SocialTimes.com

Posted: 19 Aug 2008 04:40 PM CDT

This afternoon I had the opportunity to speak with Chris McGill, the founder of Mixx.com. For those not aware of Mixx, the company provides a social content discovery service. The key offering is that users get to categorize their content via tags rather than have their content forced into pre-determined categories as Digg and Yahoo! Buzz currently do.

I also discussed yesterday’s opening of Yahoo! Buzz with Chris and what he though the impact on Mixx was. He suggested that Buzz does not target the same group of users that his site does. Chris also mentioned that the site continues to experience spectacular growth, attracting over 3 million users this month. Much of the growth has been attributed to organic sources (friends telling their friends) as well as the launch of the new Mixx communities.

I asked Chris about their monetization strategy and received the expected “we’re not currently focused on monetization” response. This afternoon I also posted that this has become an all too familiar response. If the site can continue to grow by leaps and bounds, the company may be justified in their delayed monetization strategy. I also spoke with Chris about a number of other things, so I definitely suggest listening to the podcast below!

This posting includes an audio/video/photo media file: Download Now

Primary Monetization Model for Social Media: Advertising

Posted: 19 Aug 2008 03:10 PM CDT

If it wasn’t clear enough, advertising is the core source of revenue for all companies in the social web. As I wrote this morning, advertisers provide “the revenue for four out of the five primary types of companies in the social web economy”. In another article posted this morning on Alley Insider, Vasanth Sridharan revealed that RockYou will begin launching advertisements from car advertisers.

Car advertisers are some of the largest advertising spenders in the U.S. In the first quarter of 2008, General Motors spent $536.5 million, Toyota Motors spent $350.4 million and Ford Motors spent $330.2 million on advertising according to Nielsen Monitor-plus. The auto industry was also one of the first entrants into banner advertising and they are also one of the early entrants into social media.

What Matters More: Monetization or Users?

One of the classic statements in the social web industry is “our company is not currently focused on monetization”. The creators of technology products love to spend time focusing on refining their products while building the user base. In the early stage this makes a lot of sense because if only a few thousand users are coming to your site, it doesn’t really make much sense to try to generate revenue.

The strategy of “grow first, monetize later” seems to make sense for a lot of venture-backed companies because they have the luxury of time. Unfortunately though, I really don’t think these companies have as much time as they think. In a world of limitless inventory, investing the majority of a company’s resources in building more inventory doesn’t seem to make much sense.

Social Media Advertising is Nascent

This industry is still young though and advertisers are slowly (extremely slowly) beginning to understand what social media has to offer them. Spending money on a television advertisement does not generate as much interaction with your end consumer. As such we are seeing a number of creative ways to advertise in social media.

At the end of the day though, isn’t advertising just advertising? Advertisers want to invest money in promoting their products and services and they want some way of justifying their expenditures. Early on, social media campaigns provided little data in terms of return-on-equity (ROI). We are beginning to see that change though as new social analytics companies emerge and new forms of metrics generated.

It’s time for social media companies to invest more time in developing advertising solutions rather than their user base. Until someone comes up with a new way of making money through social media, it’s the only way to generate revenue.

Can Facebook Give Consumers Control of Their Data?

Posted: 19 Aug 2008 09:00 AM CDT

One of the primary issues facing consumers in the digital era is control of their private data. Yesterday I wrote about the Peter Jennings special “No Place to Hide” which covered a lot of the issues facing consumers. The reality is that munch of our transactional data is already tracked and used to create custom profiles of our identities. Online there is currently no way to manage that data and all one can rationally conclude is that somewhere along the line our data is being sold.

Give the Users Control

Facebook could provide an interesting solution: enable users to sell their data to advertisers. The pinnacle of this system has been discussed for years. A single system in which users can grant and revoke advertisers’ access to personal data at the user’s discretion. The reality is that such a theoretically beautiful system can’t compete with existing systems. That’s because advertisers can currently purchase your data and then they are free to do as they please.

With the assistance of personal privacy laws, Facebook could potentially give the consumers back control. With Facebook Connect, the users have control which contrasts to the first iteration of Facebook Beacon. In this new system, the users really do have control of the data that remote services can access. As one developer told me though “there is the terms of service and then there’s the laws of physics”.

Challenges Ahead

In other words the system makes a lot of sense as long as the developers abide by Facebook’s rules. Facebook has already had issues with this on the existing Facebook platform. We saw this issue arise when it became clear that users that had used Slide’s Fun Wall application had their entire profiles exposed to other users. Eventually Facebook realized the problem and shut down the application until Slide resolved the issue.

Policing the net isn’t scalable though. Automated systems are important in digital enforcement which means Facebook must focus on automating their policing activities. Facebook is being careful as they roll out Facebook Connect because any flaws in the system could prove catastrophic. Luckily for Facebook (and potentially not so lucky for the developer) users’ personally identifiable data is still protected by Facebook.

