Are third party Facebook apps the great digital scam?

The last 6 months I've heard the sentence 'hey lets build a facebook app' from clueless agency people more times than I care to remember.

When you ask why - there's generally not an answer.

Well, okay ... there IS an answer. It provides revenue to the agency that build it.

Are they a scam? In 99% of cases I think they are. Just like some iPhone apps (I wouldn't want to be the person who thought the Toyota dealer locator app for iPhone was a smasher of a concept ...)

Check this out - http://www.new.facebook.com/apps/application.php?id=5588308018

I was served up an add to take their cheese toast challenge today on facebook - problem is I live in Victoria, a place where (thankfully) Sizzler doesn't have any locations.

How does this provide anything useful to the user? And what are they doing wasting their media dollars targeting people who can't visit their restaurants?

AU Dodgy patrol: Selling something you don't have

Who is the AU repping house selling Facebook News Feed ad units to clients, but not actually being able to fulfill them?

I have experienced first hand, and heard from others of a third party sales company selling these ad units to agencies, then ignoring requests for screenshots and proof of posting ... and then when repeatedly pressed finally admitting that they don't actually have the right to be selling these ads and trying to allocate the dollar amounts into properties outside of Facebook.

It's dodgy sh*t like this that gives the industry a bad name.

Six months on: Bebo still isn't the biggest social network in AU

From http://www.marketingmag.com.au/case_studies/view/in-the-spotlight-bebo-170

"Within six months we’ll be the largest social networking site in Australia.” Bebo’s Jim Scheinman at the ad:tech conference in February this year.

Whilst there's nothing better than a bit of blow in foreign exec optimism to get the media excited, I wonder how Schienman would be feeling about Bebo's current position in AU.

In July Bebo was at 719,000 users according to Nielsen Netview. Myspace was at 2.6m people. Facebook 3.4m.

Facebook hiring in Oz

So Facebook are looking for a Head of Sales in the Australian market - which suggests local operations (or at least a sales team) isn't too far away.

http://www.facebook.com/jobs/

Facebook's ad model in need of help

Judging by their latest initiative

http://www.techcrunch.com/2008/08/10/facebooks-redundant-ad-rating-system/

This allows users to rate ads with a thumbs up/thumbs down - it also asks them questions as to why they liked/disliked the ads.

Problem is - as TC point out - generally (and I mean generally) click through is a good indicator of this.

Another problem is - ads on social networks generally receive around .01-.03% CTR ... which begs the question ... if users on these platforms aren't interested in clicking on the ads ... why would they be interested in submitting feedback on them. A feedback mechanism implies users are taking notice of the ads, which generally they are not.

Another problem - the system will (for those with the time to add ad feedback) will be skewed towards negative sentiment ... not lukewarm/neutral responses - which are also a problem for the site (as neutral ads generate a low CTR, low yield etc).

Seems there's increasing heat for FB to justify it's massive valuation with inroads into the ad market ... but the more they try and the more they're getting it wrong.

Blog for sale - $3117 USD

According to Websiteoutlook.com my blog has a valuation of $3117 USD.

http://www.websiteoutlook.com/www.mimelbourne.blogspot.com

May as well sell out whilst the market is hot ...

Have a play around with the tool - according to it ninemsn is only worth around $4m USD! Facebook $481m USD. Interesting.

According to websiteoutlook, my blog is worth more than Yahoo!7 - flattering stat but hardly accurate - http://www.websiteoutlook.com/www.yahoo7.com.au

Any prospective buyers can email me.

Facebook ... when are you coming to Australia?

Am I the only one confused as to why Facebook hasn't launched local operations.

For one, they have 3.2m users here.

Two, they currently have a pretty sluggish ad business here and don't seem to be nailing the premium advertisers.

Three, there will be a need sooner or later for Facebook to localise some elements of the platform. Myspace has, relatively successfully, incorporated local content via it's music, fashion, music and impact channels which has given them column inches as well as held most of their audiences interest.

