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Archive for February 3rd, 2008

At the intersection of business and technology

A Facebook Bill of Rights

December 7, 2007, 12:25 pm
By Josh Quittner

Yesterday, I considered opting out of Beacon on my Facebook account. I pulled up the Privacy page, and looked at the tick box, which would turn off the controversial feature that broadcasts a user’s purchases at participating websites everywhere. But I didn’t pull the trigger. It was still on an open tab in my browser this morning.

Partly, I didn’t do it because I was too busy dealing with e-mail and phone calls from people about my recent Facebook rant. John Perry Barlow once said that “the media is a blunt instrument” — somehow my column was being used as a sledge hammer, and suddenly, I was the Jerry Lewis of the Facebook Hate-A-Thon. Nearly 200,000 people had swung by fortune.com to read that piece in the first day it was up. One of them was my colleague at Fortune, David Kirkpatrick, who, not surprisingly, wrote an excellent rebuttal. (I say “not surprisingly” because David wrote, as far back in October 2006, the first story I had read that convincingly explained why Facebook mattered.) With his counter-point now online, I also had to spend a part of the day yesterday fending off the excitable editors in New York who wanted me and David to argue our positions via video for the site. (One of them suggested I wear a luche libre suit.)

I am not that stupid. Nor do I look good in a Speedo. If I could do video, why would I waste my time with the other low-paid mutts in the print world? No, there is, sadly, a reason my medium is words. David is far better looking than me and infinitely more charming (though I think I have better legs.) And besides, the thing that had gotten me riled up in the first place — Facebook’s ongoing contempt for its users — had been addressed by the time David weighed in. Facebook CEO Mark Zuckerberg had issued a mea culpa and made it simple for anyone to opt out of Beacon.

But beyond all that, I didn’t want to be forced into the position of being a Facebook hater, mainly because I don’t hate it. I use the thing a dozen times a day to play Scrabulous, Texas Hold ‘Em, and to harry my daughters, wife and friends. And that’s why, in the end, I decided not to opt out of Beacon. Facebook is a great social experiment and I want to see how it turns out.

Besides, the idea of Beacon doesn’t really bug me. Reid Hoffman says that “privacy is an old man’s concern” and I tend to agree with him. I had reached the same conclusion when writing a cover story for Time about online privacy many years ago. The joy of a social network is the shared experience — the give and take among friends. I like the peripheral view I get of my friends when I log in, and I don’t mind publishing personal artifacts in exchange. Further, I’d argue that most of us get a kick out of sharing personal details within our networks. That’s what humans do in real life. It makes sense that we should crave it online, too.

What I adored about Facebook, and blathered on about endlessly, was that it gave us near-perfect control over our online relationships. (e.g. You can block jerks.) The few people I loathe, or who have spammed me, can no longer contact me on Facebook. The creation of the Innernet was an important step in the evolution of the social web: Now I can define not only who I am online, but who I want to hang out with. That’s why Facebook grew so quickly. At 50 million people, it’s about the size of South Korea and ought to overtake the UK in population within the year — if the current growth rate holds.

It won’t grow, though, if Facebook messes with its users’ right to control their social graph. It’s tough to build something this big and takes a fair amount of finesse. But it’s far easier to lose it all. Facebook’s response to the events of the past few weeks has mainly been, If you don’t like it, leave. That kind of customer service was also found on Delphi, Prodigy and AOL. If I were Zuck, I’d craft a simple Bill of Rights guaranteeing members that they own their own relationships. With Facebook’s users in control, the company is free to try anything it wants.

Well, I’m running out of time. Nurse is here for my shot, then it’s time for a nap. Have a nice weekend.

About Face(book)

December 5, 2007, 2:09 pm
On Wednesday, Fortune’s David Kirkpatrick weighed in on the latest controversy surrounding Facebook and its new advertising system. While some critics in the media say the social networking site is doomed based on its own mistakes, Kirkpatrick argues that the site will not only survive concerns about violations of members’ privacy, but will continue to thrive. What do you think? Are you a Facebook fan or foe?

About Face(book)

December 5, 2007, 1:55 pm

From Fortune’s David Kirkpatrick:

 

“The press rarely grants an autumn reprise for those it loved in the spring,” once wrote the great New York Times columnist Russell Baker. How true in the case of Internet-darling-turned-reviled-evildoer Facebook.

Facebook, the popular social networking site, has ridden the hype curve up and down in recent months, reaching a low Tuesday over claims that a month-old advertising system violates members’ privacy. CEO Mark Zuckerberg took a big step Wednesday toward silencing naysayers – one of whom was my own colleague Josh Quittner – when he issued a contrite apology and made a key change to the new advertising feature, dubbed Beacon.

“We’ve made a lot of mistakes building this feature,” acknowledged Zuckerberg, “but we’ve made even more with how we’ve handled them. We simply did a bad job with this release, and I apologize for it.”

A little history: When Facebook, the popular social networking site, announced its strategy to host applications created by outsiders in May, the world and the press was dazzled – none more than me. Facebook found itself on the covers of magazines and the lips of Silicon Valley.

Then, in October, Microsoft (MSFT) bested Google (GOOG), winning the right to invest $240 million for 1.6 percent of Facebook and a new contract to display ads on the site. The deal valued Facebook at $15 billion. Meanwhile, the number of active members, 24 million in May, has soared to 57 million. Suddenly, Facebook was king of the hill.

