Master of 500 Hats

Yang & Decker on Yahoo biz "focus": 1) homepage, 2) search, 3) mail, 4) mobile... or 5) none of the above?

(so admittedly this is a rather rough post that came out of some comments i was writing up over on a TechCrunch post about the Jerry Yang intvw at D conf... thought i'd just them up here as well)

first, let me start by noting i think the Yahoo SearchMonkey initiative is generally a good direction to be heading towards.  however, i also think there is a lack of executive cluefulness on tech strategy at Yahoo, as evidenced by the conversation with Kara @ D conf.  maybe Jerry just hasn't had enough time to cleanup from Terry's previous "strategy", but regardless i think neither he nor Sue have succeeded in setting a clear direction forward that is game-changing enough to give board members / shareholders reasonable fiduciary leeway to let them continue [mis-]leading the company.

maybe it's time for others with more cogent strategy to step in & give it a shot.

in particular, there was a telling quote from Decker about what the "focus" of the business is (or lack of one, really) that i think reveals the heart of the matter...

Sue Decker, on Yahoo core biz focus: 

"we focus on homepage, search, mail & mobile".

i guess Jerry & Sue would argue 4 priority areas isn't a lack of focus, but sure feels like that's at least 1 too many, if not 3 too many.  and curiously there's no mention of a transactional focus area, which given all their traffic & content properties & brand familiarity seems like a big missed opportunity -- one that others like eBay, Amazon, & Apple are taking advantage of.

anyway, here's my take on those 4 areas...

1) HOMEPAGE aka "sell the shit out of [limited] premium web portal real estate".  not really a great long-term business, imho.  short-term monetization is good, but long-term control is limited & therefore not likely good strategic bet.  the "home page" will fragment, become personalized, distributed.  switching costs are low.  Feeds & distributed news flow will be the model.  not sure if Yahoo's display advertising biz also fits in this box, but if so that might also be significant... sounds like what Ballmer wants.  still not sure it's most valuable asset long-term.

2) SEARCH: barely keeping significant #2 market share in search, but still pretty darn good monetization compared to the rest of their biz.  on absolute basis, great biz to be in.. tons of cashflow, even their declining market share in overall growing market probably not bad biz.  just sucks on a relative basis to look over at GOOG and think what could have been.   good near- to medium-term asset, if they don't keep losing too much share to the GOOG.

3) MAIL: tons of usage, but crappy monetization.  see my earlier posts for how to monetize the social graph data in the inbox.  imho, this is one of the more interesting assets that currently hasn't been realized in revenue. YahooGroups fits in here as well, which is just a travesty that there hasn't been more attention in past few years.  i have a friend there who may pull the bacon out of the fire, but it's a big task given how much they've squandered over past few years.  long-term, this has significant potential, but only if they really use it for something that creates user / 3rd-party value.

4) MOBILE: i don't really understand this part of their biz.  maybe some traction here outside US i'm not aware of.  (i'll refrain from commentary here, since i'm clueless)

anyway, just feels like there could be more being done with using Y! Platform as distribution play to get to all their users.  we'll see...

Chris Messina is Making Things Better.

Chris "Factory Joe" Messina lays it down in a recent post called "The Battle for the Future of the Social Web".

While i don't always agree with Chris, his perspectives are always insightful.  In regard to the recent Facebook Connect vs. Google Friend Connect
wars, i appreciate his recognition that *both* companies (not just one) are self-interested, even if they posture otherwise. 

[and note, i'm not saying either is Good or Evil... simply that they choose to create user benefit for their own purposes, not for some misplaced sense of altruism or a new network effect about "goodness"].

Regardless he is correct there's a war going on.  It caught everyone's attention last week, and it's not likely to die down anytime soon. 

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Personally i tend to opt for market competition over standards as the optimal way to improve our lives -- technical or otherwise, but i respect that Chris & others like Chris Saad put their money time where their mouths are on stuff like the DiSo Project & Data Portability.

In any case, i suggest you give Chris's post a good read... he's smart, and it's excellent.

Memo to Google, Yahoo, Microsoft, & AOL: How to Turn 500M email logins into Facebook Platform & a Crapload of Revenue.

ok, so even after all these announcements about data portability, no one seems to understand what the hell i keep talking about re: using email & IM messaging data stores to improve targeting & make friend lists work better.  i admit it's a bit inside-baseball, but it's actually pretty simple.