Yes, I am aware Facebook and myspace are pretty different plays (Facebook is a platform and a connector, myspace is becoming increasingly more of a content play), but it still doesn't remove the need to integrate with the locals.

Personally I believe to really cut through in this market publishers need a local edge or at least an angle. Utilities don't ... but the bigger ad dollars aren't in placing ads on anothers utility.

As well as this, I believe Facebook needs to drive a category education job for advertisers and agencies in regards to the best ways to use the platform. Yes, we know users are on it and they are using it regularly. The confusing element is how advertisers can use Facebook without either being cliched, annoying or heaven forbid, both. No one knows the Facebook platform better than Facebook.

Facebook growth has flattened somewhat in the past quarter so the timing seems pretty good to step into the local market and press the flesh. Google has had some success in the past 12 months establishing a deeper agency sales team and knowledge base - in terms of visibility, market service and no doubt revenues. It has also meant Google has taken a leadership position in spruiking the business benefits of search to advertisers - something Yahoo! hasn't done as well.

So, Facebook ... where the bloody hell are you?

Facebook adds MSN Search as a friend

MSN search has given Facebook a firm 'thanks for the add' after the Social Media giant allows MS to provide "web search services and associated advertisements by the end of the year on the American portion of the popular social network"

Full article - http://www.nytimes.com/2008/07/25/business/media/25adco.html?_r=1&ref=media&oref=slogin

Financial terms haven't been disclosed - probably a good move on both sides given the discussion around the $850m Google/Myspace and Google CEO Eric Schmidt's comments that "MySpace did not monetize as well as we thought."

From Valleywag in May: Eric Schmidt: "We have a lot of traffic, a lot of page views, but it is harder than we thought to get our ad network to work with social networks. When you are in social network, it is not likely that you'll buy a washing machine. It is not a long term problem but it is taking us longer than we thought."

For the search providers these two deals are very different. Google was looking for revenue first and foremost - direct revenue - from the tens of millions of myspace users that were glued to the site and the tens of millions who were joining every month. Google wasn't looking for visibility - it already had a monster portion of the search market.

Also, remember it was 2006. Facebook was only a blip and myspace was a mystery as was most of the Social Networking space. I think a lot of this deal was a 'suck it and see' type play ... an expensive experiment. The funny thing about the Google/Myspace deal is that despite the fact both parties admit that it's not really executing as expected - nothing has really been done to fix it.

Now it's 2008 and personally I think the core motivation behind MSN doing this deal with Facebook is visibility. Search is something MSN seem determined to compete in (hence their attempted courting of Yahoo! in its entirety then Yahoo! Search division) and an issue they face is that the market knowledge of their search offering is minimal or non-existant.

Facebook gives them a huge increase in distribution - and will expose them to a market who are probably not aware of the MSN search offering. For Facebook it's win/win - they have a robust search offering on their site (whereas previously people would need to leave Facebook to search) and they would have negotiated a strong deal financially. I can't imagine it propelling MSN into the search stratosphere ... but in a game as big as the search game any incremental benefit is incredibly valuable.

The deal is limited to the US right now but one would assume (like the FB display deal MSN have) that it will roll out globally. Locally Facebook's 3.2m users would be something ninemsn would love to have access to search wise. Only 33% of Facebook users used ninemsn search in May 2008. Locally, this deal could really help ninemsn at least enhance their distribution and 'opportunity to search' presence by supplying some fresh eyeballs.

It would also create a pretty significant gap between ninemsn search and Yahoo! search in this market ... a gap that is already pretty large (ninemsn at 2.8m search users, Yahoo! at 1.6m)

Facebook ads appealing to fat loss cures, engagement ring companies and debt consolidators

I discovered this little gem today - the Facebook Ad Board ... http://www.new.facebook.com/ads/adboard/

It grabs all those painful, irrelevant text and image ads Facebook runs on the left hand side of the screen (right hand side with the redesign) and places them on one handy page.

