Category building blocks

web 2.0 & making money

Article in today's financial times about Web 2.0 companies making, and not, making money.   I think the article is right and we are likely heading for some consolidation — but the article misses the most interesting points about why and how that consolidation will take place.  Its a fairly typical turn of the tide article — replete with a bonus quotation from someone who just raised a lot of money.     Moving on from the drama of MSM — start with why there will be consolidation of some form.  

The web 1.0 companies who survived and prospered did so mostly on the back of Google —  its distribution and its monetization platform.    The fact that many web 2.0 companies have yet to turn a profit is an indication that (a) Google's  platform is still not optimized for this generation of web services and that (b) Facebook, the company everyone expected to provide an alternative, has thus far failed to  provide a platform to build a business.    A year ago this week I drafted an essay on why I believed the Facebook platform needed to offer Web 2.0 applications more than just distribution — its a year later and the data is starting to be tabulated.    Facebook has left a wide gaping opportunity for others to drive into –and companies driving in to fill this gap need to scale social graphs and in order to do that they are opening up — Facebook's misstep, accomplished two moves on the chess board!    They had a chance to build another walled garden but now they are in a struggle to the bottom (or top) of who can become more open — very good for the web as a whole and, specifically, very good for web 2.0 companies.      

Moving to the how.    This shift will pry open opportunity and monetization platforms across the web – and its likely we will have diversity in this system, it will likely be much more sustainable than web 1.0.    While this change is taking place its important to grow audience, manage costs and experiment with monetization approaches that follow the grain of your service.   And lastly, the consolidation the FT talks about — may not be the typical consoldation we see as busssiness go through changes — many of the web 2.0 companies have managed overhead/costs very aggresively, there might be opportunities to loosely couple parts instead of the organizational pain that mergers spawn.    More to come on this later when I have some time to write.    

Compacting connections

Interesting article by the founder of Meetro about what he learned from his startup experience.   Intrigued by the discussion about launch and member growth — he talks about how it first took off in Chicago and then it started spreading into small communities around Chicago.   A lesson I leant at Fotolog was the value of compacting social networks — its counter intuitive but it makes sense when you think about it.     Communities need to be compact or tightly connected at the outset in order to reach critical mass.    Duncan Watts has done a lot of great research on this — Adam Seifer taught me about it in practice.    Raw growth is not the right metric to focus on when you start a social network — you need to measure and track the density of those connections — tight, compacted social networks grow faster than thin broadly distributed one's.

Future of news

I saw the future of news unfold today.   We were on a conference call with Jay who was in Falls Church VA – he heard an explosion – Dave posted the question on twitter and in the space of two hours the tweet-o-sphere figured out it was a small earthquake.      There is still nothing on the subject on Google or Google news, let alone MSM.

You can see the tweet stream below via a search on Summize.  We  talk about this stuff ad-infinitum but its amazing to see it unfold before one’s eyes.   The first tweet is from 1.35pm right after the quake.   The last one on the screen shot was approx. 3.10pm — it links to the confirmation from the USG:

(USGS has confirmed a magnitude 1.8 “micro” earthquake occurred near Annandale, VA at 1:30pm.  There have been no reports of damage or injuries.)

note the screen shot below is a compilation of tweets, re-run the search on falls church at Summize.com

summize / earthquake

Dimensionalizing the web

What is a web page today? If you look at the average web page, it’s a compilation of a diverse set of data sources drawn into a construct that we think of as a concrete whole. It probably started with CGI — and the first commercial application was likely the ad banner — but today that simple web page is made up of a whole mix of things ranging from dynamic content, ad’s,  widgets, sidebar tools, gadgets — the frame that we think of as a web page is now constructed from data streams in from all these sources and more.   This componentization of the page was the first step in what is becoming a different architecture for information delivery. What we have today are the equivalent of early life forms – necessary building blocks that evolution will use as more sophisticated lateral services develop. The organization of data streams and how they are constructed relates to our understanding of the dimensions of the web.

Question?   What would the web look like if you picked it up and looked at the bottom? I imagine, what you would see would be a set of databases – with streams of data flowing between them, into these things we call web pages and between these things we call web sites. These metaphors we have applied to the web — pages and sites — are analog’s that helped us grasp and structure the web, yet like any proxy they also impose limits on our perspective. RDF/RSS started me thinking about a lot of these ideas but in the eight or so years since those standards were developed our understanding and approach to web sites as vertical businesses has barely evolved. The spacial assumption we imposed on the web — that a site is a discrete experience that a publisher can control — maps with both a human need to impose hard edges on a dynamic, complex system but also with how we have understood media for the past 100 years or so. I think those edges are been broken down and are offering a different view of the web, and therefore of media companies, one that is less structured around the hard edges of a web page or site, less vertical, less about data silos and more about dynamic, fluid use of data and connections between data points. Some examples.

Take a look at this picture of this post I found on tumblr last week. This person — Erin — is using tumblr to announce a meetup. In this case email and reblogging are the tools she is using to confirm attendants. Shouldn’t this person use meetup for this — clearly its their preference not to, but why?

tumb log

I would propose two theories: context and easy of use. First context — context is important, Erin has followers (an audience) on tumblr, she has an environment that is customized with a user experience she could control (nice background) — and so she wants her meetup to appear in that context. Ease of use — for a myriad of reasons it seems it was easier for her to roll her own meetup than use meetup.com or to quote Pip Coburn the perceived benefits outweigh the perceived pain of trying to learn something new. So here is an example of someone molding a use case (creating a meetup) into another web experience to fulfill a need.

Example #2. What about Twitter. What is the web site Twitter.com?   The first answer — the one I would tell a stranger in conversation — is that its a destination to access and use the microblogging service provided by Twitter, “want to try one to many micropublishing? go to twitter.com”.   Sounds simple enough. Yet that conclusion isn’t supported by the data. I don’t have the exact number but I think its safe to say that more than half of the interactions with Twitter occur off Twitter.com — and the number is in all likelihood a lot higher than that. So is Twitter a protocol?, maybe.   Maybe Ted Stevens actually understood the web better than we thought — thinking about Twitter as a pipe makes more sense than as a  destination.   But its not a pipe in way that old media understood pipes — its different, im not sure i understand exactly what that difference is going to yeild but what is clear today is that each interaction that takes place on the network add’s value or context to further interactions.    As data chunks move around Twitter the get organized and collated into conversations and meme’s.  Similar to the Meetup example — each node on the twitter network is contextualized in form that makes sense for that particular interaction. But unlike Meetup, Twitter is powering all these interactions. The data becomes more valuable as it moves from interface to interface — not less.     There is something very powerful that is happening with the simplicity and openess of this network.   A network is the best metaphor I can think of for Twitter.

