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News Analysis October 31, 2007, 12:51AM EST text size: TT

Google Girds for Facebook Fight

The No. 1 search engine is banding together with other sites and software developers to build its own social networking ecosystem

Google has reached its share of dizzying heights—a share price of almost $700, a penchant for consistently beating Wall Street’s financial expectations, and an outsize influence on the computer industry. It has done so by controlling the rich vein of advertising that flows from Internet searches. But there’s a new online frontier Google (GOOG) has largely failed to tap: the rapidly growing world of social networks, which promises advertisers the ability to reach users where they live online.

While Google has concentrated mostly on placing ads based on what users are trying to find, social networking sites such as Facebook and News Corp.’s (NWS) MySpace have begun targeting users based on who they know—or more precisely, the tastes and demographic information they expose while socializing online. Aiding the social networks in that effort are legions of independent software developers who write so-called widgets, or applications such as games and quizzes, that can keep users glued to a site.

For software creators, it’s a way to get their handiwork in front of millions of social networkers. For the networks, opening up to developers means more ways to engage users and the advertisers who want to reach them.

A Developer-Friendly Tool

Now, Google wants in on the action. On Oct. 30, the company announced the release of a tool called OpenSocial, which will let software developers write programs for a variety of social networking sites that support the technology. Today, that includes not only Google’s Orkut, but also Ning, LinkedIn, and Hi5 Networks.

The idea is to create specifications common to all the sites, rather than forcing programmers to use separate standards for each. Google also has support for the technology from companies including Slide, the top maker of widgets for Facebook and MySpace, and iLike, whose software lets users compare musical tastes and find out about concerts. “The work is dramatically reduced,” says Ali Partovi, CEO of iLike. Software vendors Salesforce.com (CRM) and Oracle (ORCL) have said they plan to use OpenSocial.

In the future, Google plans to let developers use OpenSocial to gain access to data from its own widely used applications, including Gmail and the iGoogle personalized home page, and share ad revenue with its partners. Google believes it has a trove of data on users’ social relationships in its e-mail and other software, which it can mine to better target those ads. “That’s certainly an area that’s rich with opportunity,” says Joe Kraus, a director of product management at Google.

Facing Down Facebook

If the plan is successful, Google could bring its leverage to bear on the social networking market and potentially slow the momentum of high-flying Facebook. “This is an open version of what Facebook has done,” says Marc Andreessen, a co-founder of Ning, which provides tools for building social networks. Andreessen was the founder of Netscape Communications in the ’90s. It’s still unclear whether enough developers will cotton to Google’s new platform to make it a success, but if they do, OpenSocial “poses a real challenge” to Facebook, he says. “The idea of a closed, differentiated Facebook network—this announcement changes that significantly.”

For Google, OpenSocial is the first step in a plan to hit back at Facebook and Google’s chief rival, Microsoft (MSFT), which on Oct. 25 announced a $240 million investment in Facebook (BusinessWeek.com, 10/25/07), beating out Google for a stake in the fast-growing company, now worth an estimated $15 billion. So far, the companies haven’t made any announcements about technical integration of their software, though Microsoft has said it’s helping Facebook with technology that could turn the social network’s data on members’ names, connections, and tastes into user directories that are accessible by business software programs.

David to Google’s Goliath?

Facebook could encroach further on Google’s turf: It’s rumored to be working on an advertising network it will announce Nov. 6 in New York. At the Web 2.0 conference in San Francisco earlier this month, Facebook CEO Mark Zuckerberg said the company is interested in applications related to online ads.

“One of the next transformative uses of the Net is through the relationships embodied in your social network,” says Reid Hoffman, co-founder and chairman of LinkedIn, which on Nov. 2 plans to release an application programming interface that will let developers create applications that leverage users’ LinkedIn networks on other sites. OpenSocial is “an indirect shot” at Facebook, says Hoffman, an early Facebook investor. “It means that there isn’t just one social platform on the Web.”

Facebook is amassing a wealth of data on its 50 million users’ social connections, ages, tastes, and shopping habits, thanks in part to the site traffic spurred by popular third-party applications from companies such as Slide and iLike. In a Web advertising market where finely slicing segments of users is key, the social networks’ storehouses of data on users’ demographics and online behavior could be a boon to advertisers, which are warming to the sites. “If the rumors are true and Facebook is about to launch an ad network, that would be a huge step for the industry,” says Andreessen. “Advertising that’s super-targeted is incredibly useful.”