Aiming to capitalize on its newfound acclaim and scale, Facebook announced its bold new advertising strategy in November. But Zuckerberg made a few strategic errors. First, he showed a touch of hubris when he intoned portentously to ad executives in New York during the announcement: “Once every 100 years, the way that media works fundamentally changes.”

Much worse, one part of the new Beacon ad system had not been fully thought through. It automatically alerts a member’s friends when she buys a new product or rents a movie. But the features intended to allow the member to control this alert system were hard to find and insufficient.

Journalists dug up unfortunate cases, like the wife who was automatically informed by Facebook of the ring her husband bought her as a Christmas present. Consumer and privacy watchdog groups began darkly criticizing Facebook’s “disregard” for members’ privacy. Meanwhile, a group called “Petition: Facebook, stop invading my privacy!” has 68,000 members, which isn’t much for a service with 57 million users but enough to send a clear signal that people are upset.

The blogosphere – and in its wake, much of the mainstream press – went wild with derision. Here was Baker’s maxim come to life. We built them up and now we were going to bring them down.

Though Facebook has progressively taken measures to address the problems, the 23 year-old Zuckerberg until now had said nothing about the latest brouhaha. He broke his silence Wednesday with an apology to members and a fresh promise not to broadcast a member’s buying habits without her explicit approval. In a key move, he also allowed members to turn off Beacon.

Still, questions linger, including how much member information is pinging around the Net without permission or knowledge. If Zuckerberg stays attuned to these and any other ongoing concerns, the controversy will go away and Facebook will be as strong as ever. After all, that’s what happened when he wrote a letter of apology last year after a much bigger on-service protest erupted over a new Facebook feature that tells friends what other friends are doing on the site.

At first, the outcry over the Newsfeed feature was fierce. But then Facebook tweaked the feature, Zuckerberg apologized, and protesters realized they were making much ado about nothing. Newsfeed became one of Facebook’s most popular features. It’s also become part of the essential infrastructure for the viral dissemination of third-party Facebook applications created since May.

Until now, Zuckerberg’s silence has fueled press anger over Beacon and Zuckerberg’s apparent rigidity, including from my Fortune colleague, Josh Quittner, who argues Facebook may be dead.

Facebook is not anywhere near dead – and there’s zero chance it will be anytime soon, no matter how boneheaded some of its recent actions may have been. It would be virtually impossible for a new, as-yet-unheard-of service to come along and quickly steal Facebook users.

For all Facebook’s own successes, former social networking superstar MySpace, now owned by News Corp. (NWS), remains larger than ever by most measures. It takes a lot of work for a member to create a useful Facebook (or MySpace) network. They won’t flee lightly.

And while Zuckerberg may not have listened to them until now, Facebook has several “old hands” in the management suite to help guide the young company. Chief operating officer Owen Van Natta and privacy boss Chris Kelly are both in their late 30s. Chief financial officer Gideon Yu is 36 years-old and Vice President for Sales Mike Murphy is 45. All are industry veterans.

Facebook remains a seminal part of today’s technology landscape. It’s changing the way many people around the world use the Internet. For me personally, it’s the first Web service to come along in a decade since MyYahoo where I routinely spend at least half an hour daily.

Josh ends his post by saying, “Facebook has turned all the people who rooted for it into a lynch mob. In the space of a month, it’s gone from media darling to devil.” He’s right about that. But it may say more about the press – and today’s blog-led penchant for sensationalism – than it does about Facebook

 

Closed is the new open

November 25, 2007, 12:12 pm
By Josh Quittner

One of the rallying cries of the Web 2.0 movement, during its sensational rise over the past five years, is openness. Open systems (Linux, Wikipedia, any phone you can hack from T-Mobile) are good. Closed systems (Windows, The Wall Street Journal Online, any locked-down cell phone you buy from Verizon) are bad.

The basic idea is that the Web itself, that Shiva of the business world, is built on HTML and Javascript — code that’s as open and free from any one company’s control as, say, the United Nations. Smart companies are Zen-like: They give away the store and yet manage to make fortunes. Google, (GOOG) which opens up everything from its data streams (Google Maps, for instance) to the bidding process for advertising keywords is the typical example. Google is Web 2.0 and Yahoo, which has had a tortured time trying to accommodate itself to the new social web, is considered very Web 1.0 — and on the ropes because of it.

Amazon.com has always embraced openness. Launched in 1994, it’s a classic Web 1.0 company by definition. And yet it’s also at the forefront of the social web. It allowed its customers to write reviews of products before anyone else, its enormous affiliate program lets everyone sell its products and it was among the first to make its APIs (application programming interfaces) available to developers.

So it was fun, therefore, to watch some of the smartest Web 2.0 thinkers make sense of Amazon’s (AMZN) move to a closed, proprietary world last week with the launch of its e-book reader, Kindle. This was a rollout that, on first blush anyway, made the Microsoft Zune look downright innovative in its openness. (At least you can play MP3s on the Zune. For free.)

What’s going on here?

Here’s my guess: Emboldened by Apple’s (AAPL) success, some of the most innovative companies in the tech world are starting to shift back toward closed systems.

Apple, of course, is about as closed a company as we’ve ever seen. It is what makes the company great and what makes it a horror show. It’s why people love and hate it. On the one hand, Apple products are typically so far beyond those of the competition, a visitor from another planet might think that the former is made by humans and the latter by monkeys. (A techie pal, upon picking up his new iPhone some months ago, waved it at me and gushed, “This is like something from the distant future.”) On the other hand, virtually nothing about Apple is transparent and open, from it’s ghastly press relations to the way it handles customer complaints. The recent incident with the tech pundit Robert Scoble is a great example. He downloaded an Apple update to OS 10.4 and couldn’t restart his computer. I had exactly the same problem when I updated my laptop last week. So did many, many other people, judging from the thousands of views at the relevant area of Apple’s own support site. Yet, talk to Apple support and they deny there’s even a problem. It’s about as open as North Korea.