Another example.  Iminlikewithyou — the flash casual gaming site, started off as a destination (disclosure note, a betaworks company).    All of a sudden users started grabbing the code and syndicating their game on to their web sites.    But this isnt just the game — its not a widget model — its the entire underlying game net that is getting syndicated.     IILWY is closer to our understanding of old media but its contains some of the bizarre distributed breadth and possibilities that Twitter holds.

So where does all of this lead us?  I believe we need new metaphors to understand and place dimensions around what a web experience is. I don’t have an answer but I do have a few thoughts on how we can begin to frame and understand the shape of what is to come.

i) Think Centers vs wholes, think about networks vs. destinations

Pic by CALast week I was re-reading Christopher Alexander the Nature of Order . In the first book he has a section about wholes vs. centers. He makes the argument that composing visual structures as whole’s — thinking of buildings, things, windows — anything as a whole — fails to recognize the context in which the object lives. He builds the argument up starting with a dot on a piece of paper — he then analyzes how the dot divides and structures our spacial understanding of the piece of paper.  From this point he starts to frame up a way of looking at the world that is based on thinking about centers, zones of spatial activity vs. wholes.   An example he cites:

“On one occasion, I was discussing the concept of centers, as it applied to some bedroom curtains, with my wife Pamela.     She made the comment that the use of the word “centers” as I had explained it to her, was already changing her view of everything around her, even as we were talking: “When I look at the curtain in the room, and think of the curtain, the curtain rod, the window, the sky, the light on the ceiling, as centers, then I become so much more cognizant of the relatedness of all things — it is as though my awareness increases”

I think Alexander’s point and work here is profoundly applicable to the web. If you start thinking about centers — clusters of information — vs. destinations and vertical sites, for me at least, it gives me a frame of reference a metaphor that is far more expansive and networked than the one in which we operate today.   At Fotolog I learned that centers can form and cluster with remarkable speed within a community — now this is starting to happen with information moving laterally between domains.

ii) Think what can move laterally and encourage it to move

People, those things we often call users, want to take data and move it laterally across the web.   They want it to exist in context’s that make sense for a particular interaction. Whether its data portability standards, micro-content standards, people want to cross post and move data from one service to another. There is much that needs to be done here.   A year ago when F8 was launched it seemed that Facebook was driving headlong into this domain.   Yet a year later it now seems like Facebook might become known as the last portal, the last walled garden experience — data comes in but not out.   Openness of interface, api’s — letting data come in an go out of a domain is central to this thesis.    The Facebook newsfeed could be a web wide service — instead the way its articulated today is about retaining eye balls and attention — a movie we have seen before.  Last week we started talking publicly about SwitchAbit — SwitchAbit is a service that is designed to help drive this lateral movement of data across the web, while retaining context, its a small contribution we are hoping to make to this larger puzzle.

iii) Think about how to atomize context so that it can travel with the data

Dirty DataAtomizing content is one piece of the puzzle, the other is doing the same for context so it can travel with the data as it moves around the web from center to center.    Outside.in — Steven Johnson’s creation — trawls through blog posts and attaches geo context to individual posts. I sometimes refer to Outside.in as a washing machine — dirty data comes in one end — Outside.in scrubs the data set and ships out geo-pressed results the other end.   The geo scrubbed post is now more useful for end users, publishers and advertisers.   A bit of structure goes a long way when the data can then move into other structures.   The breadth of what geo scrubbing can do is staggering — think about pivoting or organizing any piece of information around a map — the spatial dimension that is most familiar to our species.  A bit of context goes a long way.   (disclosure note, Outside.in / an investment of betaworks)

iv) Think Layers

There is a layering dimension that is worth consideration — there are services starting to emerge that offer functionality that is framed around exposing some separation between different layers of the web.   Photoshop is the software that first introduced me to the layer metaphor,  i still cant use photoshop, but I think I get the layer idea.   Google earth has applied a layering concept to mapping.   Similarly services like PMOG are experimenting with layers.   Back at betaworks Billy Chasen started working with layers about eight months ago.   He developed a simple navigational tool called Fichey that lets you navigate web pages independent of their domain – using a common navigational tool.    Want to flip thru the top digg stories? — fichey makes it fairly easy and fast.   This was just a beginning.    Billy has developed a service called firefly — it’s in testing now and over the coming weeks we will begin to preview it — but its all about creating a layer of interactivity that is contextualized with the web site you are on but its exists independent of that web site.

v) Accept uncertainty, keep it rough on the edges

What did Rummy say about the known unknown’s?    As we experiment and design these new forms of interactions its vital that we remain open to roughness and incompleteness on the edges of the web.   The more we try to place these services into the convenient, existing models, that we have used to structure our thinking thus far the more we will limit our ability to look ahead and think about these things differently.

This is just a beginning.   I hope these five areas have helped define and frame how to think about alternative data dimensions on the web.  Time to wrap this post up — enough for now.

Switching bits

Betaworks is starting to roll out SwitchAbit, our first homegrown product. SwitchAbit is a content router. A switchboard to connect one service to another. It will let people shuttle a flickr to twitter, or to tumblr, facebook or pownce or pretty much wherever people want. SwitchAbit doesn’t aspire to be another UI to aggregate data — in fact its the reverse — it assumes that people want to contextualize information streams within existing services and existing communities. I’m tired of companies seeking to jam users into a new user experience that is mostly designed to drive a business model rather than drive new, relevant or meaningful interactions. As a consequence SwitchAbit is designed to be a platform — Twittergram will be the first service that will be powered by the platform.

When we started working on SwitchAbit one of the foundational services that inspired us was Twittergram, a service that Dave Winer created almost a year ago. Few individuals have been more innovative in finding ways to move data — live & static data — laterally across the web. This lateral movement of data is exactly what SwitchAbit is about. Once we had an alpha version of SwitchAbit working I sent it to a handful of people, one was Dave. After a rapid set of email exchanges — we came to an agreement and Dave is joining SwitchAbit as an advisor. The last deal we worked on was back in Userland days, between AOL and Userland — after months we never managed to finalize a relationship — this time around we managed to get this done end to end in about an hour. Good stuff.

It’s less than six months since we setup the development team at betaworks and this is the first of three products that will roll out in the coming months. As I started to outline last week betaworks is a company that through focus and structure is designed to drive linkages and accelerate innovation across what we call our network. The intent is to create a set of loosely coupled components — some wholly owned, some partially owned — and drive innovation, context and value across the network — thru the exchange of data. What people today call monetization, but monetization as it applies to a network, not two isolated nodes. Over time this network will look like a company — I guess a media company is the best analog we have today — but a little different in focus, structure and purpose. And we aren’t going to start talking about new media, again. For now we are very excited about getting SwitchAbit rolling.

beta working

The past few months have been fast and hectic. The focus has been getting betaworks to scale. We call betaworks a platform for seed business creation — let me spell out a little more about what that means to us.