Google’s Expansion Hopes

Google already has a foothold in the market for social networking ads. It serves advertisements to users of MySpace as part of a $900 million deal put in place in 2006. On Oct. 17, MySpace said it would make data on relationships among its 110 million users available (BusinessWeek.com, 10/18/07) to outside developers and share revenue from related advertising with them.

With OpenSocial, Google hopes to extend its presence on the social Web. A critical first step will be convincing outside software makers to embrace its approach. “To the extent that OpenSocial has elements that allow us to make money, it will be more attractive,” says Keith Rabois, vice-president of strategy and business development at Slide. “To the extent it doesn’t, Facebook will be more attractive. That’s a key element that drives any venture-backed business.”

Ricadela is a writer for BusinessWeek.com in Silicon Valley .

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Microsoft Nets Piece of Facebook

Posted by: Rob Hof on October 24

OK, the deal’s done: In one of the most anticipated tech deals in recent years, Facebook just forged a deal with Microsoft Corp. that values the privately held social networking service at a stunning $15 billion. Microsoft will invest $240 million for the 1.6% stake and exclusively handle ads around the world for Facebook to complement its current U.S. ad deal.

The long-expected deal puts Microsoft on the map in the hot Internet service of the day, social networking. That gives it the potential to recoup much lost ground on the Net from Google, which was believed to be a contestant for the deal, Yahoo, and a raft of other companies. But given the limited scope of the deal, it’s uncertain how much benefit Microsoft will derive from paying what is by all accounts a huge sum for a piece of a company with unproven prospects.

The hope by social sites, advertisers, and investors is that social networking sites will be able to target ads more precisely to users’ stated interests and activities on the sites. But so far, the amount of ad revenue on social sites vs. search engines, portals, and other Web sites is minuscule. Facebook is expected to post about $150 million in sales this year, about half from a deal with Microsoft to place untargeted ads on Facebook profile pages.

Some observers even speculate that Google stayed close in the bidding to force Microsoft to pay up for the deal. Google execs at the company’s analyst meeting today were circumspect about the rumors before the deal was announced. Tim Armstrong, president of advertising and commerce for North America, said in response to an analyst’s query: “I don’t think we’ll comment at this point. We have a tremendous respect for them as a company. We have a tremendous amount of social networking on our properties.”

For Microsoft, there seems little downside to the deal, especially given that it’s putting up less than some had suggested–as much as $500 million. The $240 million is a very small fraction of Microsoft’s stash of cash. The downside is that a 1.6% stake implies virtually no control over Facebook, so this could prove to be more of a straight business deal than an entry into social networking. Just speculating here, but I wonder if such an investment could end up giving Microsoft no control but effectively prevent it from pursuing its own social networking initiatives.

The deal leaves Google, which has also lagged in social networking, to come up with another way to participate in social services. Its social network Orkut, which has been an also-ran for years, has recently grown quickly in some countries such as Brazil and India, but it’s still a distant competitor to Facebook. It also recently indicated it would provide ways for Facebook application developers to place Google ads on their apps.

It’s hard to blame Facebook for raising money when it can, since it will be enough to give it plenty of money to expand prior to an expected IPO as early as next year. The trick will be to avoid the common problem of spending too much on projects that are not laser-focused on the core utility of the site, instead of keeping heads down and improving the site.

Update: Google cofounder Sergey Brin, answering a question on how Google will participate in social networking, noted that Orkut is “one of the leading social networks” worldwide. “We don’t feel we need to own everything to be successful on the Internet,” he said. He noted that Google has an ad deal with MySpace, and “we’re very happy with that,” as well as partnerships with 20 other social networks.

Mike Arrington at TechCrunch kindly liveblogged the press call, which I couldn’t listen to because Eric Schmidt was talking at the Google analyst day. More detail and commentary too at Silicon Alley Insider.

Update 2, random musings: I can’t help thinking that everyone’s focus on the $15 billion is kind of off the mark. Nobody’s paying $15 billion for this company–since it’s not being sold–so does that valuation really mean anything? Even if Facebook did an IPO next year, would investors give it a $15 billion valuation? As valuable as I think Facebook is, and can be, I don’t think so. Too soon, and too many risk factors, like potentially fickle members and uncertain ad potential. As Todd Dagres of Spark Capital told me only semi-jokingly a couple weeks ago, Facebook’s IPO could end up being a down round.

In fact, Microsoft’s investment is almost certainly driven not by what it thinks it is worth but almost entirely by its strategic value: For pocket change, really, it locks up the Web’s hottest property for more than four years, boosts the profile of its ad system, keeps Google away, and learns a lot about the future of the Web.