And yet, its success speaks volumes. The stock is up over 100% during the past 52 weeks. The company maintains such tight control over the products it sells you that you aren’t even allowed to use them in unauthorized ways. Remember the whole episode when some people tried to unlock their phones, Apple updated its software and bricked the rebel phones? Talk about closed systems…

Steve Jobs has become something of the alpha pack leader of the CEOs in Techland. While many people point to the similarities between Mark Zuckerberg and Bill Gates — affluent suburbanites, both dropped out of Harvard to pursue their big-picture tech dreams — its clear that Zuck’s role model is Jobs. (Zuck uses a Mac, dresses in his own Jobsian uniform, and tends to make grandiose statements about launching movements whenever Facebook holds an event.) While Zuckerberg’s most famous move was opening up Facebook to developers (”Today, we’re starting a movement…”) so far, he’s resisting Google’s call to create a truly open platform. Developers writing applications for Facebook must use its own proprietary language, called FBML. Google, and the rest of the OpenSocial alliance of competing social networks, use HTML and Javascript.

And really, why should he? Just because it’s open?

Apple is successful because Apple is Jobs. And Jobs believes in an almost pathological control. That is, after all, how a visionary gets results.

Will that work for Amazon and Facebook?

In Amazon’s case, if Kindle flames out, it’s not a big deal. The project is an ambitious experiment, and as Tim O’Reilly points out, even if the device itself fails, Bezos could well have jump started an industry that Amazon, with its enormous collection of e-books, is perfectly positioned to dominate.

Facebook, though, is at a more critical juncture. If it stays closed and starts to stultify as a result, members could easily pack up their tents and move to the next big thing. But if it manages to fight off OpenSocial? Look for more closed systems.

Andreessen’s solution to the writer’s strike

November 12, 2007, 3:10 pm
By Josh Quittner

Marc Andreessen for president. Seriously, I love watching him think. Even when I disagree with his conclusions, I always learn something worthwhile. His heart is in the right place and his brain is without peer. Would someone please start a Facebook group for this?

In today’s post, he argues that if the Hollywood studios don’t capitulate to the writers they will effectively destroy their business — and perhaps, spark a revolution in the business model that creates video entertainment. Marc suggests that the film industry is ripe for overhaul: the big, centralized studio model ought to be replaced by the smaller, decentralized Silicon Valley-style startup model where VC funding is abundant. The compelling part of Mark’s argument is that the two main reasons the studio system worked — marketing and distribution — no longer matter. When everything is digital, distribution is virtually free, and old-style marketing doesn’t work very well anymore. The rise of the social web allows good stuff to spread virally.

I believe most of that (though VCs HATE the content game, which is hit-based and utterly unpredictable.)

The bigger problem with his scenario is the same issue that has plagued the content-creation business since the advent of the web: The creators can’t make a decent living here yet.

Those guys walking picket lines make very healthy six-figure salaries. (As they should! Writers ought to be among the highest-paid people on the planet!) Can they do that online, alone? No way. And not in the near future. No one has yet found a way to create the kinds of revenue streams from online content that would match what a pro makes working for traditional media.

Yes, we have a few one-man brands who are currently making at least as much money online as they could working for The Man. But so far, they are bloggers for the most part, with virtually no overhead — most of the success stories, in fact, work from home. Until someone figures out a better way to generate revenue than display ads, this medium won’t be able to attract the top talent.

Marc, please solve that one asap.

Facebook Ads: What will the kids think?

November 7, 2007, 11:01 am
By Lindsay Blakely

Mark Zuckerberg and his Facebook team spent an entire afternoon Tuesday explaining their new ad strategy to an audience of big-name corporate advertisers and Manhattan media. But as a series of high-profile executives from Blockbuster (BBI), Verizon (VZ), Coca-Cola (KO) and other new Facebook advertisers paraded across the stage, no one talked much about the Achilles heel of Facebook Ads: Facebook members.

Facebook is letting them control what advertising they see but also making members the unpaid purveyors of its clients’  brands. For the new form of advertising to work, members have to be willing to participate.

With Facebook Ads marketers can do three things: build their own profile pages to connect with Facebookers; use the Facebook news feed to broadcast updates of consumers’ interactions with brands to their friends; and analyze the Facebook members’ behavior to improve ad targeting.

Marketers can only advertise once consumers decide to “friend” a company or brand through its profile page. In theory, this sounds like an ideal way to build brand awareness, but will Facebook users actually do this voluntarily?

Maren Dougherty, a 23-year old San Diego resident with 400 Facebook friends pointed out that Facebook’s ad system couldn’t possibly work for every brand. “I can’t imagine saying I’m a huge fan or Best Buy or something,” she said.

On the other hand, casually sharing information about products like movies and music with friends makes some sense, Dougherty said. After all, that’s what Facebook users already do on with their profiles.

Even so, if Facebookers know that associating with a brand, even casually, will translate into marketing messages, will they still do it? The common theory among analysts and the social networks themselves is that people want to define themselves through their favorite brands.

That may be the case, but it doesn’t mean they want to sign up to be brand ambassadors.