We are creating a network of companies — some of which we are building and some of which we are investors in — that are threaded together by a set of common themes and capabilities. A set of loosely coupled bits that over time we will seek to connect in ways that are meaningful. Some background follows on our perspective and intent.

I started betaworks in 2006 seeking to develop a new methodology, and platform, for seeding businesses. We gathered a small team and for a year we tested a series of different approaches to seed business creation. We learnt a lot, we had successes and failures, we intentionally kept it small — permitting us to learn fast, fail fast and make small mistakes. In hindsight the most important thing we learnt was a design principle. When we started out we thought we could design or architect elements of betaworks. What I learnt was that given that we dont know all of the elements we are going to thread together we needed to start by working, by building, and then in the practice of work let the components between the companies emerge rather than imposing a top down view of what the connections should be.

Mid 2007 we flipped our approach — and went bottoms up. We stayed small, under the radar, focussed on our theme, seeking not to be distracted by opportunism. We started identifying standards and methodologies to scale our work and stopped trying to over think the design. By the fall of 2007 we had assembled our learning and formally started to build out the platform. Six months later we have four things that we have built and we have fourteen seed investments.

Central to the design of betaworks is the assumption that companies building services with a common theme can and should profit from inclusion in a platform or network of loosely coupled bits and driving context and meaning across these sites is valuable. Portals are gone but a new metaphor has yet to emerge to replace the portal concept. The portal was grounded in the same set of assumptions as media has operated with for many years — as it recedes something new is emerging. Something that is more distributed — something that is not based on the assumption that erecting a walled garden around services is the way to build a sustainable long term relationship with users or a long term business. Something that actually encourages the movement of data across edge services, vs. building silos — as data moves and is exchanged it actually gains in value becoming more interesting to users not less. There is a hairball we are decoding, bit by bit, its right in front of us our job is to figure it out and scale it.

Someone said to me last week that we are a reverse incubator. Incubators share the peripheral services things that I believe entrepreneurs can and should get from the market (legal, hr, accounting, office space) — betaworks is designed to share core capabilities – software / IP, knowledge, data, standards, analytics, leadership, tools etc… Someone a year ago called it a funcubator — maybe a reversobator, or outcubator? — a little less George Clintoneque. enough.

Fotolog, lessons learnt

The week before last I packed up my office and formally ended my tenure as CEO of Fotolog. I will miss Fotolog and the team, we had an amazing and exhilarating year, what follows is a handful of thoughts on what mattered, what didn't and what I learnt running Fotolog.

#What we accomplished In the space of 12 months we took Fotolog's membership from 5.8 Million members to 14 Million, we grew engagement in terms of time on the site and features, we moved up into the top tier of Alexa's and Comscore's rankings (Alexa ranked us as #13 worldwide last week ), we turned the site into a business and we completed a sale to one Europe's largest advertising and micropayment networks. It was a busy year. When I think about how we accomplished this — the first and last thought I have on the subject are the people.

AdamS AdamL AndrewC AndrewL Andrey Angelo Anna Brian Cynthia Dan Danielle Elke Frank Jason Joseph Linh Luis Mathias Meghan Melissa Michael Olu Rachel Rodrigo Scott Thomas Tom Toshimitsu Warren 'n' Yossi made it happen, it was a privilege to work with you all. The team grew through the year — we lost some and we added a handful — and we figured out how to work as a team, how to set and deliver priorities. When I came on board the company was in a position that was on one hand typical of a start up and on the other unusual. The typical included a somewhat overwhelming list of things to get done with few agreed upon ways to prioritize or assess what should get done when and why. The unusual included the fact that Fotolog was a small team running a hugely popular web site with an audience that was predominantly international. The first job was about prioritization and focussing on scaling the site and reducing latency. We worked to establish a common set of priorities and then establish a process to execute against those priorities. We then shifted attention to monetization, cleaned up some odd contracts, tested partnering with some exotic non US companies and then drove monetization with the ad networks, and the partnership we struck with Google. We worked through up's and downs: outages, breaking 10M member threshold, a membership strike, massive growth in Europe, drowned servers, visits from the FBI, and a good deal of member love. Throughout getting the team to work together as a team was I think our biggest accomplishment — our successes flowed from that. My thanks.

#Active angel, advisor, board member, get a job… My relationship with Fotolog started as an angel investor in 2003. Then in late 2006 Scott Heiferman, Fotolog co-founder and board member, raised the possibility of my coming on board as CEO. I had known Fotolog as an investor for years — but coming in as CEO offered a wholly different perspective of the operational challenges. Thorough the experience, I learnt that you can be as active as you want as an investor, be an advisor, sit on the board, help with product or business development but you wont really have a clear idea about what's going on within a company unless you actually work at the company. You need to be in the flow of everyday decisions, you need to understand workflow, process and — most evidently what are the real challenges a company faces — not the one's they think or you think they face. The lesson here as an early stage investor is to balance the time you spend with companies — it's tempting to think you can help solve operating issues from the outside — but unless you are willing to jump in and take a job much of your backseat driving is as useful as backseat driving.

#Balancing capital raises with audience growth and monetization One of the things the Fotolog team did right since the first day the site was launched was managing the cost base of the company in a way that was appropriate to the audience, monetization and funding. At no point did the Adam, Fotolog's co-founder, misjudge the balance between these drivers. This is hard to do particularly if VC's are offering funding based primarily on audience metrics. There are sites who have audiences growth comparable to Fotolog with 4x or more the headcount. In 2008, I think, striking this balance will be as important as ever — in particular re: businesses who are building audience on the back of platforms like Facebook or Twitter — eg: indirect vs. a direct (non mediated) form end user interaction.

#Fresh matters There is a tremendous amount of value that accrues to coming into a situation fresh and seeing things without the encumbrances or assumptions you inevitably make after been in a role for a while. The Fotolog team had all the answers to the paths we ended up taking there right in front of them, it is just hard to see those paths after you have been in a role for a while. Keeping perspective is always hard to do in life, and the formation pain of becoming an entrepreneur makes it especially hard. Back at AOL, a long time back, Steve Case and Ted Leonsis used to talk about periodically firing one another — in order to keep perspective. The lesson here is that as an entrepreneur you need to flip between fervent passionate belief in your ideas and objective reassessment of your position — those perspectives usually sit at either end of a spectrum — making that flip is hard to do, very hard. Sometimes an outsider can help, sometimes getting away helps. In Fotolog's case, Adam Seifer, gets credit for making those flips. Adam and I had known each other for a long time — going back to the mid/late 90's and six degrees / Total New York — as a co-founder of Fotolog he was open to re-invention and an objective assessment of what we were doing right and what we weren't. Hard to do, not always easy, but necessary.