Snoring cures, uni preference changes, punk bands, Roger David are all irrelevant to me ... Aussie Rules, Golf, Surfing, Fat Loss ... maybe more relevant.

The killer ad model is a little way off I am thinking

Facebook and its impending redesign

So Facebook is redesigning the profile pages (check Techcrunch for more http://www.techcrunch.com/2008/07/21/the-friendfeedization-of-facebook/) of users as a way of enhancing the service.

According to Yahoo! News US, it's a "new look to reflect changes in how its members communicate with each other and how they share photos and updates about their lives."

Now, Valleywag is reporting that the new redesign has seen ads disappear from user profile pages - http://valleywag.com/5026723/where-did-the-facebook-ads-go

"Most of Facebook's inventory is junk. And Facebook's new design may help take out the trash. It's no surprise users don't click on ads on profile pages; there's too much else to do."

I wouldn't go that far, but I think over the past 2 months Facebook has definitely dropped its ad standards.

I am a fan of Facebook and its potential - engaged audience, large audience, strong targeting potential (I must stress that word, potential), the platform itself and the functionality. I have used it for campaigns, it generally works.

However I have a few gripes as well.

1. Ninemsn can only sell display inventory. You can't run expanding creative. Ninemsn cannot sell 'social ads'. Ninemsn should have access to all inventory on the site - I can't see the benefit of the current approach.

2. The text based with small image ads that run in place of the skyscraper sometimes are incredibly annoying. There is no quality control and 9 times out of 10 they are not at all relevant to me and I'd imagine most users. If I'm not getting ads for hip hop jackets, it's ads for singles services (despite checking In A Relationship on my profile), gay matchmaker companies or market research companies seeking 'Males aged 30-39 for awesome products'.

3. It is difficult to buy anything integrated on the network. A few AU repping houses claim to have access to FB ads, Facebook sort of have a US guy looking after the market but it's not ideal considering their audience size.

4. Facebook is already running low end performance ads - my belief is once you blanket your site end to end with credit cards ads, Dell ads etc you blow any chance you have of positioning yourself as anything but low CPM. Monetise at any cost ... even if it means annoying your users and scaring off the advertisers who could generate yield.

Hopefully this redesign is a step towards solving some of the above. Taking off rubbish ads from user profiles will probably have a minimal impact on revenue short term. But it does keep users from being annoyed and gives them time to maybe nail the right execution.

But developing a robust ad platform has to be priority 1 for Facebook. Without it, the ad dollars won't come and without that their $15b valuation doesn't really make much sense. There's no shortage of inventory online - it's not like we can't reach the same eyeballs elsewhere ... agencies and advertisers will start asking the tougher questions to publishers - why choose your network over the 100 others we have access to. And if the answers aren't smart, the dollars will move.

Arrington tries to create a model to value social networks

Michael Arrington of Techcrunch has come up with a model to try and value social networks

http://www.techcrunch.com/2008/06/23/modeling-the-real-market-value-of-social-networks/

It involves looking closer at where each of the main networks has usage numbers and looking at the average Internet advertising spend per user in each of those territories (ie a valuation based on where your numbers are strong and if the market is bouyant in those areas)

He does admit the model is somewhat flawed as the modelling is based on some one dimensional data ... but he still pushes it through.

Personally I think he has ballsed this one up. I love Arrington and read his work religiously ... but this is way off mark.

It assumes:

1) Social Networks are an effective place to place display advertising. (unproven)
2) It assumes advertisers value eyeballs over anything else (they don't)
3) It doesn't take into consideration how people are using each network and the advertising contexts each offers (ie Linked In is fantastic for a higher yield C suite target in a relevant environment, whereas myspace has a load of 14-17 males which can be reached elsewhere)
4) Unique audience (ie eyeballs they have that are tough to find elsewhere)
5) Engagement (Unique Browsers combined with page views combined with time spent and repeat traffic)
6) Growth (where is it coming from - what areas, what demos?)

