I Do Not Agree with the Hog Pile on Facebook

There’s a growing trend in the media to attack facebook.  It started when their redesign got pretty bad reviews, continued when their CFO left, and now is gaining steam as mainstream outlets are questioning it’s core business proposition. There are three different things here and the media is pointing to them as an indication of Facebook‘s failure.  I disagree.  Here’s why:

Product enhancements. One thing i’ve admired about Facebook is their ability to keep pushing their product forward.  They introduced a great photo experience before any of their competitors (and have grown to be #1 on the web).  Even as they were experience phenomenal growth (they hit 8 million student readers), they completely redid their home page when they introduced the News Feed.  While initially hated by their users (FB blog) and the media (Time article), it set the standard for how social networks should display user activity and is now seen as a stroke of genius.  And growth climbed even higher.  At 70 million users they then completely redid the profile page to be a feed-based page as this is the best way for users to continuously portray themselves (see Tumblr for an example).  This was hated at first too.  Now, they redone the Facebook Home page to better showcase conversations and user activity.  Is it like Twitter? Yes.  Is it hated by their users? Yes. But it is also an improvement.  More than any other company i know of, Facebook is constantly pushing to get better in all areas and doing it fearlessly.  Even if they misstep, I applaud them for it.  From my experience at AOL i’ve seen that when yoy have a large user base it’s very easy to become tentative and second-guess every move.  Not changing becomes the easiest path.  It also means you start dying.   This latest change is more an indication that they’re not dying but moving forward.

Valuation.  Facebook got an absurd $15 billion valuation from Microsoft when it sold them some equity.  That deal was more than just equity sales but it also solidified Microsoft’s relationship with them as their exclusive third-party ad provider (story).  That valuation has become a problem as every new raise that happens in the industry (Twitter,  FriendFeed) is evaluated against it.  Facebook is now raising at a more reasonable level at a $5 billion valuation.  I don’t think this is an indication of failure of FB but rather a reflection (a) that these raises are straight equity and not part of an ad sales agreement, and (b) the market is the worst it’s ever been.  I think it’s ridiculous to think that the environment is the same as it was in October 2007.

Business Model. The media talks about Facebook’s failure to make an ad business out of their inventory.   Time’s article this past week was called, “Facebook Takes a Dive: Why Social Networks Are Bad Businesses.” This is completely ridiculous.  First of all, MySpace is making money.  Let me repeat. MySpace is making money.  They were bought by Fox for $580 million and they then immediately did a deal with Google to sell ads on their search page from 2006 to 2010 for $900 million dollars (details here).  That’s a quick profit of $320 million.  Everything else on top of that year-in and year-out seems to be gravy.  The article in Time continues to say:

What is true is that social network sites have had trouble making money. MySpace was supposed to be a big part of the revenue growth at News Corp. Wall St. thought Murdoch was a genius to buy it. Last year, News Corp had to admit that MySpace would not hit its revenue targets. That is usually not the hallmark of a property that is going to take over the Internet.  Analysts believe that MySpace rival Facebook had revenue of $265 million last year. That is astonishingly low for a company that had 57 million unique visitors in the U.S. last month. And, Facebook also has a very large international user base.

So let me get this straight, even though MySpace is profitable at $500-800 million dollars a year in revenues and even though it’s generated hundreds of millions of dollars for News Corp it’s a bad business becuase they missed their revenue target last year?  That is completely ridiculous. Facebook is a differnt issue.  They have repeatedly said that they are deprioritizing ad revenue and instead focusing on growth and user engagement. Since they started saying this (starting in late 2007), they have grown from 50 to 200 million users.  I’d say that’s pretty good execution. Facebook makes about $275 million a year.  Could they make another 100-200 million if they started selling more ads on search pages and profile pages?  Absolutely.