#Positioning matters When I started at Fotolog one of the early set of discussions we had was about positioning — what is Fotolog? what does the brand represent to our members and what is the relationship our members have to the experience? Fotolog had for a long time been considered as an international version of Flickr. Yet when we looked at the usage data it was radically different to Flickr. Yesterday, to take a random data point — 6% of all the people who ever signed up to Fotolog uploaded a photo to the site, thats a degree of engagement beyond Flickr and many other photo sites (870k pictures, one picture per member, 13.9M members — translates into 6.3% of the total membership). Last month comscore tracked Fotolog users as spending 26 min on the site, per day, Flickr's numbers are less than a quarter of that number. By digging into usage data we concluded that the Fotolog experience was social, social media. Understanding this helped us orientate our positioning for our members, our advertisers and ourselves. The rituals associated with digital images are slowly taking form — and operating from within the perspective of a mature analog market (aka the US) tends to disort one's view of what how digital imagery is going to be used online. The web as a distinct medium is developing indigenous means of interactions. We figured out the positioning, summarized it in a short phrase (share you world with the world), put together a banner with 1.. 3 steps to get going on Fotolog and got to work. Clear positioning helped us, and helped our partners figure out what we were and what we weren't.

#Scalling, speed matters Fotolog is a huge bazaar of user generated content, displayed on a small number of page layouts. The importance of rendering those pages as fast as possible cant be understated. It's always easy to put more things on a page but rendering a page quickly and giving the user what they came for has to remain the top priority. As we go into 2008 Fotolog has steamed passed the 150M daily pageview threshold, we are heading towards 5BN monthly pageviews, we now have more than 350M photos that we host, guest book messages per photo now average almost 12, an increase of more than 30% over the past year, and Alexa ranked us at #10 in the world last wednesday, #10?!@ (the average for last week was 13). This past Christmas period saw records of uploads, pageviews, November to December saw month over month growth of over 10% — a big shift since in past years the holidays have been downtimes for our membership. Its hard to determine what has changed, I think its a combination of the relative growth in Europe (where uploads and activity has continued to grow through the holidays) and the fact that the internet and Fotolog are becoming more and more threaded into people's personal lives, and media experiences. Maybe its also a little bit about Florkey — Fotolog continues to make people feel special — its microfame of a form that Warhol could never have anticipated.

#Saying no is hard It is hard for young organizations to say no. No to possible partnerships, no to business development inquires, no to investors who think they understand your business. Yet saying no is what many small companies need to learn how to do. When you are still figuring out what you do and how you make money opening those questions to third parties can either grind you to a halt (partnerships are complicated), distract you into retrofitting a model that your partner understands but may not be right for you or just confuse you. Bob Pittman taught me how easily a mass of small projects that you leave unfinished or undecided can drown out the one's that matter. When I arrived at Fotolog one of the first thing we did was shut down many of the business development conversations the previous CEO had opened up. We might have missed a gem but shutting them down gave us the space to figure out what we needed to do. What we didn't have a chance to do at Fotolog was the automate the business development process. Once you get to a scale and can standardize your contracts along with your API's you can scale partnerships in a manner that doesn't require saying no to partnerships — everything becomes a test and trial.

#Integrating publishing and distribution into a seamless experience Fotolog taught me the power of melding a publishing capability with distribution. This is what Facebook did when they added the news/mini feed — all of a sudden your updates, activity on site was pushed to your friends — its an important lesson that many other user generated content sites could learn from. Media companies often separate these functions — which in turn skews value towards distribution. Social media networks are using a distributed audience to categorize and rank what is valuable and most interesting. Fotolog started doing this over five years ago — the form that Fotolog uses is simple but effective. When you publish a photo it appears on your page and in thumbnail form on all the pages of your friends. Since the average Fotolog user has 51 friends — each photo you publish is distributed through to 51 people, they in turn re-distribute it. Facebook introduced the news and minifeed structure a year and a half ago as a means to drive and distribute information accross the socialmap they were building. In 2007 the newsfeed became such an important part of the service that people are exploring Newsfeed optimization since only an estimated 0.2% of all submitted items get published into the newsfeed. Fotolog's approach was simple but it was and continues to be groundbreaking and in my opinion a core piece of innovation that is now spreading to the web as a whole.

#Working with an investment bank Several people asked me whether it made sense for Fotolog to engage and work with an investment bank. At Fotolog working with a bank, in our case UBS, was necessary. Interest in Fotolog spanned four industry categories (media, internet, cell phone and traditional photo companies) and three geographies (US, Europe and South America) — organizing inquiries from the matrix of companies that fit into these boxes was complicated to say the least. The UBS team did a fantastic job of putting out a broad net and pulling it in quickly to find out where the legitimate inquires were coming from — they worked tirelessly on our behalf. The transaction we ended up doing was technically a sale but it was also part merger, part recap. Fotolog had been through three meaningful rounds of funding and the cap table was more mature than the business was. The business needed both a direct ad sales capability and a micropayment partner in Europe — Hi Media gave us both. UBS worked with us to navigate our options, mindful of the stage of growth the business was in. Key investors — including myself — continue to hold stock in the acquiring company, not because of a lock up (there was none) but because we believe in the combined value.

# Working with an international audience is challenging This shouldn't be the case, for years the leading web companies in the US have talked about international growth, international commitments but in pretty much all cases international audiences are an afterthought for US companies. I think this is a mistake. The web offers means to reach and monetize audience outside of the US in ways that couldn't have been imagined ten years ago. Think about building a US based company that garners one of the larger audiences online that is pretty much all outside of the US and marketing and monetization are all executed within the platform, nothing needs to be local. Its pretty astounding. Looking forward as global GDP growth outpaces US GDP growth (3.9 percent versus 2.2 percent in 2007), as broadband continues to be available faster and cheaper outside of the US as innovation starts to happen outside of the US (vs. replication which is much of what has happened to date) — as all these things begin to come together international growth has to become a meaningful part of US companies growth.