Personally, neither myspace or Facebook are doing a particularly good job of bringing in money. They are both probably the largest single sellers of remnant cheap inventory and in doing so are doing a great job of devaluing their audience. I don't think this is just limited to Australia either, as the consensus amongst the marketers at Ad:Tech SF seemed to be the same. Yes they have shedloads of users, but that offers them minimal advantage because this doesn't alone appeal to advertisers.

These hypothetical valuations are nice and make for interesting reading - but they completely miss the mark. The challenge for FB and myspace isn't just finding the killer application, it's finding the killer spin that brings in the advertising dollars they want more than anything.

A lesson when marketing to 30-39 year old men

Never refer to them directly as 30-39 year old men. What was this copywriter thinking?

Thanks for making me feel old! I thought Jay-Z said 30 was the new 20 eh!

Once You're Lucky, Twice You're Good - review

Readers of this blog will know I ordered the new Sarah Lacy book, 'Once You're Lucky, Twice You're Good' and it arrived about a week ago.

I finished it today on the flight to Perth - so thought I'd throw a bit of a review together for anyone who was interested and is maybe considering buying the book.

I really enjoyed reading this book. Lacy is a great writer and structures the book in a way that makes it hard to put down, and it's a good resource for those who pay attention to the Valley/SF Web scene and also for those with only a passing interest ... the core theme of the book seems (to me anyway) to be the underlying motivations of the leading Web 2.0 entrepreneurs and what drives them.

What drives them appears to be making the next shit hot product ... not VC or going public ... they want to create something that makes a difference to users. With that in mind, it's no surprise that the book mainly focusses on the development side of things rather than the real world, business element. Huge valuations are thrown around ($8b for Facebook, $200m+ for Digg, $500m+ for Slide) with no real justification of why these companies are valued in the way they are.

For someone on the business side, this was frustrating ... they talked about the YouTube valuation of $1.5b back in 06 but there is minimal explanation that right now YouTube is still struggling to monetise its audience and content.

The book revolves around a few main characters.

- Max Levchin. Slide CEO, paypal founder, angel investor ... all round Silicon Valley key player
- Marc Andreesen. Netscape co-founder, Mosaic founder, Opsware founder and now Ning
- Jay Adelson. Revision3 Chairman, Digg CEO, Equinix
- Mark Zuckerberg. Facebook CEO and founder
- Kevin Rose. Digg Chief Architect, Pownce, Revision 3 - Diggnation.tv
- Reid Hoffman. LinkedIn Chairman
- Sean Parker. Napster, Facebook
- Ben and Mena Trott. Six Apart
- Peter Thiel. Paypal Co-Founder, VC, Angel Investor
- David Sze. VC
- Evan Williams. Blogger founder, Twitter

Those familiar with the above list will know it's a mix of initial dot com guys who had successes and new blood. The theme that links them is that right now in the Valley things have changed - there is a contempt (or at least cynicism) around venture capital ... and there isn't a single minded goal/desire to take the company public.

With the already successful guys (Andreesen, Levchin, Williams) there is a desire to show their peers that their first success wasn't a fluke. For Levchin (who is probably the star of this book) there is almost a single goal to make sure Slide is more successful than Paypal. What Lacy misses is that potentially Slide is just a fad ... and that when you compare it to Paypal right now, it seems a little irrelevant. There are pages dedicated to Slides dedication to building Facebook apps like Top Friends and Horoscopes and 8 Balls ... which to me seem irrelevant when compared to a revolutionary payment platform. Maybe I'm missing something ... (edit: Lacy does mention within the book that perhaps Slide isn't the game changer PayPal was ... however in my opinion doesn't flesh this out near enough)

I really enjoyed reading about Digg and the Jay Adelson, Kevin Rose dynamic. Some of the best parts of the book are the two recounting the talks they'd had with other companies to acquire Digg - amongst them Yahoo, Newscorp and even Al Gore.