Damon Brown, a 31-one year old Los Angeles writer and editor,  said he’s a huge hip hop fan and not opposed to touting the latest Kanye West album on the various blogs he maintains. But he draws the line at overt advertising. “It’s a whole separate thing for me to be affiliated with Rockefeller Records or Kanye West,” Brown said. “If the point is to have a viral, organic feel, you can’t manufacture it and that’s hard for advertisers to understand.”

Advertising analysts responded favorably to Facebook Ads, though not without noting how complex the strategy will be to implement.

Emarketer senior analyst Debbie Williamson said the promise of social network marketing has been to tap into the way messages spread virally from person to person. “What Facebook is doing is trying to extend that to make word-of-mouth part of marketing online,” she said. “It’s a big, complicated undertaking and there are a lot of moving parts that need to fall into place.”

Facebook, however, has a knack for introducing features that spark an initial backlash among members but that eventually become accepted. It first happened in September 2006 when Facebook opening up its gates to members outside of the college crowd. That same month, Facebook introduced the news feed, inciting uproar among some members who thought broadcasting their activities to friends and the friends of friends was intrusive.  Yet none of those changes did anything to slow Facebook’s growth from about 12 million users almost a year ago to nearly 50 million now.

Time will tell if Facebook’s bold advertising scheme will be tolerated, and more importantly, perform as planned. On the first point, the social network may not have much to worry about.

“This wouldn’t stop me from using Facebook,” said Sarah Baicker, a 23-year old graduate student at Northwestern University’s Washington, D.C., campus. “I don’t think anything can make us stop using Facebook at this point. It’s so engrained in the culture.”

Big advertisers are Facebook’s new friends

November 6, 2007, 4:51 pm
By Jessi Hempel

A hush fell over a packed sixth-floor room this afternoon in a nondescript Manhattan warehouse as Facebook founder Mark Zuckerberg took the stage. “Once every 100 years, the way that media works fundamentally changes,” he said haughtily. So began one of the most highly anticipated launch events this fall as Zuckerberg unveiled Facebook Ads, a three-part strategy to help advertisers better connect to customers on the social networking site.

Advertisers can create free Facebook pages for their products and services, build SocialAds that pair display and text advertising with personal recommendations, and access data about how Facebook members use their products.

Building on its strong history of giving Facebook members control over their online profiles and retaining an uncluttered, highly structured look and feel, the company will let users select the advertising that will be displayed on their social networks, creating advertising inventory only in the network of fans that a brand builds virally online. No fans, no ads.

Here’s how it works: First, advertisers can create free pages that play host to the same interactive applications that Facebook members now download in their profiles. A product called Beacon will allow advertisers to display their fans’ activities on newsfeeds — a running update of friends’ activities on a Facebook homepage. For example, if a Facebooker chooses to become a fan of Saturn cars, that fact may appear in the newsfeed.

Second, Facebook announced SocialAds, display and text ads that are paired with interactions with Facebook members. For example, if a user named Jane Doe purchases a pair of Puma running shoes, her friend may receive a social ad — either running down the side of the page or in a news feed — that consists of a banner paired with a notice that “Jane Doe has just purchased a pair of Puma running shoes.”

Last, without revealing personally identifiable information about users, Facebook will provide analytics and reporting to advertisers about consumer behavior. “In a fundamental way, the Facebook Ad platform may change the way people view advertising,” says IDC analyst Rachel Happe. “A brand will have to earn the affiliation of its customers in order to have the opportunity to advertise to a broader network.”

Application developers will watch the system closely. “It does begin to move Facebook into application-specific domains such as iLike and Flixster,” says Jia Shen, CTO and cofounder of RockYou, one of the largest widget makers on Facebook. “Another aspect of concern is how the new types of newsfeeds, placements, and pages do begin to dilute the Facebook newsfeed. We don’t know how Facebook will control the frequency and priority of these new events, but it adds more to the already crowded newsfeed area to contend for space.”

Facebook Ads follows an Oct. 24 announcement that Microsoft (MSFT) will take a $240 million equity stake in the site, valuing Facebook at $15 billion. The company is private and does not disclose numbers, but it is widely reported that Facebook earned a profit of $30 million this year on $150 million in sales. With a $15 billion valuation, that translates into 500 times earnings.

Industry analysts have long wondered how the startup plans to make money. Until now, Facebook’s advertising opportunities have been limited to banner ads that run down the side of pages and smaller ads that appear in newsfeeds. Advertisers can also pay to sponsor groups. Facebook’s move today ups the ante in the fast growing area of brand advertising on the Web. Ad spending on social networks in the United States alone will reach $900 million this year, according to online advertising research company eMarketer. That figure is expected to jump to $2.5 billion by 2011 as advertisers move brand advertising dollars online.

Major competitor MySpace made two advertising announcements of its own this week. On Nov. 5, the Web site revealed new behavioral targeting efforts that will allow advertisers to reach even more specific audiences. If Universal Pictures was able to connect with MySpace users who say they liked movies, for example, the company will now be able to target people who identify that they like movies and also that they prefer horror films. The site also unleashed a self-service advertising tool for small businesses, bands and individuals.

Facebook’s new strategy is a welcome innovation, says Michael Barrett, chief revenue office for Fox Interactive Media, the Newscorp (NWS) division that oversees MySpace. “There’s a lot less competition with Facebook for real ad dollars than with the portals,” he says. MySpace’s advertising efforts are better spent trying to harness ad dollars directed at banner ads on sites like Yahoo (YHOO), MSN and AOL. His take? Any innovation on the part of Facebook will ultimately help everyone profit from social networks.