[UPDATE: Yahoo just joined Microsoft (via Windows Live Contacts API) & Google (via Google Contacts Data API) in enabling 3rd-party programmatic access to contacts in the Yahoo mail address book accessible via API.  now all 3 just need to enable filtered access using messaging frequency & keyword relevance, and we'll finally be getting somewhere... who's gonna step up first?]

the thing is, i actually DO believe we're on the verge of something game-changing here.  i DO believe that the social gestures & interactions pioneered on Live Journal & then Facebook & now Google & MySpace are slowly going to migrate over to the rest of the web, and energize all of our normally boring websites with social cues & viral behaviors. 

HOWEVER: i'm really friggin' tired of a popup with 50 of my 1000 friends (whose names all seem to begin with 'A') or being asked to upload my address book (over 2000 contacts, many of whom are email lists or people i don't know) to use as a viral distribution method. 

so here's the skinny homeboy:

I HAVE WAAAAAAY TOO MANY DAMN "FRIENDS" IN MY SOCIAL NETWORK.  I GOTZ THOUSANDS OF DONT-GIVE-A-F*#K "CONTACTS" IN MY ADDRESS BOOK.  BUT DON'T ASSUME I'M GOING TO SPAM / UPLOAD / INVITE ALL OF THEM TO CHECK OUT YOUR CHEAP-ASS, NON-MONETIZING, PRIVACY-RAPING, BUTT-UGLY DESIGNED, RETARDED UX, PO-DUNK WEBSITE OR FACEBOOK APP.

In other words, i don't trust [most of] you.

in fact, i don't trust ANY of you -- friends or websites or apps -- any further than i can throw [a sheep at] you.

just cause i've accepted an invite to be your friend, or happened to find you on a website, or in a forum or group i've passed by in the online version of a wham-bam-thank-you-ma'am-for-the-one-night-stand, DOES NOT MEAN i want to know what you had for dinner last night, who you knocked boots with lately, or if your new social networking startup for Retired Dread Pirate Roberts or website for exterminating Rodents Of Unusual Size is worth bazillions.

on the other hand, there probably IS a small subset of crazy peeps who i DO want to share your shit with, but it's probably only ~10 people in my potential network of 1000.  and i want to figure out how to choose 10 targeted people quickly & easily out of my random network of 1000.  (and probably only 1-3 of those folks will really take a look, but those are the ones you want).

so let me state that more clearly.

PROBLEM: when i'm on a website or social network or social app, it wants me to help refer other people / help with some lame-o viral marketing scheme.  however, i'm only gonna do that for a select few who really share my context / insanity, not everyone in my network (unless my name is Robert Scoble).

what I DO NOT WANT:

• select from a god-awful list of 100 faces in your pop-up face listbox
• upload my entire address book of 2000+ contacts for you to spam the world
  
• wait for your data-loading / selection function to crash horribly, after taking forever to load

what I DO WANT:

• popup the MOST RELEVANT 5-10 peeps who meet certain key criteria
  
• use an intelligent combination of shared interests & messaging frequency to figure out who these "TOP" friends are (for the given context)
• let me select 1-3 of them to invite & checkout an awesome [video game | baby stroller | new book | really good pr0n] i just found

SOLUTION: let's see now.  WHERE? can i find an easily accessible data store with info on how frequently i contact other people, already-indexed relevant keywords for conversations i've had with those folks, and provides a built-in distribution method for sharing further information & content?

ANSWER: why, it's EMAIL! you stupid mofo.  and also your IM client, and your SMS history on your cellphone, and nowadays your photostream & Facebook wall & tweetstream & everything else related to the Centralized ME.

Now, WHO has the largest collection of email / IM data on the web?  Well i'm guessing the order looks something like this:

1. Yahoo (~400-500M email users, ~10 years of data)
2. Microsoft (~300-400M email users, ~10 years of data)
3. AOL  (~100-150M email users, ~15 years of data)
4. Google (~100-150M email users, ~5 years of data)

note for the record, MySpace & Facebook also have a shitload of this data, as do other social networks, altho like Google they're a bit newer to the game than Yahoo, Microsoft, & AOL who've been collecting all that data for over a decade.

ditto for cellphone carriers, especially in geographies where text messaging is more prevalent (= non-US, altho we're finally catching up).  except you don't really have to worry about these guys, since they're even more clueless than the big web platform dinosaurs.

so now recently, Facebook & MySpace & Google have all rolled out offerings to demonstrate off-network profile access, friends list, & other social network platform services infrastructure to enable any other 3rd-party website to provide Facebook Platform-style services & apps.   previously Microsoft, Google,  Yahoo, & AOL have created authentication & contact APIs to enable use of login infrastructure & address book services on 3rd-party sites. 