On the other hand, did Google really lose all that much? The Microsoft deal doesn’t include search ads on Facebook, so that door is ajar, if not wide open. Google’s ad machine clearly isn’t hurting, either, judging from its latest quarter. And I wouldn’t count out its potential to make a play in social networking.

The picture will become clearer by Nov. 6, the day Facebook will announce its “SocialAds” network–and a day after Google is rumored could announce a way for software developers to get access to social data on Google’s Orkut social network and iGoogle, its personalized home page.

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Google’s OpenSocial: Take That, Facebook!

Posted by: Rob Hof on October 30

Google has just announced its long-expected blast back at Facebook, whose social applications platform has taken off like wildfire since its debut in May. Google tonight outlined plans for a common set of standards that it promises will make it easy for software developers to write programs that run on a wide range of social networks, including Google’s own Orkut, hi5 Networks, LinkedIn, Ning, Friendster, and others, representing a total of 100 million people. Salesforce.com and Oracle also are part of the initiative.

But not Facebook or MySpace, at least for now—as Ning founder Marc Andreessen told me, they don’t need to now, because developers are already writing programs just for them thanks to their large audiences. Photo slide shows, games, and musical taste sharing programs from companies such as Slide, RockYou, and iLike have attracted millions of people to install them in a matter of months. That has generated huge excitement in Silicon Valley, not least because Facebook is allowing them to make money from ads or other marketing promotions on those programs if they wish.

On Tuesday, Facebook also plans to announce an ad network that’s expected to enable advertisers to target precisely the people they want to reach based on their demographics and on the information on themselves that they type into their Facebook profiles. Google’s announcement comes just a week after it apparently lost a bid for a piece of Facebook to Microsoft.

The Google platform, called OpenSocial, potentially lets software developers create programs that will run on any social network that accepts the standards (though each site will have control over which programs, or widgets, will run on its real estate). Google’s Joe Kraus says it’s not just about making Google social, but “making the entire Web social.” “This is an open version of what Facebook has done,” says Andreessen. “This definitely poses a real challenge” to the prospect that Facebook would have the biggest platform for social programs on the Web. Developers can potentially reach even more people than on Facebook alone, and other social Web sites don’t have to persuade developers to write just for their sites, which they generally don’t have the resources to do.

The announcement was slated to go out Thursday night, but the New York Times broke the story, so Google moved up the release. More to come, but for now, there’s more detail at TechCrunch, which first reported it late last month.

Google’s OpenSocial: Take That, Facebook!

Posted by: Rob Hof on October 30

Google has just announced its long-expected blast back at Facebook, whose social applications platform has taken off like wildfire since its debut in May. Google tonight outlined plans for a common set of standards that it promises will make it easy for software developers to write programs that run on a wide range of social networks, including Google’s own Orkut, hi5 Networks, LinkedIn, Ning, Friendster, and others, representing a total of 100 million people. Salesforce.com and Oracle also are part of the initiative.

But not Facebook or MySpace, at least for now—as Ning founder Marc Andreessen told me, they don’t need to now, because developers are already writing programs just for them thanks to their large audiences. Photo slide shows, games, and musical taste sharing programs from companies such as Slide, RockYou, and iLike have attracted millions of people to install them in a matter of months. That has generated huge excitement in Silicon Valley, not least because Facebook is allowing them to make money from ads or other marketing promotions on those programs if they wish.

On Tuesday, Facebook also plans to announce an ad network that’s expected to enable advertisers to target precisely the people they want to reach based on their demographics and on the information on themselves that they type into their Facebook profiles. Google’s announcement comes just a week after it apparently lost a bid for a piece of Facebook to Microsoft.

The Google platform, called OpenSocial, potentially lets software developers create programs that will run on any social network that accepts the standards (though each site will have control over which programs, or widgets, will run on its real estate). Google’s Joe Kraus says it’s not just about making Google social, but “making the entire Web social.” “This is an open version of what Facebook has done,” says Andreessen. “This definitely poses a real challenge” to the prospect that Facebook would have the biggest platform for social programs on the Web. Developers can potentially reach even more people than on Facebook alone, and other social Web sites don’t have to persuade developers to write just for their sites, which they generally don’t have the resources to do.

The announcement was slated to go out Thursday night, but the New York Times broke the story, so Google moved up the release. More to come, but for now, there’s more detail at TechCrunch, which first reported it late last month.

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Learning more about Generation M

February 17th, 2008 · 9 Comments

Children born between 1982 and 1998 are now beginning to enter the workforce; while they’ve been called many things, I continue to use the term Generation M. [And that’s not because of any personal pride in coming up with the term; rather, the characteristics that define this generation seem to have a lot of “M” about them — mobile, multimedia, multitasking, multichannel and so on.