As of this afternoon, 100,000 new advertiser pages have gone live on Facebook. Logos of Facebook’s 60 advertising partner companies — including Blockbuster (BBI), CBS (CBS), Coca-Cola (KO), Sony Pictures Television (SNE) and Verizon (VZ) — flashed across the screen as Zuckerberg completed his address. Many advertisers don’t yet know what to expect. Jessica Jackley Flannery, co-founder of microlending site Kiva.org, says her colleagues anticipated so much traffic from Facebook Ads that they stopped to consider whether their site could handle it before signing on. “We were on Oprah a couple months back, and we survived the sudden spike then, but this could mean an even bigger gain.”

MySpace and Bebo join Google’s OpenSocial team

November 1, 2007, 4:52 pm
By Lindsay Blakely

Google today announced two big new partners in its battle to make social networks more open — MySpace and Bebo.

When news surfaced Tuesday of Google’s (GOOG) OpenSocial alliance, MySpace (NWS) and Bebo were conspicuously absent from the list of partners joining the effort to create common standards for social networking applications. So, not surprisingly, was top-tier network Facebook.

OpenSocial will allow developers to build widgets that work across a network of social networks that include Hi5, LinkedIn, Ning, Friendster and now MySpace and Bebo.

“This is the logical next step,” said MySpace CEO Chris DeWolfe during a Thursday afternoon conference call at Google headquarters. “Having an open platform where developers can reach a critical mass of people — we’re at over 200 million users now — is an amazing breakthrough for the developer community.”

Facebook requires developers to write their applications in code that is proprietary to its network. OpenSocial developers will use HTML and Javascript.

“We want to see [OpenSocial] adopted by as many people as possible,” said Vic Gundotra, head of Google’s developer program. “We have reached out to almost everyone in the industry.”

Facebook did not immediately return requests for comment.

The battle for the soul of social networking

November 1, 2007, 12:35 pm
By Lindsay Blakely

Google’s new OpenSocial initiative is just the opening shot in what promises to be a long fight with Facebook.

The OpenSocial alliance, which seeks to create common standards for social networking applications, has so far signed up Google’s (GOOG) Orkut social network — it’s big in Brazil — as well as Hi5, LinkedIn, Ning, Friendster and business software makers Salesforce and Oracle.

“I view this as Version 1.0 of a fairly extended conflict that’s going to happen over the next few years,” says Ray Valdes, research director of Internet platforms at Gartner. “This was an important move by a major player but by itself it’s not going to make or break any individual network.”

Google announced Thursday afternoon that it’s adding MySpace and Bebo to its list of partners. MySpace, the largest social network with over 200 million registered users, will double the number of users developers can access with their applications through OpenSocial.

The question is whether Google will have the pull to bring Facebook into the fold.

Facebook has been tremendously successful in attracting developers to its own proprietary platform, which explains why the company is absent from Google’s OpenSocial network. At last count, Facebook had collected almost 7,000 widgets that let members do everything from discovering new music to engaging in virtual food fights.

Another big name not being openly social with Google is Yahoo (YHOO), which has been struggling to make its mark in social networking. It recently decided to close its personal profile network, Yahoo 360, choosing to focus on a new network called Mash. Currently invitation-only, Mash lets members modify the look of their friends’ profiles. Mash is considered the testing ground for a much larger concept that Yahoo is calling the “universal profile,” or a social network that will integrate other features like Yahoo Mail and Yahoo Answers.

When the company reported its third quarter earnings on Oct. 16, Yahoo CEO Jerry Yang said two of his strategic goals were to become the “starting point” for the most consumers on the Web and to offer the most desirable platform for third-party developers. On Wednesday, a company spokeswoman declined to say whether Yahoo will join OpenSocial, but did remark that the industry needs “common sets of socialization standards.”

For their part, developers welcome OpenSocial because it relies on relatively easy-to-use programming tools like HTML and Javascript to create widgets. Mark Kantor, a co-creator of the Graffiti drawing tool application for Facebook, is already talking to Google about OpenSocial.”The value proposition is pretty clear here,” he says. “Hopefully if it works, we’ll develop something once and get access to all of the networks.”

Google’s OpenSocial officially launches today with widgets from RockYou and Slide, as well as music and movie applications iLike and Flixter. Most of these applications can already be found on Facebook, MySpace, Bebo and other social networks – a sign that developers are agnostic when it comes to which sites they’ll work with.

“Facebook is open to a point and they’re criticized for it but it makes sense,” says Biz Stone, co-founder of Twitter service that lets friends send each real-time updates of their activities. Twitter built an application on Facebook and Stone says the company is working on one for OpenSocial.

Gartner analyst Andrew Frank says the evolution of the Internet may be one indication of the how the battle between the social networks will play out.

“One of the things that made the Internet so successful was that it was based on common standards,” Frank says. “With Facebook you have a return to proprietary programming.”

Is Facebook worth $15 billion?

October 24, 2007, 7:03 pm
By Josh Quittner

With Microsoft (MSFT) buying a minority share that values Facebook at $15 billion, hyperbole became reality. Or did it? The answer to that question turns on whether the social network is worth what Microsoft paid.

And that depends on whether you believe Facebook is just the latest online fad—or whether, as Facebookies believe, the social network is building the next, grand computing platform. (A platform is geek for a computer environment upon which applications can be built. Windows, for instance, is a platform. So is the Web.) Silicon Valley, and the rest of the tech world, is divided on this point.