NOW i'm not sure what this is so damn hard for people to figure out, or why it's taken over a decade for Microsoft, Yahoo, or AOL to get their ass in gear, or why Google didn't do it in the last 5 years, and why Facebook Platform (which was built in barely a year?!?) blew past them all to become the first legitimate Web OS (walled garden or not). 

But now that everyone has FINALLY woken up, the next step is to put all this shit together & make it useful for everyone else OUTSIDE the walled garden.  In short, that means:

1. Use 3rd-party acct infrastructure to provide "no login rqd" single sign-on
2. Use profile data for landing page customization & campaign targeting
3. Use email data for friend lists, filtered by msg frequency & keywords
4. Use all of the above to enable viral distribution on the non-social web
5. Use payment info (after MSFT/GOOG buy AMZN/EBAY) to buy stuff

Platform vendors -- at the very least Google & Microsoft, hopefully Yahoo & AOL too -- should be offering these enhanced services for any 3rd-party sites that utilize the above infrastructure.  Perhaps it will take further consolidation to make this happen.  My guess is one camp eventually is Microsoft + Yahoo + Facebook + Amazon, and another is Google + AOL + MySpace + eBay, but those parts could fit together slightly differently.  Regardless, once you combine portals + search + social networks + messaging + commerce, you get a very very interesting & quite lucrative combination of assets.

Those assets SHOULD be utilized to create a Web Operating System which in turn drives the implicit web that accelerates user acquisition, improves activation & retention, energizes referral, and eventually drives substantial increases in revenue for a whole new wave of web 3.0 startups.

Of course i've already covered all of that in Startup Metrics 101.

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Bernard Lunn: Microsoft=Ali, Google=Foreman, & "Web 3.0" = "Rumble in the Jungle" (i'll let him explain)

Bernard Lunn has just finished writing a pretty amazing 3-part tour-de-force on the coming Internet "post-recession phase transition". and guess what -- the resulting big winner is probably NOT Microsoft, NOT Google, but rather The Little Guy!

(yay! that's me :)

Bernard's 3-part set of posts are here:

1. The Whatchamacallit, Post Recession Phase Transition
2. The Emerging Main Street Web
3. Dancing With Gorillas: The New Web Era

The articles are long, but they're good... they also reference several other amazing posts too.  well ok, several amazing posts, and my amazingly insane Google vs Microsoft rant about Web 3.0 = Hailstorm 2.0 (only amazing thing in my post was the choice of font sizes & colors... yes, i know... i'm working on a custom font called "Kidnap Ransom Note Helvetica", coming real soon).  along with my tinfoil helmet piece, he references another truly amazing look-forward post by Paul Ford (written back in 2002, altho presented as future history in 2009) called How Google beat Amazon and Ebay to the Semantic Web. 

i remember reading that humdinger back during the recession, and just being floored by the vision.  there was also a followup animation called Epic 2014 that chronicles the rise of "GoogleZon" (= Google + Amazon), similarly visionary.  after reading Bernard's articles, i'm realizing again how incredible those 2 pieces were, especially since they were written 4 & 6 years ago.  the Epic 2014 flash animation is re-posted below... it's almost comedically conspiracy-minded, but if you take a step back you have to be impressed with how close to on-target the vision is... in fact, it's not even out of bounds to say the prediction of a Google-Amazon merger could conceivably still happen (or Microsoft-Amazon, or Microsoft-Ebay, or Google-eBay, etc etc).

anyway, i think Bernard's overall summary blog trilogy is a relatively good & mostly sane analysis of where we're headed in the next 2-3 years, and it's probably less crazy than my own version. 

again, i highly recommend checking his stuff out... it's excellent.

btw, just have to give extra props to Bernard for the visual imagery re: Microsoft = aging champion boxer Muhammad Ali duking it out with Google = young George Foreman, aka the Rumble in the Jungle -- classic Ali-Foreman fight in Zaire, basis for the documentary When We Were Kings.  that is SO on target.

the analogy fits perfectly... except that Ali won that fight, and i'm not sure whether Microsoft will win this one. regardless, as Bernard points out, the real winner is you & me, Joe Six-Pack Web Consumer. 

that's right... you read it here first.

Web 3.0 = great taste AND less filling.

Startup Metrics 101: a Product & Marketing Workshop (@ Web 2.0 Expo SF 2008)

Here's the Startup Metrics 101 presentation Hiten Shah & I are giving at our Startup Metrics 101 workshop  at Web 2.0 Expo SF this afternoon:

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UPDATE: some terrific followup commentary on Startup Metrics from Andrew Chen, who is a bonafide Wile E Coyote SUPER GENIUS, and who came up with a lot of ideas Hiten & I stole from liberally for our presentation ;)

Note: we appreciate any comments or suggestions you have, and in particular please feel free to make comments below about any additional tools & resources of note we should include for Acquisition, Activation, Retention, Referral, and Revenue.  AARRR!

