This afternoon the Wall Street Journal reported that ten privacy organization assisted by the Electronic Privacy Information Center (EPIC) have formally filed complaints with the Federal Trade Commission for Facebook's recent website changes to its privacy settings. The company spends a lot of time and money trying to mitigate government scrutiny and interference in its business. The problem here is Facebook has made "privacy" part of their business. The 350 million users of Facebook have a wide range of understanding and awareness regarding what the company does to both protect and stretch the end user's social graph as it relates to privacy. I voiced my opinion on other blogs that the average Facebook user would have difficulty understanding the privacy setting pop-up screen in the context of logging in to the system. While it did provide the option to reset the settings to those previously configured, the settings were altered during the conversion to allow search engine indexing until you went in to actively reset them. Your personal profile information and photos were set to "everyone" until you logged in to reset them. Not sure if the company has a strong consumer privacy advocate to balance the development and marketing organizations.
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According to Comscore data, Facebook added 40 million members in February. Meanwhile, MySpace is half the size today where a year ago both were serving over 115 million people per month. Today, Facebook serves over 275 million monthly unique visitors. While Steve Rubel claims Twitter is peaking as it recently jumped to 4 million monthly visitors from 2.6 million in one month, I don't see it. Many corporations have recently included their Twitter handle in their press releases, and it's getting more business users. There are an estimated 520 Twitter applications. The only thing that would slow them down is persistent service outage or lack of a viable monetization plan. They recently raised $35 million at a $250 million valuation, not bad. The key difference I see is their phenomenal success with the Twitter API proliferation. They got this right from the get-go as opposed to the starts & stops of Facebook. Twitter has a live of its own and is rapidly reaching critical mass.
Facebook finds itself embroiled in lawsuit waged by founders of ConnectU, the Harvard website where Mark Zuckerberg once programmed. The article with complete details was put out by 02128 Magazine. Having promised to finish the ConnectU site with the sites founders, Zuckerberg informed them on January 14, 2004 that he was working "on another project." On February 4, 2004, he launched Facebook. Recently, Facebook just completed another round of funding provided the Chinese billionaire, Li Ka-shing - the $60 million investment was small bet given he is the 9th richest man in the world according to Forbes at $23 billion. What is troubling now for Facebook is the online blogs and comments where you are starting to see users taking down their profiles and calling for Mark to step down. The reporter for 02138 obtained the documents from the Federal Appeals Court. The documents were available for download but have since been removed since they contained Zuckerberg's social security number and other personal information. The privacy watchers and media are having a heyday with this - the irony of the Facebook founder who wants to collect and sell personal information on 50 million people doesn't want his information out there. True, his privacy was violated and this week Facebook announced some changes to its ad platform, Beacon, to give users more control of their data. The financial investments provide plenty of resources to squash any legal maneuvers. For the many industry watchers comparing Zuckerberg to Bill Gates, they more fuel to the fire. Bill as a Harvard dropout who, along with his classmate, Paul G. Allen, presumably copied a version of the BASIC compiler designed by two Dartmouth college professors. It's usually not the first with the idea; it's the first to market who wins. For now we'll have to see how many Facebook users know or care about this lawsuit.
Microsoft beat out Google for a stake in the growing social networking company. The investment represents a $15 billion valuation which Greenspan would certainly think exemplifies "irrational exuberance." With more advertising spend moving to the web, this opportunity represents a way to specifically target users based on their hobbies, favorite music, location, age and gender - just to name a few. According to eMarketing, the U.S. advertising market for social networking sites is forecasted to exceed $900 million this year. The deal for Microsoft is access to international expansion by Facebook where they will be able to influence more of how the model develops. According to ComScore Media Metrix, Facebook experienced over 129% growth in unique visitors year over year compared with only 23% on MySpace. Microsoft has struggled with their online investments over the last four years and this represents a way to energize that group. Here's where the social networking sites have changed the traditional (if we can call it traditional now) online advertising model. Typically, users are presented banner and rich media ads depending on what they are doing on a web page or results from a search query.