In one camp are the cynics, or rather, the folks who believe that the One, True Platform is the wide-open Web. The people on this side of the debate tend to be Google (GOOG) partisans—and never mind that Google is the 800-pound gorilla that, through its brilliant, targeted search advertising, rules the Web. On the other side are those who believe the Web is too open, too raw, too unruly. Facebook, which is closing in on 50 million members, promises to restore control—over privacy, unwanted email, and virtual contact of any kind—to users. That’s a pretty powerful lure, and I’ve already written that, in my opinion, building the “Innernet”—where we can define our persona and limit our contact with the outside world—is the next big stage of online evolution.

The tricky part? How does Facebook/Microsoft make money? Advertising is the obvious answer, but how that works, is anything but apparent. Most people believe that when Mark Zuckerberg & Co. talk about social ads, they’re conjuring up a scenario that looks like this: I login to my Facebook page, and instead of a normal ad, I’m greeted with a banner that says something like, “Hey Josh! It’s your friend Jim Smith’s birthday in two weeks. Jim loves Neil Young and Neil has a new album that just came out last week. Buy it here.”

Now, that’s pretty compelling. Or pretty intrusive. I honestly don’t know how I’ll respond to such a solicitation. Again, the geek world is split on this point, with some people saying that’s a violation of privacy, while others maintain that privacy—as one social network pundit told me recently—is an old man’s concern. So whether Facebook is worth $15 billion (or a whole lot more) really depends on whether it can figure out a way to gin up new kinds of online ads that work far better than anything we’ve seen. If it makes that breakthrough, $15 billion for Facebook will look like the deal of the century.

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At the intersection of business and technology

January 31, 2008, 1:59 pm

Google gets its way with new wireless network

By Michal Lev-Ram

Somewhere in the Googleplex, Sergey Brin, Larry Page and Eric Schmidt are celebrating right about now.

That’s because the Internet search giant Thursday scored its first big win in the mobile business: The minimum $4.6 billion bid has been met in the Federal Communications Commission’s auction of the so-called C block of the 700 MHZ wireless spectrum, and that means that the eventual winner of those airwaves will have to make their new network open to all mobile devices, a provision Google (GOOG) lobbied hard for last year. The FCC should be happy too — so far more than $13 billion in bids for the five blocks of spectrum have come in, exceeding the agency’s goal of taking in $10 billion.

The FCC had previously said that if its reserve price wasn’t met it would begin a new auction without Google’s open access requirement. The bidding race had stalled earlier this week, and until Thursday it wasn’t clear whether Google would get its way.  But Thursday morning, in the auction’s 17th round, a $4.7 billion bid rolled in.

What we still don’t know — and might not know for a while — is who will end up winning the C block, as the FCC is not identifying the bidders until the auction of the separate blocks of spectrum is completed. Google has said it would make a play for the C block airwaves, which are currently used for analog TV, but the company may have participated in the auction just to make sure the reserve price would be met. According to analysts, it’s likely AT&T (T) and Verizon Wireless (VZ) have their eyes on the C block as well, and at least one of them has been bidding, either against each other or Google.

“We think from this point on, Google can either exit the auction (i.e. stop bidding assuming it’s not the highest bidder currently) to hand it over to another bidder, or Google can  vie to win (but would unlikely be ’stuck’ with the spectrum),” Bear Stearns analyst Robert Peck wrote in a note Thursday.

Why does Google care so much about this slice of spectrum? Because its wireless success depends on widespread use of its services on cell phones, and having a more open network would give it greater freedom to spread its mobile goods. Google currently faces resistance from U.S. carriers, who have traditionally had a tight grip on the type of devices and services allowed on their networks. Google’s new Android platform — a new mobile operating system open to all developers — has yet to prove its viability,  and having a more open, nationwide network in the United States could make it easier for Google — and other companies — to get more of its offerings on more devices.

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Google falls to earth

At the intersection of business and technology

January 31, 2008, 10:14 pm

Google falls to earth

By Yi-Wyn Yen

Turns out Google is mortal. The Internet search giant ended a month’s worth of disappointing earnings from Silicon Valley tech companies by missing Wall Street’s forecasts too.

Google (GOOG) blamed a slowdown in its fourth-quarter growth on its difficulty selling ads on social networking sites. The company delivers online ads for about 20 social networking sites, including MySpace (NWS). “I don’t think we have the killer best way to advertise social networking,” said Sergey Brin during a conference call with analysts Thursday. “Some of the things we were working on in Q4 didn’t pan out. There were some disappointments there.”

Google is the latest tech company struggling to stay ahead of consumer spending and behavior during an economic slowdown. EBay (EBAY), Apple (AAPL), and Yahoo (YHOO) reported projections that underwhelmed Wall Street in the past week. Google does not give sales or profit guidance, but its fourth-quarter numbers gave reason to make tech investors a bit nervous. Google has already wiped out nearly $73 billion off its November market cap, when shares hit a high of $747. By mid-day Friday, the stock was trading at $521.

The Mountain-View, Calif.-based company made $4.43 a share for the fourth quarter, which was a penny short of analysts’ consensus. Google raked in a $1.2 billion profit for the quarter, up 17% from a year ago. Sales, minus the money the company shares with its ad partners, came in at $3.39 billion, up 52 percent from the previous period a year ago. The Street had anticipated $3.45 billion and Google’s shares dropped more than 7 percent in after-hours trading to $516.20.