#Google's scale and reach is astounding … Mid summer '07 we signed a deal for Fotolog with Google to add search to the Fotolog's member pages. The deal had many benefits — among them access to search services and greater transparency into Ad Sense — offering greater control over our our inventory. We learnt a lot doing the deal with Google and we learnt a lot executing on the deal. In doing the deal we learnt how far ahead Google is vis its rivals — I cant offer much more detail but when you dig into it their scale and footprint is astounding. In executing the deal we learnt that despite the improvements in transparency that we gained by entering into a direct relationship the Google platform is still hard to manage as a publisher, it's closed or maybe translucent is a better word — you get the impression that you know what is going on and why, but often its an illusion. This is a problem — as CEO I bet our strategy on Google's platform, applying it to our international audience to get us to break-even and beyond without having to scale up and ad sales team. In hindsight Fotolog needs to have a direct ad-sales capability to complement the networks — the Hi-Media deal gives us that capability in one fell swoop. The deal we did compliments our network capability in a way that we would have had to build if we hadn't decided to work with Hi-Media.

#The future of advertising & social media networks … Is still very much in its infancy. Yet there are indications that display advertising matched with technology that offers adequate cross network targeting could un-tap the value of user generated content sites. Targeting and conversion are real challenges for advertising on social media networks — the more engaged the audience, the more fluid the conversations, the less likely that on page targeting is going to work effectively. Yet companies like Lotame and Lookery are starting to use the data inherent in the structure of the social network to improve targeting and relevancy and hopefully conversion. It is early days but I believe there is promise here — so much so that betaworks has invested in both these companies). Let me offer a detailed example. If you look at Fotolog's PC gaming group over one month in 2007 the group received 500k pageviews. Yet it you look at the "virtual group or channel" — if you target gaming ad's to all the people who visited the gaming group in that past month — even when they are on other areas of the site the reach is extended to 100M pageviews. As Andrew Cohen likes to say "pictures of Aunt Edna might not be so easy to monetize but if you know all the places that people have been who are looking at Aunt Edna you might be able to influence and target where they might want to go next". I believe this holds promise.

Looking to 2008 there is much to do at Fotolog. Integration with Hi-Media is done — we started that back in August and completed much of it before we closed — and the fruits of integration are now coming forth. The team at Fotolog is pretty much as it was — Erik-Marie Bion and Andrew Cohen have taken over leadership (Erik Marie in Paris as CEO and Andrew in NY as the GM). Cyril, Emirik, David and the Hi Media team have been a pleasure to work with, truly. And now they have another great asset on their hands, I am excited to see what they and the team here in NY do. Thank you once again — I learnt a lot from you all.

Facebook Beacon: Not what I signed up for

Finally got a taste of beacon yesterday. I bought a ticket at Fandango and it was posted in my Facebook newsfeed — fb_evil.jpg you can see the image to the left here. No opt-in, no notification on Fandango, no notification from Facebook that beacon was enabled — it wasnt what I expected — if you want to see a play by play of what is meant to happen, its here). I felt there was a violation of commercial trust unlike I had experienced in a while. Yes I get spam, targeted behavioral ad's but this is both more explicit and more of a violation of the compact that I thought I had with Facebook. I find it astounding to think that a site believes it has my permission to gather and use this data on a non aggregated basis. Age, sex, location — thats one thing — but a purchase that is then explicitly broadcasted out to a group of people, some of whom i know, some of whom I wish i knew and some of whom wish they knew me? If I hadn't found beacon blocker to be as easy to setup I would have closed my Facebook account.

What's the context here? The Facebook needs to rapidly figure out how it can earn an operating margin that reflects the way it is scaling its audience growth. They need to do this to justify the valuation that MSFT pegged on the company. And if private equity investors are going to invest they are going to need to see the path to torrid margin growth, and cash flow — even if this investment is purely financial (eg: at a valuation that is discounted to the strategic MSFT round). Facebook is supposedly making money today but there are two important caveats that add up to supposidely. First, most of the money Facebook is making is from an advertising agreement that blends rationale economics with MSFT willingness to pay a premium to Facebook to keep them out of Google's arms — in English — the advertising deal they have isn't market priced, the investment demonstrated that fact. Second, even if the advertising deal was made up of rationale / extensible economics — advertising using a third party network, doesn't have the kind of operating margin that Facebook needs to achieve to support a market cap of $15BN+.

Facebook is in experimentation mode — and beacon needs to be placed in that context. Nine months ago Facebook launched its digital asset business — that was meant to be a high operating margin, revenue stream. Digital assets sales didn't take off. Then came F8. F8 and the platform initiative has been a huge boon to web 2.0 companies looking for distribution — but as yet, it is not a business. Now we have social ad's and beacon. Both are meant to lead Facebook to the promised land of Adsense like operating margins. My guess is that they will fail and Facebook will have to try again. Not to say there is anything wrong with testing radical new approaches to monetization. Its very necessary — and its brave and unusual to see a company of this scale figuring out its business in the public eye. I think Facebook's market position is fascinating — not since Netscape have we seen a company with this scale of audience without a scaled business model to match. But unlike Netscape — Facebook has at least $250M – $500 of capital to invest to figure its business model out. They have taken the VC model and turned it upside down. They have sold strategic alignment for cash and a stub of equity — buying them time to figure out where the business is.

My bet is the beacon backlash will be severe. The service is presumptuous at best, it lacks transparency and its poorly executed (ie: Facebook's web privacy setting states "…you will still be notified on affiliate websites when they send stories to Facebook. You will be able to decline individual stories at that time." This is not what I experienced). And even if they navigate the backlash they will likely be forced to make it an opt'in feature – rather than opt'out. As a feature that you need to opt into beacon will fade — users wont be navigating Facebook's frustratingly translucent privacy settings to turn beacons on. I wonder if Facebook's platform effort might have given them to the idea that they have permission to launch beacon. This would be facinating — they seem to have bought into their own marketing pitch that they are a web wide platform, missing the fact that they are a site and the web is the platform. I dont believe they have users implicit consent to collect and explicitly serve up this data — I certainly haven't. The backlash that is brewing online is, I believe, very different to the backlash they experienced when they launched the newsfeed. Along with users, MoveOn is at the helm — they can marshall resources and attention in Washington and the EU — this is very different to the newsfeed.