Google adwords have led the charge and this is a very profitable business model today. Customers search for things, ads are presented, click-through happens and the online cash register rings. On social networking sites the user's purchase decision has nothing to do with search. It has to do with what their affinity group is doing, what their friends are recommending and other online discussion about the goods and services being consumed by their social network. Both Google and Microsoft are at a strategic disadvantage here. I will analyze this more thoroughly later. This investment is also overshadowed by a competitive war between Google and Microsoft. Google has stepped up its investment and expansion in office productivity applications offered as a service and Microsoft has stepped up their online advertising business. Ballmer was asked about this at the Gartner conference. They are going after each other's core business. The companies in the middle, like Facebook, will not be collateral damage - they will change the way marketers think about online advertising.
I didn't get an invitation to the Web 2.0 summit this year; instead I got a nice email from "the team" to attend the upcoming event in Berlin or Japan. It would have been a chance to see Steve Ballmer, Marissa Mayer (from Google) and Mark Zuckerberg all in one place. The invitation would have given me the opportunity to spend the $3600 for a ticket. We'll gear up for next year. Zuckerberg was reported saying "it's almost wrapped up" when asked how his recent funding activity was going. Rupert Murdoch and Chris DeWolfe announced that they will be opening up MySpace to developers.
Facebook set the pace when they opened up their site back in April. Since then they have had 100,000 developers who have delivered 6,000 applications to their site. That's a lot of development, not to mention the programs or widgets that didn't make it. One open issue remains. Will MySpace allow the porting of their user data to other applications? As discussed before on this blog, the whole issue about how to federate personal information aka "social graph" is unresolved. Google and others are attempting to create standards. The recent announcement of online medical
repositories by Microsoft and Google is alarming to some privacy watchers. Google has created a health advisory council to give some street cred to their proposal. Personal information should always remain in control of the person, not the system. When you allow the signup process at a social networking site to access your personal phone book or email, you can undermine your own security. Some people have experienced receiving emails from people who were asked to join their network without remembering they invited them in the first place. Don't let the world enter your network without a "tickie."
There is a cool new Facebook application just out. It's a customizable version of Bob Dylan's music video, "Subterranean Homesick Blues." You enter in your message text into ten boxes and the program customizes itself. Bob himself scrolls through your message in the video. You can then post it to your Facebook profile. Don't tase me bro, it's all done legally. The creators, techlightenment, won the account to create a Facebook application to celebrate Bob Dylan's forthcoming single and his recent album for SonyBMG.
Facebook has grown quickly but has only taken in $35 million
in venture financing. According to its investors, it is on track to hit $150
million this year in revenue. In 2006, Facebook was valued at $525 million and
received $25 million in funding. The next round of financing will value
Facebook much higher, some investors like Peter Thiel think they could be worth
around $10 billion. Don't count out the other guys, even though MySpace numbers
are dropping, a recent internal Google video leaked detailing plans to
integrate some of their offerings into a 'facebook' like experience. They would
accomplish this by combining Picasa, GTalk, Calendar and Reader.
Every interaction will be managed by a complex web of dynamic feeds based on preference and collections. Google wants to create some standards so users can notify aggregators of their update feed across syndicated content and other Web 2.0 venues. It's all about who can get the applications out faster and grow membership and use of those apps the fastest. One simple application on Facebook called "Visual Bookshelf" helps members find new books by providing recommendations from reviews written by their friends. The company who created the application, Hungry Machine LLC, says the application is adding 10,000 users a day. They have a link back to Amazon and a commission is generated for each book sold online. Visual Bookshelf didn't replace what Amazon does; it merely provides a plug-in gathering point to enhance the Facebook user experience -not requiring them to leave the site to look for books. It's a different channel to market. That's the way you monetize the Facebook effect - rather it be with Google or any other Web 2.0 company.