Not that all of this came as a big surprise. “Our expectations were a bit muted going into the quarter,” said Christa Quarles of Thomas Weisel. “But, this is still a company that grew 52 percent a quarter.”

Along with the discovery that fans of social networking sites have a low propensity to click on ads, Google was challenged by a decline in advertising spending in financial and travel businesses. Chief Financial Officer George Reyes said the slowdown was “seasonal” due to the holiday period last quarter.

Meanwhile, the growth rate of paid clicks for AdSense, which displays ads on sites outside of the Google homepage, has slowed. Paid clicks increased 30 percent compared to a 45 percent growth rate from the same period a year ago. AdSense, which made up 34 percent of total revenue, raked in $1.64 billion.

Google’s performance is a telling sign of how consumers use the Internet, and thereby gives some indication of how the Internet industry is faring. Analysts, naturally, tried to bait Google chief Eric Schmidt into giving some guidance for 2008. Schmidt, who acted like an air traffic controller by directing which of the five other Google execs answered questions on the hour-long call, didn’t budge.

When one analyst asked about potential outlook during a “weaker economy,” Schmidt quipped, “We’re not going to talk about the current quarter. We’re talking about the past quarter. We haven’t seen any negative impacts with rumors of future recessions.”

Real or not, Google has proven that it’s not immune to an economic downturn. While Jonathan Rosenberg, who runs Google’s product management team, painted a cheery picture of bargain-hunting consumers clicking on ads during a recession, some feel that’s not enough.

Google is banking a lot of the extra revenue to come from DoubleClick, the ad serving company it bought for $3.1 billion last year. Google can’t close the deal until the European Commission approves the merger. A ruling is expected by April 2. Said Schmidt, “We’re hopeful that it’ll clear.”

Filed under Google

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At the intersection of business and technology

February 1, 2008, 5:43 pm

Will Microsoft save Silicon Valley from Google?

By Michael V. Copeland and Yi-Wyn Yen

SUNNYVALE, Calif. — There was talk of monopoly in Silicon Valley Friday morning as news of Microsoft’s $45 billion offer for Yahoo spread at Internet speed via e-mail, instant message and mobile phone. But the huge irony is Microsoft’s bid for Yahoo is seen by many here as just what is needed to fend off another monopolist in the making: Google.

“We would prefer to see a healthy Microsoft and Yahoo,” says Geoff Yang, a venture capitalist with Redpoint Ventures and an early investor in Internet-based companies. “But I am starting to get worried about Google’s dominance, and in the absence of three healthy companies, I’ll take two. Competition is good for us, the industry and customers.”

A decade ago, that wouldn’t have been the case as most people in Silicon Valley viewed Bill Gates’ gang as barbarians, taking on, and in most cases crushing, cherished iconic Valley companies like Netscape. No one wants to call it out loud and proud, but the role of aggressor formerly assigned to Microsoft (MSFT) has been taken over by Google’s (GOOG) in the estimation of many of the Valley’s technologists and investors. In the case of Yahoo, Microsoft is more white knight than Visigoth.

By themselves, Yang and others are quick to point out, neither Microsoft nor Yahoo (YHOO) have demonstrated an ability to stop the Google onslaught, but combined they might have the heft to pull it off.

“Putting MSN (Microsoft’s Internet portal) and Yahoo together ought to provide some more scale and more efficiencies so that there is some reasonable competition,” says David Hornik, a venture capitalist with August Capital and another experienced Internet investor. “We could get more of a real marketplace than we have today.”

The hopeful note was also sounded by a number of former Yahoo employees. One of the original Internet companies, Yahoo still boasts the most traffic of any site online, streaming through its portal and various properties. And with additions like Flickr, Zimbra and other Web 2.0 startups, it has kept a strong hand on the content side.

“Yahoo will never catch up with Google in search,” says Paul O’Brien, a six year veteran of Yahoo and the head of marketing at local events search startup Zvents. “They can continue to be a portal, but there is not much room for growth there. But Yahoo is still a sexy company. Combining with Microsoft puts their properties in front of everyone who has a computer. If I were still at Yahoo I would think this is good news, it’s a new opportunity and new blood.”

But feelings were decidedly mixed Friday morning at Yahoo’s Silicon Valley campus in Sunnyvale, Calif. Four hours after the news hit, about a dozen Yahooligans were having coffee and omelettes in the company’s cafeteria and discussing whether Yahoo would accept Microsoft’s bid. Those approached by a Fortune reporter spoke on condition of anonymity.

“This is all anyone’s talking about this morning. But I can’t comment,” said one Yahoo employee, pointing to a glass wall where a group of managers sat. “They’re watching.”

The Microsoft offer follows Tuesday’s announcement that Yahoo would lay off 1,000 workers by mid-February.

Now this. Just how many jobs Microsoft might shed after acquiring Yahoo is a big unknown. Though employees said there had been rumors for some time about a possible Microsoft bid, the timing came as a shock. “I knew the stock price put us in prime selling territory, but I just felt like someone pulled the rug under me,” one Yahooer said.

Some couldn’t be happier as Microsoft’s announcement drove Yahoo’s stock up nearly 50 percent by mid-day. “This is great news, great news,” said one employee who works in accounting. “I’m not worried about my position or finding a job elsewhere, so I’m pretty excited about the stock going up.”

“I’m freaked out,” said another employee who joined the company less than a year ago in a junior marketing position. “I thought it would be cool to work for Microsoft at first, but then I read the letter and it sounded hostile. I’m already worried about the layoffs, and this doesn’t help.”