All of these reasons above are why sensationalist articles discussing the demise of the social network drive me nuts.   Nobody knows what the future holds, but one thing that we can pretty much be sure of is that sites that have great user engagement and activity – and facebook has over 20 million users update their status at least once a day – will get the ad dollars.  Nick O’Neil has a good post on AllFacebook today on why he’s willing to pay a $34 CPM on facebook.  It’s not the silver bullet but it shows that there is a profitable end in sight for the company and it’s not necessarily the horrible business the media would like it to be.

Go narrow and do 1 thing well

I did an interview last night for USC business school where i was asked a lot of questions about Qloud and its beginnings.  Questions like “What advice would you give to aspiring entrepreneurs? What have you learned?”  Well here goes…

i often hear people talk about “doing something big.”  While I admire their desire to change the world, i find it interesting that quite often the companies that do end up changing the world started as small passion projects/startups.  And the business model they find is usually nowhere in sight at the beginning.  Some examples:

  • Facebook started as a Harvard-specific tool to get people to better interact with each other.  After it worked well for Harvard, it expanded to the Ivy’s (and Duke & Stanford), then slowly to other schools and eventually everyone.  That wasn’t it’s original goal.  They just wanted to make it easy for people to hook up – i mean, connect
  • Craigslist started as an email list to share functions, jobs and stuff in San Francisco.  They sat in an office and got emailed tips as to what was going on.  They then added some comments and emailed it out and eventually just posted it to a web site.
  • The Google guys were in grad school and staring at some big servers they had.  One idea they wanted to try was to index the entire web.  Once they did that, they then had to brainstorm as to what they could do.  They never started with the desire to dominate web advertising.  Larry Page Speech
Kathy Sierra at SXSW

This thought of doing something you believe in and are passionate about regardless of the size really hit home for me when i heard Kathy Sierra’s keynote at SXSW this year. She had 16 points on how to make breakthroughs happen.  Point #15 was Don’t mistake narrow for shallow. She pointed at hyper-focused blogs like Passive Aggressive Notes and the “Blog” of “Unnecessary” Quotation Marks as mastering a very tiny sliver of the internet. But you could point to the 3 i mention above (Facebook, Craigslist, and Google) as examples of companies that started narrow and gradually expanded to be game-changers.

When thinking about companies, i think it’s important people try new ideas and things they are passionate about. You’re going to be working 24 hours a day 7 days a week on one idea, so you have to love it. Or as Tim O’Reilly says Work on Stuff That Matters.  It’s clear that startups don’t have all the answers when they begin so at least you can start with something you’re willing to continuously think about.

I was again struck with this thought this morning when i read Clay Shirky’s great post about newspaper and the change they are going through.  He too talks about Craigslist saying:

Imagine, in 1996, asking some net-savvy soul to expound on the potential of craigslist, then a year old and not yet incorporated. The answer you’d almost certainly have gotten would be extrapolation: “Mailing lists can be powerful tools”, “Social effects are intertwining with digital networks”, blah blah blah. What no one would have told you, could have told you, was what actually happened: craiglist became a critical piece of infrastructure. Not the idea of craigslist, or the business model, or even the software driving it. Craigslist itself spread to cover hundreds of cities and has become a part of public consciousness about what is now possible. Experiments are only revealed in retrospect to be turning points.

So, my advice to aspiring entreprenuers is – (a) focus o  something you love; (b) don’t focus on changing the world but rather focus on doing something, one thing, extremely well.  If you execute on those 2 points, it’s easy to expand into something more powerful and profitable.

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Twitter Thoughts – More like MySpace than Facebook

I spent a lot of time this weekend explaining Twitter to people.  People want to know not just what it is but why they should use it.  It’s confusing for people who have never tried it.  It’s so simple yet so confounding.  This chart explains the early stages well: twitter3

One thing i’ve noticed in my explanations is that Twitter is much more like MySpace than Facebook.  I also heard the term “egocasting” for the first time.  It makes sense. Both Facebook and MySpace are social networks but if you look at their architecture, you’ll see that Twitter is more like MySpace in that all profiles are public by default and it’s a place for sharing.