But to run out a counter point — what if beacon is accepted — everything else aside is beacon actually gathering useful information? Like Facebook itself, beacon, is gathering chad's of people lives in a manner that is machine readable but of unclear relevancy. Facebook needs to broker partnerships with all the retailers who are make up my commercial relationships — my commercial graph – and like Facebook's social graph aspires to, it needs to map how relevant these relationships are to me. This is where I think the Facebook model is most flawed. When I friend someone on Facebook I have to put them into one of 14 categories representing how we connected. This might represent 14 categories that can then be mapped across the social network but its only a few steps more interesting than Friendsters rating of whether you were a friend or not. Its not how human relationships are mapped. The dynamic nature of human relationships is reduced on Facebook to a narrow, stagnant handful of categories in order for them to be fully accessible and managed by the code base. Dumbing human relationships down so that they can be more effectively managed by machines is problematic. Its almost back to the the cathedral and the bazaar — computer centric experiences vs. human one's. And what about the data — these commercial chads of data — two counter perspectives. I was reading an interview with Craig Venter this weekend. He talked about how the six billion letters of his genome are now mapped but that the only useful conclusion thus far is that he should be taking statin drugs (fat lowering drugs) a conclusion that could be reached with far less data — by simply looking at family history. Are these beacon data points actually representative enough to form a data set that will enable behavioral targeting? In discussing behavioral targeting with the founder of Tacoda last week he explained how second order data was often more predictive of behavior — not first order. I wonder how predictive and useful these data points would be anyway. Over to Twitter — compare a Twitter stream to the Facebook news feed. Facebook's news feed feels like media, its processed, organized and polite. Twitter is messy, its all these tiny little specs of people's lives in a stream of data that offers a surprisingly human feel — Facebook has processed, digested and organized — Twitter is a steady stream of chatter, some of it useful, much of it messy, but all of it very human. Similar story with Fotolog — it has none of the computing cetric categorization that dominates Facebook — the site is messy and hard to navigate if you are a machine, but for humans its seemingly a pleasure — average time on the site is now 25 min per user, per day. These are disctinctly human experiences online — I believe we need to foster these experiences and get machines and code to be smarter about us, not the inverse. There will be more — not less — to come on the subject of beacon. Oh, and btw Beowulf was good — worth seeing in 3D.

F8 and that Telegraph road

The launch last week of Facebook's platform initiative, F8, has generated a lot of talk, much of it in the mainstream press.  Its a compelling story, Facebook is becoming a platform, out maneuvering Myspace, doing to the web what Microsoft did to the PC.   Its a story we have heard before, it seems to recur periodically.  However, the announcement last week was mostly about distribution –  it didn't involve either deep or open access to Facebook data nor open access to its infrastructure.   F8 as it stands today is a partnering platform.  This one more small step in a long negotiation that is taking place between web sites on how data is owned, on how its shared between sites and how people navigate through services on one site to another.   This conversation is still in its infancy.  

XML really began the process of lateral data flows between sites and the vision of the semantic web offers a rich set possibilities — yet it's early days — most sites still operate in vaccum's and most user data is still stuck in proprietary silos.   And while the technology certainly needs to evolve so do the scope and kind of business arrangements.   The web of contracts, contracts between vertical sites, contacts between sites and users – needs to evolve in order for the vision of the semantic web to reach some of its compelling end points.   Weaving, back to the Facebook announcement.  What happens next is more interesting than what happened last week.    Facebook has taken a different approach to Myspace – who has opt'd to control much of its third party innovation through fairly simplistic interfaces and binary business driven rules, more like a traditional media company, vs. letting the community really build on top of the service in a meaningful manner.     As the Facebook platform evolves there are a handful of things I will be watching:

1. How deep are are the API's that Facebook is going to present to the community.    Facebook markup language is a proprietary API, the "platform" maybe wide in terms of distribution but its not deep, there is little to no access for third parties to the social data or infrastructure that makes Facebook such an interesting service, and its not open for developers to just build on, everyone accepted into the platform has to be sanctioned by Facebook, the degree of openness, real openness (vs. marketing gibberish) will dictate the depth and the value of the platform.   Amazon has done a great job at developing a set of platform services — starting with the affiliate model, extending it into community and then the Mechanical Turk and the elastic computing cloud services.  These web services were built step by step along with trust and a degree of openness that surprised many.    Pretty much every startup I work with today is using EC2/S3 — if Facebook going to have the same influence over the web application space, if so they need to open up more than a distribution funnel. iLike's weekend server hunt demonstrates a need on the infrastructure side, but the is also a real need re: social data.    Offering Facebook users the ability to port social data, their social network across applications and letting applications developers innovate on top of that data set would be really interesting.

2. How will the application metaphor evolve?   I see the metaphor Facebook has applied as the most interesting thing in the announcement last week.  The web has spawned many interesting platforms for micro application development.    Applets, plugin's –  from WordPress to Firefox to Myspace there is a an active ecosystem of development around many web sites.    But the term application suggests user control beyond a widget or plug-in, applications are often monolithic, the management of applications by the underlying OS is usually benign and in service to the application (get me that device driver)  — the term application presents a high bar for Facebook to jump over.    To me the use of the term suggests a rich set of API's and a clearly defined layer – a layering of both technical and business terms.   Its an exciting challenge to see if they can make this truly an application environments.   And if they do, what is Facebook's relationship to these applications?   The identity issue below is only scratching the surface of this question.   It was fascinating to me that in the announcement last week most of the mainstream press look in the rear view mirror for metaphors — this was going to be like windows was to the PC.   I hope not — we don't need another OS, what we need are open development platforms — and open access to data.    I did a lot of work on platforms a long time back — back in 1998, I invested in a company called WebOS that tried to go down the path of applying the desktop metaphor to the web, of duplicating the inadequacies of the desktop on the web.    There were few people comparing last week's announcement to Adobe's Apollo — Apollo is setup to be a more traditional, extensible platform.  One of the companies I am working with — im in like with you — is developing much of its service in Apollo.   Apollo is truly a web application environment — offering state management outside of the browser, for example Apollo will let me do my web mail while I am unconnected.  But Adobe is building this as a platform service, like Flash the intent is to proliferate the tool set across the web, developers will adopt it as will end users and like Flash it will provide revenue from scaled developers paying Adobe a license fee.   This is a platform business model that the market understands.   A cross platform run time isnt as sexy sounding at F8, but it might be more meaningful.  And then there is Firefox 3 — another valid comparison that didnt seem to come up in many discussions.   

3. How will application providers be promoted in Facebook?   This is critical to understanding the underlying business terms between the distributor and the application creator.   Last weeks announcement was about distribution, and it formalized an approach for Facebook partners, business development in a box, a highly scalable approach to partnering.     But what are the underlying economic drivers?     At AOL promotion and positioning was usually governed by dollars spent.    At Google it now seems to be about long term strategic value: years ago the Google services that were tiled above search results – were best in class – for finance related searches (search for a stock ticker), Yahoo finance was promoted, Mapquest was the default when you searched for a location.   Then slowly over time Google services received prominence equal or better to others.   Today its pretty much all Google services upfront, in default positions — nice to leave some pointers for competitors but as Google knows well defaults drive traffic and traffic drives revenue.  