Web 2.0 Expo SF: Series of Tubes + Startup Metrics 101

Starting tomorrow, i'm helping organize the biggest geekapalooza north of SXSW: Web 2.0 Expo runs all week in San Francisco. 

along with Brady Forrest & Jen Pahlka, i'm co-chairing the largest gathering of nerds in the free world (disneyland for nerds, some might even say :)

For the past six months, we've been working hard to put together over 100+ sessions and 200+ speakers on topics such as:

• Strategy & Business Models
• Marketing & Community
• Design & User Experience
• Web 2.0 Fundamentals
• Web 2.0 Development
• The Mobile Web
• Web Operations
• Social Networks & Platforms

If you're in town this week, i hope you'll stop by & check it out.

I'll also be giving a Startup Metrics 101 workshop tomorrow with Hiten Shah & Vanessa Fox.  If you're trying to figure out what your startup should be focused on & how to measure it, drop by and find out.  At the end of the workshop we'll do a few Extreme Startup Makeovers for any brave souls willing to subject their websites to public review & commentary (promise we'll play nice ;)

So hurry up & get those tubes humming!

Google Q1 2008 Earnings: "Comscore, Eat My Shorts."

All is well in the valley again: Google returns to kicking much hiney.

(& in particular, Comscore has Eric Schmidt's foot tightly secured up its arse)

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Google sez: I'm STILL the JUGGERNAUT, BITCH! (courtesy of web analytics + Google Website Optimizer)

I've written before that while most people realize how dominant Google is in search, they don't realize how dominant Google is in web analytics. and imho, even fewer people understand why Google is placing such a huge bet on analytics (& checkout, & a/b testing), which i believe is required in order for them to pave the way for future growth in CPA-based advertising. 

yep, they're still The Juggernaut, bee-atch!

side note: many folks may be aware that one of the more notable transitions that occurred during the end of the last dot com bubble / recession of 2000-2004 was the dropoff in CPM-based advertising (Yahoo & AOL) and the simultaneous birth / growth of CPC-based advertising (Google & Overture->Yahoo).  this isn't really that surprising, since during tough times there will always be a flight to quality / lower risk, and qualified clicks (CPC) are certainly lower-risk / higher-quality than impressions (CPM).

looking forward, while i don't quite agree with folks who think another internet recession is looming, i would observe that any such pullback will likely create a new & further flight to quality, which i believe could spur further growth in CPA-based advertising (which typically results in a specific conversion and/or transaction).  in other words, CPC (clicks) is better than CPM (impressions), and CPA (actions or transactions) is better than CPC. 

with impression-based advertising, i hope some % of users who see an ad click on it, go to a website, and convert to an action or sale.  with click-based advertising, i know how many people click thru to the site, but i still don't know how many convert to an action or sale.  but with CPA, i only pay for the specific conversions, actions, or transactions that actually happen.  wotta deal!

This inexorable, incremental advertising [r]evolution is illustrated below:

now if you believe this analysis, you might suggest companies that control point of sale / transaction & conversion data are well-positioned to take advantage of this potential next wave of advertising... and you would be half-right, in that companies like eBay & Amazon (& actually also Yahoo Stores, Craigslist, & several other e-commerce sites) know exactly when sales occur, and could possibly setup a way to allocate & charge for advertising based on the potential for leads that actually convert.

however, most e-commerce companies aren't adept at offering "turn-on-the-faucet" advertising solutions that drive more users to their listings or eBay storefronts at the drop of the hat.  furthermore, i don't think they're well-prepared to gather data via web analytics to see which merchants they should be sending the best traffic to (just give me the GOOD leads, murray!).  this is kind of curious, since theoretically they have all the data they need to make it happen.  but so far, Google has been eating their lunch WITHOUT having hardly any point-of-sale transaction data (albeit with the modest success of Google Checkout they now have a little, and with Google Analytics they are gathering quite a bit).

still, all of this conjecture is moot without a strong ability to understand user behavior on websites prior to actions or transactions occurring.  and to date, Google Analytics -- like most analytics tools -- has not been very decision-oriented.  that is, the output of most web analytics tools do not drive towards making a decision... they simply sit there & look pretty.  great if you're sending a report to your boss, but kinda crappy if you're trying to figure out what features & marketing actually drive better performance.

