—or any other mobile app for that matter," laments one former Flickr executive. "You had this external team with strong opinions as to what the app should do."
And so, after a bit more score settling in the article, Gizmodo concludes:
Flickr's mobile and social failures are ultimately both symptoms of the same problem: a big company trying to reinvent itself by gobbling up smaller ones, and then wasting what it has. The story of Flickr is not that dissimilar to the story of Google's buyout of Dodgeball, or Aol's purchase of Brizzly. Beloved Internet services with dedicated communities, dashed upon the rocks of unwieldy companies overrun with vice presidents.
I don't buy this, in this case I think its uber user grumps distorting the reality-field. I reckon there was actually a different story going on:
1. In 2005 Yahoo knew what Social was all about, and went out of their way to buy leading "Web 2.0 v.1" companies.
A comeback doesn't seem likely, says Gizmodo, unless its spun out.
Flickr is still very valuable. It has a massive database of geotagged, Creative Commons- and Getty-licensed, subject-tagged photos. But sadly, Yahoo's steady march of incompetence doesn't bode well for making use of these valuable properties. If the Internet really were a series of tubes, Yahoo would be the leaking sewage pipe, covering everything it comes in contact with in watered-down shit.
Now I really don't buy this one. Facebook's IPO is going to create a Social Frenzy, and anyone with the assets Flickr has, is going to be valued pretty highly. Perish the thought that those who want Yahoo to sell it off for "a few bucks" know it full well too, and want to do a Del.icio.us flip-play
Wednesday, March 28. 2012
This Olympic's logo was an object lesson is paying vaunted professionals a lot of money for a very mediocre product, and the UK olympic strip is coming up much the same - it seems to have left out the red in the Irish, Welsh and English colours. (It is mainly blue, leading wags to point out its the only way Scotland will ever be seen to win anything. Well,the designer was called McCartney....)
Which could be bad news for the UK, because it appears that teams that wear red win more games than ones that don't - Economist:
And why is this - some hints from another piece of research:
In 2009, a team of German scientists working at the University of Munster found that combat sportsmen were more likely to win dressed in red than blue because of the effect on judges. During their experiment, referees watched clips of fights in which contestants’ outfits could be digitally manipulated. When shown in red, the same fighters scored better than when clothed in blue.
As the Economist points out, this stuff should be fairly well known in sporting circles so it is a missed opportunity for the UK. But thre is something depressing about the inevitability of "designers" putting form over function.
If the British do not bag a lot of medals there will be some very angry Londoners, as it wil be adding insult to the various injuries done already from wildly underestimated budgets, shutting off the transport system to commuters and more (and don't mention the limited ticketing to citizens).
And next time round, how about crowdsourcing the designs (and a lot more in fact) - costs less, involves the nation, and you will very likely also get better designs. Coming to think of it, why not this time round, its not too late to change the strip.
More Broad Stuff
Poll of the Week
Will Augmented reality just be a flash in the pan?
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