Screenshot of Facebook's application directory

Last week the COO at Facebook, Owen Van Natta, said:  "How are we promising not to trump your application? We're going to level the playing field, developers won't be second-class citizens–we're going to compete directly with them."   Accordingly, the Facebook application directory is organized today mostly by popularity — but mostly is different to always. 

See the ringed sections of the screenshot — unlike third parties Facebook applications don't list the number of users of its applications (Marketplace is a Facebook application).    And note the that Application directory (boxed) starts with Facebook's top Applications.    Finally, as the users expands and contracts the application list (the more carat, where the arrow is pointing) Facebook's one advertisement on the page moves down, partially below the fold.  Tell me this execution isn't setup to collide with business priorities.

In Japan, on the cell phone, Do Co Mo understood that with a limited UI placement of third party services needed to be ranked by usage.   Is Facebook headed down the same path — and what does the COO really mean?? — Facebook owns this garden, competing directly with application providers is going to be, interesting.

4. How will Facebook manage identity and data across third party applications?   Some sites promoted in F8 seem to be managing identity independent from Facebook, others are doing a one click install and sign in (but even in the case of Mosoto, you are signed in for chat but to file share you need to sign in again?).    Does Facebook become a alternative identity broker on the web and if so they are going to have to a lot more open in their approach to data — open ID is a pretty high standard.      Facebook has traditionally had a fairly rough privacy policy — they gather a lot of data about their users and there has been a fair amount of controversy about it.    As they manage data across applications this is only going to get more challenging. 

5. Lastly, how does Zuckerberg social graph extend beyond the core college audience / behavior?   The feed feature added a whole new dimension to Facebook and extended the time people were spending on the site significantly, Comscore data suggests it went up by over 5 mins per day.   Fotolog has a similar, feature that alerts users to new uploads by friends — its a significant driver of our navigational based traffic.   But how does the audience and the use cases evolve beyond the core?   Will people outside of college enter in real names into profiles and will the social dynamics of the broader audience fit with the services that were built for the student based audience?   Over the past year I have started to use LinkedIn more — its starting to become useful, the network is large enough, the alerts I get from LinkedIn are useful — not spam.  I signed up for Facebook shortly after they opened up — but I didn't go back, till friends started inviting me.   Over the past 6 months I have visited the sites to confirm friends but there is nothing useful about Facebook as yet, and useful aside it better be either personal or entertaining — but like so many other social networks its about collecting connections, but whats are the services that are going to drive usage for me — I don't see it yet.   

This is a quote from Giga Om's review post the launch event, its worth a slow read.   "Zuckerberg says you can serve ads on your app pages and keep all the revenue, sell them yourselves or use a network, and process transactions within the site, keeping all the revenue without diverting users off Facebook. This was the opposite to what was stated in the WSJ article earlier this week, and gets by far the biggest reaction from the crowd."  

This got the biggest reaction from the crowd??  Maybe a crowd packed with Web 2.0 service and feature developers who are in need of an audience found it it interesting.    If a user today opt's in to use your site on Firefox — or your application on windows — or even within the grandfather of walled garden's AOL — you still get to keep the ad-revenue.  So why is this a big surprise?  Maybe the attention the announcement garnered is also about the proliferation of web based features searching for a destination to marry themselves to.

Intent and that Telegraph Road

A long time ago came a man on a track
Walking thirty miles with a pack on his back
And he put down his load where he thought it was the best
Made a home in the wilderness

I do think its worth do ask whats the intent behind the Facebook announcement, who is meant to serve and whats the need behind the F8 initiative?    The Facebook was launched as a service for US college students.   It was full of social tools, it let you build out your own network, post events, notes, photos and most importantly its all private, so that students can develop a profile that is real vs. many of the fantasy based profiling you see on Myspace and other sites.   Facebook achieved a lot of its early traction for the same reason as Cyworld did– you could enter your College, your year and actually find friends, colleagues, friends to be, cruches etc.  Because people used real names on the service — emails were verified by domain and you could find anyone in your university.   This was and is a big idea — few sites have a relationship based with their users that maps to real identities.     Anyone who has attended a US university or college knows exactly what this is about. Then came the monetization.  

Facebook started with advertising, they achieved some remarkable successes by mid 2005 they became profitable, they had 2,000+ colleges and 20,000+ high schools on the service.   And the audience was rabidly engaged — 2/3rd's of the active membership came to the site everyday.     But look at Facebook's reach through 2006 — it is flat, because by 2006 they had tapped into an audience and grown the business about as far as it could go given its natural limitations: students.    Reach tracked by AlexaThey were now faced with the question of how to scale your business beyond its base.   They could go global — there are services like FriendsReunited in the UK and Australia who are demonstrating, albeit with differences , that the market exists outside of the US for a Facebook like service.    And /or they could opt to extend the scope of the Facebook offering and try to reach a broader audience in the US beyond students.   They decided to push on both fronts but most significantly in September last year Facebook opened up to users irrespective of whether they were in school or not.   In 2007 Facebook's reach more than tripled.  Before they opened up the doors to the broader audience they were adding 15,000 members a day, today they are adding 100,000 a day (NYT stat, note Fortune says 150,000 a day).  They now have 24M active users, posting mostly Photos, notes and events.

Then came the churches then came the schools
Then came the lawyers then came the rules
Then came the trains and the trucks with their loads
And the dirty old track was the telegraph road

But now reach has extended they need to find ways to get people to spend more time on the site.  Here comes the platform initiative.  The platform that was released last week is about extending Facebook in a different manner to the other social networking sites.  Its about continuing to extend Facebook features by offering distribution of third party applications on Facebook.  Yet the features been added are contained within the Facebook experience.   Out the gate its a great opportunity for fledgling sites, particularly sites that are more of a feature than a destination — Facebook is offering one click installs for applications within Facebook. Its about distribution and its about continuing to drive the amount of time people are spending on the site, which in turns drives advertising.  Facebook is playing the same game as media aggregators have played since the dawn of time.    Whether its Disney, Yahoo or AOL — its all about getting in front of the distribution firehose — they are selling their audience.   Day 1 its not setup as a sale.   Remember that AOL used to pay service providers to offer content and services within the walled garden — then in 1996 when AOL hit a scale it stopped paying providers and started charging — bit by bit AOL flipped the model.  This all seems far less interesting and ambitious than the headlines suggest.   Zuckerberg told Kirkpatrick that what Facebook is unveiling would be "the most powerful distribution mechanism that's been created in a generation."  I hope its is more than that.     If Facebook's F8 is about trying to extend the size and scale of innovation and services in what amounts to another a walled garden experience it will another building block in the long history of web hype.  The Facebook has a great social platform to build off, I hope they are brave enough to let their users take their data and extend services beyond their control, beyond the walled garden.  