Let me explain more.  one of the strangest things i noticed during SXSW last week was that during panels, whenever someone asked a question, they came up to the microphone and (a) stated their name, (b) said their twitter handle, (c) asked their question.  Everyone did that.  It was amazing.  People at SXSW are entrepreneurs but more than promoting their company, they are there to promote themselves.  People are brands now more than ever and promoting yourself and your brand is more important now more than ever. Twitter lets you do that better than any other social tool.  Just like MySpace allowed bands to simply say, “hey go to www.myspace.com/pinkfloyd” users can say, “hey just go to twitter.com/pescatello to find out about me.”  It’s public, it’s just a URL and it will provide all the info you need to get to know someone.

Whether it’s good or bad that the popular tools of society are built to broadcast yourself out to the world is a good question.  Regardless of the answer, the fact is that Twitter is here and embraced and only go to grow in strength and adoption.  There’s a whole other post on why Twitter caught on. I do think it’s a good tool for our time and it combination of “egocasting,” easy mobile usage, and a great API have helped. I’d love to hear more about what you think. Please comment below

twitter

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Obama poster drama

obama

I heard a great podcast yesterday on NPR about the iconic Obama poster (seen above). The poster is done by a fascinating artist named Shepherd Fairey.  It’s a little known fact that Fairey is also responsible for the Andre The Giant “OBEY” sketches that i remember from the 90’s.  He really gets around.

In this case, Fairey took a photo he found on Google and then altered the neck, the eyes and the colors (and cropped out George Clooney) to make a poster than came to symbolize the campaign.  Shepherd always claimed that he made the poster from an Associated Press photo and about a month ago, it was finally determined which photo he used and who the photographer was. It was a photo of Obama sitting at a press event in Darfur with George Clooney.

darfur

All this would be nice and peachy except that because the photo was an AP photo, the AP came to Fairey and threatened to sue if he didn’t dish out a percentage of revenue he made from the poster. Fairey acknowledged that he’s willing to pay the standard license fee and attribute the photo to the original photographer but he won’t be bullied into paying.  So, instead he sued the AP in an attempt to discourage companies from punishing artists for creating art.

While his argument stands on fair use, to me the real issue is about people making derivative works. It’s the 21st century and lots of people take lots of images and transforming them into art. If each is penalized into paying a bounty for the original source we’re limiting and hurting society.

In this day and age, users are both consumers and creators of content.  So many YouTube videos have copyrighted works in them.  Last week there was a huge fiasco around Facebook’s Terms of Service when they claimed they owned all user uploaded material.  Thankfully, they backed off.  But the backlash from the users illustrates that ownership of property, attribution, and sharing is really important to the web.

If anything this just leads me more and more into believing in Creative Commons. It’s truly the only mechanism that let’s people properly manage their rights

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Leaders and Followers

There’s a new book by Seth Godin called “Tribes” which talks about the startup culture and out-of-the-box thinkers.  Two interesting parts of the book are the parts about followers and the parts about Leaders.

A good question exists talking about the difference between employees and followers.  Employees show up each day and do their tasks whereas a follower is someone who is following a calling. Followers work because they believe not because they are told to do so.   Great companies illustrate this.  You can see people flocking to Facebook and Apple because those companies inspire.  They don’t recruit but spread gospel.  It’s interesting.

This relates directly to the talk about Leaders.  The following characteristics were thrown out in the book:

  • Leaders challenge the status quo.
  • Leaders create a culture around their goal and involve others in that culture.
  • Leaders have an extraordinary amount of curiosity about the world they’re trying to change.
  • Leaders use charisma (in a variety of forms) to attract and motivate followers.
  • Leaders communicate their vision of the future.
  • Leaders commit to a vision and make decisions based on that commitment.
  • Leaders connect their followers to one another.

Makes me think about how i interact with my coworkers and how i behave at work.  Some people are better than others at finding a vision and staying focused on it.  What do you think?  Is this hard for you to do? Do you know some people who are particularly good at it?