Google Website Optimizer (multivariate testing / landing page optimization) is an absolutely critical piece of the web analytics / CPA puzzle that *does* provide exactly that type of feedback.  it allows you to conduct a series of experiments that combine various copy & graphics, and select the combination(s) that work best. 

as of yesterday, it's now available to anyone, on any website, free of charge.

wake up folks: time to smell the coffee.

and start COOKING... with GAS.

Web 3.0 isn't the Semantic Web, it's Hailstorm 2.0. Why it Matters & How Microsoft-Yahoo can beat Google.

note: this isn't an April Fool's post, at least not intentionally...

Semantic Web, WTF? 

Blogga please, tell me something i give a shit about.

while i find the concept of a semantic web intellectually stimulating, for the most part i think it's just a lot of geeky mental masturbation (did i just repeat myself?).  personally i hope folks like Metaweb are successful, but i have a feeling it will take awhile to get there.  maybe in 5-10 years let's take another look & see where we're at. 

Until then, i'd rather talk about something with near-term (ie, before the Singularity) implications.

so i have a more practical assessment of what "Web 3.0" is going to look like: it's the "always-logged-in internet", and i'll predict that we could get there in just 2-3 years.  the key to all of this is aggregating large groups of user logins, using friend lists, messaging systems, & feeds for relevant targeting & viral distribution, and integrating payment systems / online wallets to close the loop & conduct ecommerce transactions.

Facebook is almost there with all of these components (e-commerce is coming soon), but even though they're ahead of the game the big winners are still likely to be the two remaining Internet juggernauts Microsoft & Google, and whomever buys Yahoo & AOL (see MSFT & GOOG). Of course NewsCorp / MySpace and Apple will also be significant players, and there's certainly a continuing role for major ecommerce players like eBay and Amazon (or at least their underlying payment systems).  But it wouldn't be surprising to see many of these services consolidated into just 2-4 vendor alliances over the next few years.  the benefits to any of these groups will be substantially greater distribution, user engagement, & monetization.

still with me, Inter-tards?

yeah, i know it sounds like a big clusterfuck, but let me walk you through it.

(note: i'll limit my crystal-ball gazing to the US / English-speaking countries, since i'm not really qualified to talk about the global scene, altho i was impressed by this recent interview & presentation on asian internet & social networking services by Benjamin Joffe).

Microsoft wants Yahoo like Imelda wants Shoes, but Not for the Reasons You Think

Microsoft is about to buy Yahoo, yet most people still have no frigging clue about the real reasons this deal is happening.  for sure, those reasons do include eyeballs, search, & advertising -- Microsoft is prudently paying up for Yahoo's leading share of eyeballs & page views, and more importantly its [gradually decaying] share of the search & online advertising market, which IAB says totaled ~$21B in 2007, and is still growing quite nicely. on those merits alone, and counting the book value of Yahoo's minority stakes in Yahoo! Japan & Alibaba, Yahoo is easily worth $40-50B... for the right buyer, anyway.  but if the Borg was just trying to buy another portal and/or shore up a distant #2-3 position in search, it probably wouldn't be worth the hassle. 

this discussion is timely since the real story is this: Microsoft is trying to leapfrog Google's dominance in search by buying a similarly dominant some might say monopoly position in email & IM, and use those assets to create a universal web login, aka Hailstorm 2.0.

this is vintage Microsoft, right out of the embrace & extend playbook, and it just might work.  note they probably still need a dominant web payment service to seal the deal, but it's not inconceivable to think Microsoft goes after eBay (to get PayPal) or Amazon after they swallow Yahoo.  either would suffice.

btw while i know this sounds like a vast right-wing conspiracy, let me be clear -- the benefits to users are tremendous if/when this starts to happen, regardless whether it's Microsoft or Google (or anyone else) who's leading the charge. 

and for those of you who think Facebook Apps are the biggest waste of time since Tetris, imagine what could happen if the targeting gets a helluva lot better & we start using the same social sharing / viral distribution techniques to discover cool stuff on the open web...

... and then buy it together at substantial group discounts, like a pack of electronic wolves bringing down a very big & tasty e-caribou.  mmm, yummy.  if you think Facebook NewsFeed, Twitter, & FriendFeed are addictive, wait until you see Viral E-Commerce in action.  it will be one giant Fucking E-Feeding Frenzy.

but before we get to end-game, let's try & figure out wtf Web 3.0 means...