From reading this book, and being in San Fran earlier in the year, it is a very exciting time in the web world. Plenty of innovation, sure, but also realism. This book I think could do more to talk about the business reality of some of these Internet plays - I think at times Lacy seems to show a distaste for the 'blue shirt MBA guys' and admiration for the tech, coder types.

My thoughts are the two need to co-exist and great web businesses acknowledge this in all aspects of the business. Maybe I am missing what the general feeling is in the US right now ... but with the likes of Slide, Ning, Digg etc it seems the logic behind them is build a great product, generate a strong userbase and then monetise.

Problem is, there is no shortage of great web tools/properties with large audiences ... the problem that will force many of them out is not being able to properly monetise their audience. I think this is a valid challenge of Web 2.0 and one not being acknowledged ... especially if the new breed (or the old breed's new projects) are determined not to repeat the mistakes of the past.

I would even argue that smart Biz Dev guys are more important than ever now - and in short supply.

Still, I recommend this book to anyone wanting not only an insight into these companies, but an insight into where the web is heading.

Top 5 moments ...

1. The conditions (alleged) Mark Zuckerberg places on his girlfriend in terms of dates per week and how much time he gets to himself. Zuckerberg actually comes across as a bit of a douche in the book I think.

2. Kevin Rose talking about buy out talks with Al Gore.

3. That Ross Levinsohn - former head of Fox Interactive Media - wanted to buy Digg ... the Digg guys met with Rupert and the Newscorp bigwigs, Digg wanted to sell, Levinsohn was dead keen on the concept ... but an offer never came. Weeks later Levinsohn bailed from FIM ... you have to wonder what could have come out of a Myspace/Digg product.

4. Jay Adelson's description of his days at Equinix are actually quite sad ... you don't really know if it was naive optimism or gritty determination that kept him at a company that seemed determined to burn him.

5. Reid Hoffman. Seems like a good guy and potentially is sitting on the most valuable product of them all in LinkedIn

Buy from Amazon - http://www.amazon.com/gp/product/1592403824/ref=cm_cr_pr_product_top

Facebook passes Myspace globally

Techcrunch is reporting that Facebook now has more global users than myspace - http://www.techcrunch.com/2008/06/12/facebook-no-longer-the-second-largest-social-network/

Both are now sitting at 115m unique users worldwide.

The majority of Facebook's huge growth is coming from outside of the US - where myspace and Facebook are growing at a similar rate.

From the article: "Facebook added 75 million monthly uniques over the last twelve month, but just 13 million of those visitors are located in the U.S. MySpace added 5 million U.S. uniques during that period - at this rate it will take 4+ years for Facebook to catch up to MySpace in the U.S. market."

Myspace is fighting back with a redesign that is set to drop sometime soon, seeing the site remove a lot of the clutter and become a cleaner platform. They have also actively courted the developer community to bring some innovation to the site through third party apps ... a strategy well executed by Facebook.

April Neilsen data is out

Netview has released its April data ... And it's interesting!

- Facebook have overtaken myspace (see - http://mimelbourne.blogspot.com/2008/05/facebook-passes-myspace-in-au-for-first.html)

- Yahoo!7 shed over 450k users in one month (almost 10% of their audience)

- ninemsn have shed over 330k users in April (compared to May)

- Twitter has 49,000 users (April is the first time I have seen Twitter on Netview)

- Google search is down 197k users

- Yahoo! search is down 114k users

- ninemsn search is down 329k users

- Ten.com.au is down 44k users in April. However, this figure for some reason does not factor in the bigbrother.com.au traffic - which is at 267,000 users for April (up 101k year on year)

The AU Internet universe sits at 11,229,000 ... which is down marginally from the 11,443,000 in May.