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Recording Life

I just read a great article by Clive Thompson called “Head for Detail” about Gordon Bell‘s latest experieement.  Please just read the first 2 paragraphs.  It’s about Gordon and how he is recording everything he’s doing (video, audio, emails, web, everything).  He’s been doing it for the past 14 years and is able to bring up almost eveyrthing.  Clive writes about Bell, saying:

He[Bell] had a tiny bug-eyed camera around his neck, and a small audio recorder at his elbow. As we chatted about various topics–Australian jazz musicians, his futuristic cell phone, the Seattle area’s gorgeous weather–Bell’s gear quietly logged my every gesture and all my blathering small talk, snapping a picture every 60 seconds. Back at his office, his computer had carefully archived every document related to me: all the email I’d sent him, copies of my articles he’d read, pages he’d surfed on my blog.

This really resonated with me as i am already trying to record my life. I have photos up on Flickr, i have my ideas going to my blog, i have my mundane thoughts going to Twitter, my videos going to YouTube, and my friend interactions recorded on Facebook.  I’m already on the web but just in the totality that Bell is.  Storage is getting cheaper and cheaper it’s gone from $233,000 for a gigabyte in 1980 to less than $1 today.  Soon there will be enough storage in your cell phone for your entire life to be stored.  I do this because i want to remember. I want my memories to be accesible all the time and reading the article made me realize how inefficent i’ve been in capturing them.

I really like articles like this becaues they make you think about where the world is going and wonder how human interactions and functions will change.  It touches on how humans will change when we no longer have to remember stuff.  I already don’t remember phone numbers beceuase of your cell phone. What if you don’t have to remember people’s names and interactions and you free you mind to be more creative.  Just imagine – that’s what i’m doing now….

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Why did Flickr stop innovating?

Image representing Flickr as depicted in Crunc...
Why aren’t you better?

I’ve been a big flickr fan for years.  I take a lot of photos and that’s always been my favorite spot to put them.  Flickr‘s been great at pioneering the 2.0 photo experience. They were the first to have a photostream view – not just albums. And they were the first to have tags which allow you to organize your photos in a better way.  However, they haven’t done much lately.  Sure, they added videos which is GREAT but that’s about it.  The look hasn’t changed, there aren’t many new features and i feel that they are getting out developed by facebook’s photo experience and Google‘s Picasa.   Sure those sites have different goals for their photo experience but at least they are moving forward. What’s Flickr done for me lately? Nothing.

Both Facebok and Picasa allow you to specifically name who is in each photo. Facebook does this by “tagging” a photo with a user and Picasa does this by analyzing the faces in the photos.  Both are brain dead simple to use and are really slick.  I’ve always used Flickr’s tags to do this with thier photos but i’d like to more specifically associate a photo with a user.

I also think that Flickr could make the “editing” of photo metadata easier.  The order a picture shows up in your photostream is effectively the date you took it – but if you upload a photo much later, you have to go back and manually adjust the dates so it appears in the right spot. Flickr has always made title and description editing amazingly simply by keeping it in-line but adjusting the date and privacy of a photo still takes you to another page.  Why can’t they make that easier? Same thing with setting a group of photos to a later date. This is too hard to do.

The bottom line is that i still love Flickr but i feel that it’s getting stagnant.  i’m starting to think that Flickr has officially become a Yahoo company and not a nimble startup.  And i don’t want to hitch my wagon to something that is in maintenance mode.  I knew this day would come and i think the day might finally be here. I think i could say the same about delicious too.  That site could have been much bigger than it is.

I’m wondering now – where should my photos go? What’s going to be be even better.  I don’t like how Picasa is only albums but i do like how they are at least getting better and better.  Is there a 3.0 photo experience that i can use?

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How many people can you know? What's your Dunbar number?