"Web 3.0": It's a Series of Tubes

over the past few years i've refrained from offering high-minded opinions about what Web 2.0 means, other than a) it's a good name for a web conference, and b) ajax & flash are cool to look at / drag around.  beyond that there's no real magic to Web 2.0.  sure, lots of web users can help you beta test your startup, crowdsource good content, and filter it better... you can certainly make use of that.  but the biggest benefit of the internet is simply being able to measure & collect user feedback in real-time.  if you're smart, you can use that feedback loop to test for better landing pages / conversion, iterate incrementally, & make better decisions -- resulting in better user experience & (hopefully) the ability to make [more] money.

so when people have long conversations about "Web 2.0" i usually think they're either full of horseshit, selling something, or both.  and until recently anyone who said anything about "Web 3.0" was full of horseshit squared.  given that perspective, believe me it's saying something when i go out on a limb like this and use Web 3.0 in the title of a blog post.  i may indeed be full of it myself, but i really do believe there's going to be a sea-change in how people use the web over the next year or three. 

and while it's related to innovations in social networking & social app platforms, i'm not sure Facebook or MySpace (or even LinkedIn) are the ultimate winners in this one.  social networks are clearly part of the overall web [r]evolution, as are internet powerhouses Apple, eBay, & Amazon, but this one still comes down to either Google or Microsoft (note: assuming Yahoo gets bought by MSFT, & AOL gets locked-up by GOOG one way or another)

Why?

Because the Future of the Web belongs to whomever controls Search, Content, & these 3 core infrastructure components:

1. User Logins & Passwords
2. Friend Lists / Address Books
3. Payment Systems

Messaging systems (email & IM; also SMS) comprise the largest aggregations of user logins.  They also have implicit social graph data & targeted friend lists buried in their data stores, but they take a little mining to get to.  The #1 and #2 players in messaging are Yahoo & Microsoft, with Google & AOL duking it out for #3 (note: Gmail is growing a lot faster than AOL).  And if you include messaging on social networking systems, Facebook & MySpace are also significant players.  These two have advantages over other auth / identity systems, since they've already built out Friend Lists, News Feeds, Social App platforms, & other viral mechanisms that enable amazingly efficient (if spammy) distribution vectors.  But they still need better ways to monetize; and currently Google is doing that best of anyone via search. ecommerce systems like eBay & Amazon are also doing it well via online shopping & online wallets (PayPal, Amazon 1-Click), & Apple is doing a nice job via iTunes collecting payment info on millions of users too. 

I'm sure i'm overlooking a few significant players, and like i said this ain't a global market analysis, but hopefully you get the general Web 3.0 picture.

if not, here it is summarized:

The Always-Logged-In Web: No More Passwords, The Targeted Friend List, & Viral E-Commerce

"Web 3.0" is the condition which exists when someone is always "logged in" on the web, and can move from site to site without ever having to re-enter a username/password. 

It means my address book / list of friends is always available, and more importantly that my current context is understood and considered when i want to share my experience with others.  It means when i'm asked to "send to a friend", instead of seeing a list of 150 friends, or asked to upload & spam my address book of 1500 contacts, i'm presented with a list of only 5-10 contextually-relevant friends... who might be interested in knowing when i'm surfing an ultimate frisbee website for parents of 2 kids, or about to buy a book about italian christmas cuisine traditions in the PA-OH-WV tri-state area.  if you think Beacon was scary, then this service probably isn't for you... but i bet it will work fantastic for many folks, with a bit of tweaking & tuning.

Currently the technology to pull this off is available in bits & pieces through the various internet platform service providers i've noted above.  None of them has enough critical mass of a) users and b) technology components to pull it off by themselves, but with the right acquisitions and rebel alliances, a comprehensive solution is within reach of several vendor groups.  The most likely leaders of those groups are Microsoft and Google, with participation / key infrastructure from other leaders in messaging (Yahoo, AOL), social networking (Facebook, MySpace, LinkedIn), and ecommerce (Amazon, eBay, Apple).

i'll followup up on this core observation in a few future posts, but i think i've outlined the main points.

other interesting items for future posts / discussion:

• engagement: using profile data for landing page optimization
• distribution: using messaging data stores for better contact list targeting / keyword relevance
• monetization: using targeted friend lists & feeds for "viral e-commerce"
  

Business Models for Social Networks: Monetizing Social Capital, The Long Tail of Cool, & The Friends List.

Q: Social Networks still Sexy? 

Or is the Thrill Gone?

well, what's new folks... turns out Teh Sexy depends on CASH MONEY, G. 

which means we probably need to do more work on social network monetization & business models.

many folks rip on Facebook & MySpace for having weak business models (including me, see previous post on Facebook Monetization). which is probably why MySpace is opening up their platform and launching a new "hyper-targeting" ad service, and also why Facebook recently hired Sheryl Sandberg... both companies are trying hard to figure out how to make [more] money, both for themselves and also for their platform partners / participants.