Facebook passes Myspace in AU for first time

April Neilsen numbers are out and Facebook has passed Myspace in terms of usage.

Facebook: 2.646m users
Myspace: 2.623m users

Source: Neilsen Netview, April 2008

Myspace has shed over 380,000 users in the past 5 months.

Game changer? Facebook launches Instant Messenger

New product alert - Facebook have launched an in browser IM client and from a quick play it's pretty good.

Facebook chat works within the web browser and gives you access to all your friends on Facebook.

The interface is relatively clean and unobtrusive ... it doesn't require any software install and you begin using it with a pre-existing base of friends. Two huge benefits.

Myspace should have done this 2 years ago - I guess it's not surprising they missed this one. Their idea was a seperate app - and who needs ANOTHER IM app?

It sits at the bottom of your Facebook window ... and allows one-click conversations. You can also turn the feature off - which is handy.

If I look at my ACTIVE msn contacts - 80%+ are on Facebook. This would mean it would technially be easy for me to migrate over.

Since it launched a few hours ago I have had loads of friends already message me - so people are keen to trial ... which is the biggest obstacle to messenger takeup.

Definitely one to watch. Will this impact local messenger apps? Probably not - in the short term ... but it definitely has the potential as it evolves and awareness increases.

Facebook launch Lexicon

Facebook have launched 'Lexicon' ... it's a tool that allows you to measure the comparitive buzz on Facebook of up to 5 seperate terms.

Here's an example I prepared earlier - http://www.facebook.com/lexicon/index.php?q=barack+obama%2C+hillary+clinton (you must have a Facebook account to view)

The official Facebook release is here - http://blog.facebook.com/blog.php?post=13856412130

"At Facebook we love tools that allow you to see what people around the globe are searching for or discussing on blogs, such as Google Trends or Technorati. We thought it would be cool to show trends on the public and semi-public forums across Facebook (also known as Walls)."

I had a chuckle when the example they used was 'Juno' (great movie btw)

So how useful is this for us in AU. To be honest, not very ... but that doesn't mean it's not interesting.

The main issue is the data isn't localised. The second is we don't actually know the volume of 'buzz' ... thirdly it's only based around Wall posts (profile, group, event)- which is only one component of the Faceboon experience.

But it shows Facebook have some interest in allowing their audience to make some sense of the millions of conversations going on each and every day on the platform.

Facebook ads are starting to feel less relevant

Check this one ... not to mention all the sh*tty singles ads and random text with small image placements I am seeing. Daft - a burger no mere mortal could digest with an ambiguous call to action.

Be careful Facebook, no one likes a social network full of rubbish advertising. After all, isn't it the reason many chose you over your busier brother?

What is up with Yahoo!7 search?

Checking the latest Neilsen Netview numbers Yahoo!7 search is down 27% year on year ... surely an issue given it was given a strong push in January during the Oz Open and has been promoted heavily during key Network 7 programs in February.

Search
February 08: 1,231,000
February 07: 1,680,000

Source: Neilsen Netview, February 2008

Their ATL activity to push their Mail property has seen a modest 1,000 new users year on year (February 07 to February 08) currently sitting at 1,438,000 users. Over the same time the 'Email' category has added 301,000 users.

Mail:
February 08: 1,438,000
February 07: 1,437,000

The question must be raised on why this activity isn't generating results. Both the Y!7 search and Mail products are strong and robust services - so why aren't they being taken up. Mail wise there was a push to offer users a new domain (and the opportunity to get a new address) ... but the numbers don't seem to indicate this is adding additional users.

In other Neilsen news ... both myspace and Facebook saw month on month declines for February 08 - however when you factor in that February had 2 less days than a 'normal' month the drops are really cancelled out.

Social Networks February 08
Myspace: 2,662.000
Facebook: 2,377,000
Bebo: 629,000