One worker sighed as she reached for copies of the San Jose Mercury News and the Wall Street Journal. “Just seeing if we’re in the news,” she said. “Ugh.” Behind her, about a half dozen colleagues were at the company’s gym running on treadmills with their eyes glued on CNBC’s updates.

Steve Mitgang, CEO of online video site Veoh, and a former senior vice president at Yahoo in charge of ad products and the creation of the company’s online ad system Panama, is bullish on the combination. “Online advertising is all about being able to understand users in the right context, what they do during their day and their lives,” Mitgang says. “Search is a part of that, but it’s not everything, Google doesn’t have it all. Combining Microsoft and Yahoo gives them the greatest context in the world about what users are interested in. It could be extraordinarily powerful.”

But the big fear among some in the Valley is that Microsoft somehow crushes the thing it most needs in Yahoo, Internet expertise. The smart move, say Valley insiders, is for Microsoft to admit they have failed at the Internet game and let Yahoo become their online presence. “If I were Microsoft I would look to Yahoo to be the lead in figuring out the digital future,” says Hornik. “Not the other way around.”

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Google: Microsoft’s Yahoo! Bid Raises ‘Troubling Questions’

Google fired back today at Microsoft’s bid to buy Yahoo! in a blog posting here by Google

But, of course, Google says there’s more at stake than just its status as the dominant Internet company:

So Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ email, IM, and web-based services? Policymakers around the world need to ask these questions — and consumers deserve satisfying answers.

Google clearly won’t take this deal lying down.

Yahoo! and the Future of the Internet — The Official Google Blog

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At the intersection of business and technology

February 3, 2008, 3:51 pm

Google: Will Microsoft monopolize the Internet?

By Todd Woody

SAN FRANCISCO — In preview of what could shape up to be a fierce antitrust fight over Microsoft’s $45 billion offer for Yahoo, Google’s chief legal officer on Sunday made clear that the search giant would not sit on the sidelines, questioning whether Microsoft would “now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC.”

Writing on the official Google (GOOG) blog, David Drummond, the company’s senior vice president for corporate development and chief legal officer, argued that a combined Microsoft (MSFT) and Yahoo (YHOO) “raises troubling questions” and would pose significant competitiveness issues. “Could the acquisition of Yahoo allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet?” he wrote.

Drummond sketched a future where a MicroHoo controls an “overwhelming share of instant messaging and web e-mail accounts.”

“Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ e-mail, IM, and web-based services?” he asked. Making clear that he was directing that rhetorical exercise at regulators in Washington, D.C., and elsewhere, he wrote, “Policymakers around the world need to ask these questions — and consumers deserve satisfying answers.”

Repeatedly calling the software giant’s bid on Friday for an iconic Silicon Valley company “hostile,” Drummond portrayed the Internet itself as at stake. “This is about more than simply a financial transaction, one company taking over another,” he wrote. “It’s about preserving the underlying principles of the Internet: openness and innovation.”

Of course, as Google has expanded its hold over the Internet through its dominance of search and online advertising, observers have questioned whether the Mountain View, Calif., company itself poses a Microsoftian threat to online openness. In fact, on Friday a number of Silicon Valley movers and shakers welcomed the Microsoft offer for Yahoo as a potential counterweight to Google’s ambitions.

In his blog post, Drummond also seemed to signal Google’s interest in a white knight riding to its Silicon Valley rival’s rescue. “We believe that the interests of Internet users come first — and should come first — as the merits of this proposed acquisition are examined and alternatives explored.”

A Google spokesperson said that the company would have no further comment “for the time being.”

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Web 3.0 and The Virtual Generation – Marketing Take Note!

January 30, 2008 <!–sumanchaudhuri–>

Web 3.0? What’s that now? We’re still dealing with Web 2.0 and now I’m already talking about Web 3.0?! Well, if you’ve been reading my earlier posts, in essence, I’ve already talked about Web 3.0 – the Semantic Web. So I won’t go into the details of that in this post. My focus for this post is where I think Web 3.0 is heading and what one of the trends in that space will be and what it means for marketing agencies in the future.

As the concepts around Web 3.0 become more and more of a reality, one of the trends is going to be the semantic user experience. What I mean by this is how we can explore the notion of adding artificial intelligence and context around the user experience to make it a much more compelling and customized activity for each user. Any marketing person worth their salt knows that in this day and age, you should be devising your marketing around creating an exceptional user experience. The semantic web will take this to a new level. As we gain more context around data that a user wants to work with and parlay that into the user experience, we need to remember that context will be king. Mobility, audio, video and presence will the new desktop. Users will move from becoming consumers to prosumers – they will be the ones controlling the content – creating it, adding to it, enriching it, sharing it with their peers.

So what does the virtual generation (or Gen V as Gartner calls it) mean? It means a new generation that is tech savvy and carries out most of their networking and interactions via the digital medium. A generation that is immersed in virtual worlds and their identity in this world is their virtual avatar. Marketing folks will need to shift their thinking from collecting demographics information to collecting information that these avatars leave behind because the avatars will grow personalities and the user’s likes and dislikes will be reflected in their avatars. What does this mean for product companies? Think about how to allow Gen V to explore your product in virtual worlds. The semantic web will lead to augmented reality – th ability to mix real world and computer based data to arrive at decisions. That will become more of a reality once cloud computing and associated technologies such as virtualization become more and more mainstream, resulting in optimal use of bandwidth, machine computing power, expanded reasoning and dynamic visualization to create a semantically rich user application to serve the next generation – Generation V.

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