Don't get me wrong here -- FB & MyS are both viable entities with their current monetization, but they'd be a hell of a lot more interesting if they could prove customers are worth tens or hundreds of dollars per year, instead of just pennies or single dollars.  Similarly, VCs would probably show a lot more interest in putting money into more SNS categories & niche verticals if any of the current ones can demonstrate traction in $, not just users & page views.  RockYou & SocialMedia & Lookery & VideoEgg claim to have solved the crappy monetization, and each of them has shown some potential for creating a lot more value for publishers / app developers (and those guys are a lot smarter than i am, so more power to you folks -- keep sending those checks to developers, they need it!)

But i think it's gonna be an uphill battle for most SNS, because currently most users of broad-based social networks aren't exhibiting targeted/-ing or commercial behavior.  They're just hanging out.  They're browsing.  They're playing games.  They're socializing & communicating.  They're looking at pictures & listening to music & watching videos.  And of course, they're poking each other.  All these activities are social, however they're not very focused on actions leading to high-value transactions which can be translated into more cash money, G.  so for now, they gotta make it up in volume.

Now there are exceptions, such as LinkedIn (which i think is making good money on 1/100th of the FB/MyS userbase).  And there are also category verticals aligned with social behavior, such as music apps (iLike), movie apps (Flixster), or book apps (iRead, Virtual Bookshelf), and other sport- and fashion- apps.  And category verticals will have higher CPMs, and those apps could very reasonably collect millions of users & monetize well.  Jeremy Liew from Lightspeed wrote a great post on business models for Facebook Apps last fall that summarizes # page views / installs might be required to generate minimal amounts of sustainable revenue.

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But for the most part people come to MySpace & Facebook to have fun, and not to perform search-focused behavior, commercial transactions, or other productivity-focused behavior. again, LinkedIn is the current exception for broad-use social network where people are generally doing "productive" actions with high potential txn value... altho nowhere near as frequent usage as other SNS.   Personally it's not clear to me whether there are other broad-based social networks that could monetize well, however i do think there's plenty of room for a parent-focused SNS that could be very widely adopted, and could be the hub for a lot of productive / transactional behavior.  But until that comes to pass, we mostly have a lot of people throwing sheep at each other.  Ahem.

So how do these big SNS juggernauts make more samoleons?  I've mentioned a few of these before, plus a few new ones:

1. Integrate Apps, Pages, & Advertising (enable apps to share users with fan pages)
   
2. Offer Targeted Social Search & Commerce Features (on platform, coming soon)
3. Monetize The Long Tail of Cool (rev-share with influential micro-celebrities)
4. Accelerate Off-Platform Transactional Behavior (use profile data & friend lists to increase conversion / commerce)

Let's take a look at each of these in turn.

I. Integrate Apps, Pages, & Ads = Auto-Match [Geeks + Advertisers]

This one is really quite obvious, and i'm surprised it hasn't already happened.  In fact, it's a bit frustrating that Developers and Advertisers aren't being connected directly on Facebook.  FB seems to have punted on it for now, and is apparently leaving it to startups like RockYou, SocialMedia & others to figure out how to monetize "app-vertising".  while i understand Facebook wanting to let the market take care of solving some platform ecosystem issues, this one seems too important to outsource.   

Isn't it better to get this engine humming, & drive more value for everyone?

I think this is what we've seen with AdWords over the years.  Google figured out a great way to match advertisers with a very high volume of users doing keyword searches, and made it super easy for those advertisers to "turn on the faucet" thru a self-service approach to buying search traffic that monetized quite nicely.  KA-CHING: instant money machine.  Aggregate users by keywords, let them click on stuff, and then direct the traffic to the highest bidder (actually, direct traffic to the best combination of ad copy CTR & keyword costing, and optimize for cash generated).

I'm not sure Facebook has done a great job with SocialAds yet, but regardless users executing lots of searches isn't quite what FB is famous for (yet).  You have to use what you got, and right now FB isn't a search destination (see next point about integrating more search & e-commerce).  However, it IS a pretty amazing place for viral distribution & app installation / usage. 

So how could FB take more advantage of monetizing virality & app distribution?

I would offer 2 very basic observations:

Observation #1: Developers build apps that acquire lots of users.  They want money.

Observation #2: Advertisers want to acquire users.  They have money.