The Netxplorateur Forum invited me to speak to them about Generation M a few days ago; as part of my preparation, I trawled through my bookmarked items to see what had changed since mid-December, the last time I’d spoken about the subject (also in Paris, as it turned out, at Le Web 3). Which meant I had an excuse to re-read the excellent Pew Internet report on Teens and Social Media, published just before Christmas last year.

Read it if you get the chance, it’s worth it.

Four things stand out for me in the report:

Generation M is faced with a vast array of choices when it comes down to communications. They really use this vast array. [We never had this choice, so we should not judge them. Things are different, and we have to live with the differences.]
A segment of Generation M, termed super communicators, use the array more extensively than others. And they defy their critics by meeting their friends in person far more often than other teens. [Putting paid to the myth that these kids spend all their time online and have no “life”]
Those that belong to social network sites are the most active content creators, the most active contributors of social objects, the most active participants in the conversations around the social objects. [These are the people that marketers would do well to understand, because they are the new marketers, the viral recommenders who are adept at creating and using social objects.]
While all this is happening, the landline continues to be important. [This is probably a self-fulfilling prophecy, restricted to the developed world, and will prove completely false in India, China, Africa and maybe even Russia and South America. Nevertheless it is of interest to me, and not just because of where I work!]

The relevant charts from the report are given below for your convenience.

2270202955_071f31532f2270207665_b1f231b055

2270210145_01141d7d572271003480_f430f15a47

Tags: Four pillars

9 responses so far ↓

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  • Robin Blandford [ByteSurgery] » Digital Teens: Still Landlining It – Digital Media Engineer //Feb 17, 2008 at 11:20 am

    var sz_global_config_params = {cppluginurl:”http://confusedofcalcutta.com/wp-content/plugins/sezwho”,cpserverurl:”http://www.sezwho.com”, sitekey:”202360e5fa52eef9184059e502db61f8″,blogkey:”47340b837eab2″,blogid:”0″, plugin_version:”1.3″} ; […] – JP observes in the Pew Internet report on Teens and Social Media that across all teens, the landline is still […]
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  • Feb 17, 2008 at 6:26 pm

    In India landline is significant for a different reason: reliability. It is common to have conversation like: “hey I can’t hear you, you voice is breaking, I’ll call you from landline…’
    And the operators are pushing landline with deals by bundling landline with broadband, or mobile.

    In the charts, interesting to note that email is at the bottom and ’sharing own artistic work’ is in the top.
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  • Conviviendo con la Generation M » El Blog de Enrique Dans //Feb 17, 2008 at 9:24 pm

    […] entrada en Confused of Calcutta, “Learning more about Generation M“, describe a partir de un informe de Pew Internet los hábitos de la generación nacida entre […]
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  • sysrick.com » links for 2008-02-17 //Feb 17, 2008 at 11:32 pm

    […] Learning more about Generation M […]
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  • Feb 18, 2008 at 10:38 am

    I think I was born before my time!
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  • David David (Check me out!)

    Feb 18, 2008 at 2:11 pm

    Are you claiming you invented the term Generation M?
    I seem to remember this being used around in the mid nineties and possibly before in a number of published university articles and its been used ever since to describe multitasking, mobile, media and any other term beginning with M.

    I’d like to see a breakdown on differences between the sexes on the charts above
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  • Feb 18, 2008 at 6:40 pm

    I think the first time I saw the term being used in public was in a Kaiser Family Foundation study sometime in 2005. I started using the term in public after that, in preference to any other terms.

    it is this preference I was alluding to.

    I should have come up with a better construction, I see how you thought I came up with the term. What I meant was my preference for the term in comparison to others. Like preferring The Because Effect to “abundance economics”.
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  • Feb 19, 2008 at 10:58 am

    Hi JP,
    I guess one of the next fight is for this generation, having simplified uses of these services. And probably the aim for electronics devices is the converge effect, to avoid having several devices in our pockets ; there’s some studies about this.
    Generation M today is so much “Multi-devices” too…
    L.
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  • Feb 19, 2008 at 5:46 pm

    Hello Everybody!!

    I agree, the Generation M, …unfortunately there advantages and profits, but..also there are… many things bad..
    ‘m makinf Events of Networking, called “6 Degrees”…and a lot of people don’t use IT, Messenger, Social Networks, Skype…is incredible, but now each child use Internet, and have e-mail,… WELCOME GENERATION “M”!!!

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