Taking One Step Forward

While we may not have complete control of our data in which we can grant and revoke access to advertisers, Facebook Connect is one step in the right direction. The reality is that users must have control of their data. Even Facebook doesn’t give users complete control yet though: users still have their personal data locked within Facebook’s databases and it’s not coming out anytime soon.

There is clearly a competitive rationale behind not giving users’ complete control. Is it possible to give users complete control of data access while limiting data ownership? Definitely and that’s exactly what Facebook is attempting to do. This doesn’t work as a long-term strategy but in the short-run it will most definitely help move toward giving the users back control.

For now we must accept that this is a step in the right direction yet still remain critical of future moves. Privacy is something that consumers lost control of long ago. Perhaps these new social services can begin to give the control back to the users.

The Social Web Economy: Business Development & Sales People

Posted: 19 Aug 2008 08:00 AM CDT

This is a continuation in the series on "The Social Web Economy"

While they don’t exactly have the same roles, I’m grouping business development and sales people into the same category. Both people end up doing a lot of the same things. The sales person’s primary job is to bring in advertising dollars. Whether it’s brands or advertising agencies that they are talking to, this group is generating the revenue for four out of the five primary types of companies in the social web economy (the only one they aren’t generating revenue for is analytics companies).

Analytics companies may or may not have a sales team depending on their strategy. They most definitely have a “business development team”. For the purpose of this post, the primary difference between business development and sales is that business development (or biz dev) focuses primarily on partnerships with other companies that help add value. Sales teams on the other hand bring in absolute dollars.

In small start-ups, the management team (or individual executive) does most of the business development. Advisory boards and boards of directors can also be leveraged to help perform business development operations. The bottom line is that this group is helping most of the companies in the social web economy keep afloat. For those companies that are in the red, these teams are most likely the ones taking the brunt of the beating after a CEO returns from their monthly board of directors meeting.

In order to generate substantial revenue, companies in the social web economy must have business development and sales teams. While the industry continues to search for alternative monetization models, it's becoming increasingly clear that advertising dollars are the primary source of revenue. As such, companies are pitting one sales team against another, each attempting to offer creative new advertising solutions that will hopefully in the end bring in the big advertising dollars.

Unfortunately this space is becoming increasing competitive and in turn we are going to see a growing emphasis on hiring the top sales teams. No matter how you look at it, this group is driving the revenue. That's the bottom line.

Next post in series: “The Social Web Economy: Investors”

Friendster Launches OpenSocial Support

Posted: 18 Aug 2008 07:00 PM CDT

Today, Friendster announced that they have deployed OpenSocial version 0.7 for their platform. In the coming months, the company will begin rolling out version 0.8, the version that MySpace announced support for in the past couple weeks. The most significant part of this announcement is that now developers that have build applications on other social platforms supporting OpenSocial will be able to make the accessible via Friendster much quicker.

In contrast to Facebook’s 30,000 plus applications, Friendster has only 569 applications. That’s not to suggest that the applications are not being used though. According to Friendster’s own statistics, “over 10 million unique users have added ‘apps’” since the launch of the platform last year. While less significant than some of the larger platforms, this is still a substantial number.

Monetization will continue to be a challenging issue for Friendster though given that their primary demographic is southeast Asia and the majority of advertising dollars are spent domestically. Whether or not the company is generating substantial revenue, the company has been able to expand its reach in Asia where the competition continues to heat up.

This is the first news to come out of the company since they announced a new CEO and $20 million in funding.

LinkedIn Launches Company Directory

Posted: 18 Aug 2008 05:18 PM CDT

Last week LinkedIn launched their company directory which has been in beta for the past few months. They also introduced the ability to search by company based on industry, location and company size. I wrote about the new directory back in March but I didn’t have the chance to browse through the directory. My first search was to find all of the companies based in the “Internet” industry in D.C. The result? 118 companies. I then proceeded to do the same thing for San Francisco and came up with 505 companies! Not extremely shocking but still informative. Here are the number of internet companies in other popular “creative class” cities:

Atlanta, Georgia - 48
Austin, Texas - 41
Boston, Mass - 132
Chicago, Illinois - 76
Denver, Colorado - 57
France (Country) - 196
London, U.K. - 125
Los Angeles, California - 246
Miami, Florida - 33
New York, New York - 306
Phoenix, Arizona - 21
San Francisco, CA - 505
Seattle, Washington - 84
Washington, D.C. - 118

How accurate is this calculation? Not very accurate because in the United States, the total number of companies claiming the “Internet” industry only amount to 2,323 which is far less than I would imagine actually exist. Then again, LinkedIn was extremely accurate with the companies based in Washington, D.C. so there is a good chance that this is a pretty good indicator.

The directory couldn’t find my own company though (Social Times Inc.) which has been classified as an “Internet” company. There were also other companies missing but so far this is the most accurate directory I have found for “Internet” companies based in the Washington, D.C. area. Take a look around the LinkedIn company directory and let us know if you find any problems with it. Do you think this is a useful tool?