In the same NY Times article i just wrote about, there’s a great section the “hard-wired upper limit on the number of people he or she can personally know at one time” and compares that number between humans and apes.  It reads:

In 1998, the anthropologist Robin Dunbar argued that each human has a hard-wired upper limit on the number of people he or she can personally know at one time. Dunbar noticed that humans and apes both develop social bonds by engaging in some sort of grooming; apes do it by picking at and smoothing one another’s fur, and humans do it with conversation. He theorized that ape and human brains could manage only a finite number of grooming relationships: unless we spend enough time doing social grooming — chitchatting, trading gossip or, for apes, picking lice — we won’t really feel that we “know” someone well enough to call him a friend. Dunbar noticed that ape groups tended to top out at 55 members. Since human brains were proportionally bigger, Dunbar figured that our maximum number of social connections would be similarly larger: about 150 on average. Sure enough, psychological studies have confirmed that human groupings naturally tail off at around 150 people: the “Dunbar number,” as it is known.

The big question then is: Are people who use Facebook and Twitter increasing their Dunbar number, because they can so easily keep track of so many more people?

I find my social networks work against/for this number in 2 ways:

  1. For my good friends the relationships are strengthened through social networks and Twitter. I learn more about them and we’re able to interact more often
  2. There are weak friends that i normally would discard and never talk to again but instead they hang around on Facebook and Twitter and i gradually grow to learn more about them.  Over time they turn into actual friends or i delete them and they turn into nothing.
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Being Digitally Close

There is an article in the NY Times a few weeks ago called “Brave New World of Digital Intimacy” and i think it’s one of the best pieces i’ve read in a long time at explaining why Facebook Status, News Feed, Twitter and other new digital platforms are useful and popular.

The online area that the article talks about is “incessant online contact” or as some call it, “ambient awareness.” In the offline world people pick up on moods by little things like body language, sighs, little comments, etc..  In the online world this is being done by microblogging tools like Twitter (140 character updates), Dopplr (where are you traveling?), Tumblr (what web items do you like), and Facebook’s Status Feed.  The article asks the question that i get asked all the time, Who cares?:

For many people — particularly anyone over the age of 30 — the idea of describing your Image representing Twitter as depicted in CrunchBaseblow-by-blow activities in such detail is absurd. Why would you subject your friends to your daily minutiae? And conversely, how much of their trivia can you absorb? The growth of ambient intimacy can seem like modern narcissism taken to a new, supermetabolic extreme — the ultimate expression of a generation of celebrity-addled youths who believe their every utterance is fascinating and ought to be shared with the world.

This is indeed how many people view it.  But the genius of the article is how it explains the subtle usefulness of the information:

Each day, Haley logged on to his account, and his friends’ updates would appear as a long page of one- or two-line notes. The updates were indeed pretty banal. One friend would post about starting to feel sick; one posted random thoughts like “I really hate it when people clip their nails on the bus”; another Twittered whenever she made a sandwich — and she made a sandwich every day. Each so-called tweet was so brief as to be virtually meaningless.

But as the days went by, something changed. Haley discovered that he was beginning to sense the rhythms of his friends’ lives in a way he never had before. When one friend got sick with a virulent fever, he could tell by her Twitter updates when she was getting worse and the instant she finally turned the corner. He could see when friends were heading into hellish days at work or when they’d scored a big success. Even the daily catalog of sandwiches became oddly mesmerizing, a sort of metronomic click that he grew accustomed to seeing pop up in the middle of each day.

This is the paradox of ambient awareness. Each little update — each individual bit of social information — is insignificant on its own, even supremely mundane. But taken together, over time, the little snippets coalesce into a surprisingly sophisticated portrait of your friends’ and family members’ lives, like thousands of dots making a pointillist painting. This was never before possible, because in the real world, no friend would bother to call you up and detail the sandwiches she was eating. The ambient information becomes like “a type of E.S.P.,” as Haley described it to me, an invisible dimension floating over everyday life.

This is exactly how it works.  Now, i don’t have ESP through this but i do enjoy the knowledge of how my friends’ lives are progressing. These tools have enabled that to happen and it has certainly enhanced my relationships with them.

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