Hmm... what's missing here?  How about a marketplace for Advertisers to set open bids on per-user acquisition costs? How about enabling apps to share users with Facebook [non-people] Fan Pages that represent Companies, Products, & Brands?  Let's call it Adwords for Apps.  Come on Facebook... turn SocialAds into this, and your developers will LOVE YOU.  so will Advertisers.  In fact, this kind of relationship is already happening in the market, but requires contracts & negotiations and TOO MUCH FRICTION to develop without more automation.  Seems too important to leave to the market, and we need the platform economy to grow faster... buy one of the appvertisers if you need to, but help accelerate matching by automating the process.

Not clear what MySpace is planning in this area just yet, but hopefully they will be creating similar opportunities, and connecting developers with media & entertainment advertisers on their platform.

II. Offer Targeted Social Search & Commerce Features

So if your users aren't demonstrating targeted or transactional behavior, why not introduce more opportunities for them to conduct that type of behavior?

I'm not going to do a deep dive on this one, since it will probably rollout on Facebook pretty soon.  FB is already rumored to be working with developers on a Commerce / Payment API beta, and Ben Ling mentioned it publicly for the first time at Graphing Social Patterns West and i'd guess that means it's not far from release.  wouldn't be surprised to see it sometime in next few months, possibly at the upcoming Facebook F8 2008 event.  FB could also integrate / enhance search functionality by adding social recommendation features that will increase targeting behavior, and perhaps increase their advertising & sponsor $$$.  Either / both of these developments will likely expand monetization opportunities quite a bit, for both Facebook and/or app developers.

MySpace already has a searchbox and some commercial options for entertainment & movies, and even has some more productivity-focused stuff like MySpace Jobs, powered by my old employer SimplyHired.com (disclosure: i'm still an advisor & investor... keep up the good work guys :)  Not sure if they just need to do more to share rev with their nascent platform developers, but there's certainly room here for them to develop better economics and grow the market.  I also don't get why more bands don't embed PayPal buttons on their profile pages so people could just buy their songs directly (is this against MySpace TOS?  isn't this mind-bogglingly simple?  what am i missing here?)

III. Monetize the Long Tail of Cool (= rev share on recommendations, social capital)

I've mentioned this idea before of enabling social network "micro-celebrities" to monetize their social capital by various means, perhaps through some kind of rev-share on news feed messages that other users click on (aka "FeedSense" ?), or via clicks on their profile or invitations, or via other rev-share modifications to the Beacon feature.  Not sure of the mechanism here, but pretty sure a rev-share makes sense somewhere (but a rev-share on what?  oh yeah, back to making money again.)

Definitely the students in our Facebook class at Stanford noticed that certain users drove a much more substantial amount of app adoption / distribution than others, and it's not unreasonable to assume that there are millions of micro-VIPs in online local groups that represent the Paul Revere or Tiger Woods or Michael Jordan for their local virtual community.  These folks that push the tipping point of a new meme, or amplify an existing one, are the people that create/add value in social networks.  And the really cool thing is that Facebook & MySpace know EXACTLY who these people are, and could choose to highlight & reward them for their efforts.  Fame & Fortune await for thousands of mini-Tigers out there.

Of course, any monetization of social capital runs the risk of cheapening the currency, and people who burn up their good name / fame by spreading crappy brands or services will get demoted, and/or their currency will be devalued.  However, on the flip side, the average nobody who keeps sharing great stuff and helping their friends discover it could be rewarded handsomely with fame, if not fortune.  I know i'm already motivated to share cool stuff into my feed, and i appreciate others who do the same -- i just wish there was a feedback loop for me to know when i suck and when i don't with the stuff i share.  Again, this is something Facebook or MySpace could easily do by monitoring & measuring internal distribution of content & apps, and providing feedback on what items are being amplified / damped, and perhaps even using that feedback to reward people financially.  What's cool about this stuff is it takes advantage of proprietary assets these SNS have created in viral distribution.

IV.  Accelerate Off-Platform Transactions (It's the Friend List, Stupid.)

I'll leave this one for a bit later... still working on summarizing the concepts.  But let's just that for anyone who is aggregating user data profiles & friend lists, this stuff could be a LOT more valuable off-platform where transactional behavior is already occurring.  Enabling viral distribution on the normal Internets is the key to increasing value / monetization, but requires a few key steps to achieve.  One of these is enabling login off-platform.  Note that this isn't limited to just SNS like Facebook & MySpace, but will likely also include large providers of email, IM, and SMS messaging services -- namely Microsoft, Yahoo, AOL, & Google.  Perhaps also eBay & Amazon & a few others as well.  More on this later.

Okay, so what did i miss?  Any other cool ideas for monetizing social networks?  Comments, please.