A last point worth making is the absence of Microsoft, Yahoo, Ebay and AOL in the platform / social networking space.     Live.com was meant to be a web development platform — but things hewed back to Windows with the launch of Vista.  Microsoft developed much of the thinking behind the web as a platform — with hailstorm and then live.com — but IE7 and Live haven't taken the lead.   Yahoo made all these great acquisitions, many of which they they have left in silos and failed to build upon.    Ebay has this amazing social / trust network that links merchants and end users.    We think of profiles as been specific to social net, but Ebays profiles as they relate to trust and commerce and communications (skype) are a trove of data that could be opened up to users, applications and the web as a whole.  And the merchant relationships, what about extending them into advertising.     Like wise with AOL — there was a recent comment about the importance of opening up AIM, again…     Its amazing to see the leaders of earlier generations of the web MIA — gone from this social networking race.

The semantic web needs to be distributed at its core, another walled garden is too low a bar for a really powerful and interesting social network to aim for.  I hope Facebook actually step beyond the marketing hype and deliver a social platform for the web.

Happy birthday Fotolog

Today is Fotolog's 5th birthday — a few words, and some images to mark the day.   It has been an amazing five years for Fotolog.  The history of the site is fairly straightforward.    Fotolog was started in mid '02 by Scott Heiferman.   Adam Seifer came on board soon after and took over the project and Scott focussed on building Meetup.   

The vision of the service was to cater to new picture taking behavior — as people were starting to adopt digital cameras the use cases around the capture and processing of images was also evolving.  Pictures have always been social – but the digital world was giving images a whole new social dimension.  Fotolog was created as a social media network — the genesis was Photo Blogging, the result was a mixture of social networking and user created media sharing.   This is what Scott's original Flog looked like:     

First Cyper Picture

The layout of Fotolog, was and is intentionally simple.     Fotolog has resisted the temptation to add feature after feature — rather it has stuck to offering a handful of features, similar to Craig's list the focus has been on the content and the conversations.    From the early days Scott and Adam had the vision that the pages on Fotolog needed to be social.    They needed to include not only your images, but also images from across the network, providing a visual navigation that today drives much of the time our members spend on the site, a self formed, organic distribution system, letting members see and be seen.    Complementing this social network of images they added comments and guest book entries — making the experience one where media intersects with communications, day in day out, millions of images collide with billions of conversations.     The growth of Fotolog has been steady and consistent — but it took 2 years to gather real steam — as the chart below illustrates.   In early 2005 we hit a million members — amazing to consider, since we are now adding close to a million a month.  

Milestones Flog

The phenomena started in Brazil.   Adam will tell you that in those early days he was concerned that Fotolog might get stuck in Brazil, Portuguese isn't a global language.   But Brazilian's have turned out to be a strong early indicator of global internet phenomenas — from ICQ to Hotmail to Okrut to Fotolog, Brazilians seem to have a knack for early adoption of global social platforms.  The Fotolog audience started skipping geographies and borders and today we sign up members from approximately 70 different countries everyday.    Our audience is still very large in South and Central America and we have complemented that base with strong European growth.   The primary language of Fotolog is images, beyond that the chatter around the site includes and mixes many different languages.  

This is what the home page looked like when we hit a million members.   Its not that different to what the home page looks like today — again, simplicity and consistency has mattered to the history of Fotolog.  

 1MM Flog'ers

Out of interest I checked how many of the 15 members with images above were still active on Fotolog.    A quick check of member names and recent posts indicated that nine of them have updated Flogs in the past six months.    Four of them have updated their Flog in the past 3 weeks — juju15 , lepadilha, tabata, mash — its amazing that after years members are still coming back and using Fotolog to share their world 

Yesterday we had 673,150 uploads to the site — with our regime of one photo a day and 8.3M member accounts that means that yesterday a little over 8% of the people who have ever signed up to the site, uploaded a photo to Fotolog.    That doesnt included all the members who just visited friends Flogs — but to have 8 percent of your membership coming back everyday is pretty engaging and pretty amazing.   Fotolog also hit #18 on Alexa earlier this week — our highest ranking ever.   The traffic on the site continues to surge — our reach continues to grow (see a ranking vs. facebook), and for people who want to relate us to other US photo sites (which I always say is a poor comparison, given that Fotolog is about self publishing and socializing and photo's just happen to be the medium, they aren't the end), see the relative traffic rankings over the past three years, vs. other photo sites, Photobucket is picking up share, Flickr seems to be flatlining, and Shutterfly is still a seasonal processing site.     Fotolog is a testament to the creativity the internet has unleashed — millions of people sharing moments of their lives through images and conversations.  

A thank you from the team in NY to all of the people and all of our members who have made this global collage of conversations possible.  

And read Adam's Birthday post here .    

The Photobucket Sale and Fotolog

In the wake of Photobucket's sale last week to News Corp., people have asked me two questions: 

(i) How is Fotolog different from Photobucket?
(ii) Why did News Corp. buy photobucket? 

With the week now over, let me take a pass at answering both questions.  

How is Fotolog different from Photobucket?  

Photobucket and Fotolog are both built around media (photos and videos) and they are both related to social networking.  And they are both experiencing rapid growth.    But that’s where the similarity ends. Photobucket is a tool that is agnostic of destination – while Fotolog is a destination. Photobucket stores image-based media, then distributes it to your page on social networking sites such as Myspace, Bebo, Piczo, Friendster, etc. Fotolog is a destination where you post one image a day which then becomes the center of a social interaction/chat with your friends.  It’s intentionally simple – stripped down and focused on the social media experience. 

The Photobucket acquisition affirms the importance of user-generated content of any media type — images, video, etc. — and media's emerging relationship with social networking. I often call Fotolog a social media site because it's all about the intersection of media and communications, two things which were once like oil and water — they traveled on separate pipes and represented distinct experiences. But they are now coming together in fascinating ways. It's early days, but I believe that the combination of media and communications — gifting, sharing and transferring social capital, between users/members, via user-generated content or digital assets that represent identity — is a more than a trend. 

The first generation of social-networking sites stressed self-publishing over connections (from Geocities, to Tripod to Blogger).  The next generation focused mostly on connections (sixdegrees, and friendster are the classic examples here — tools to gather friends and connections, as social capital accrues in theory to the people with the most connections). The third and current generation of sites blends media with connections — each with a different emphasis. 

Focusing in on Photobucket and Fotolog — the difference between the two is clear when you look at traffic and usage data. Both sites are on a tear. Alexa (link #1 below) ranks Fotolog as 24th largest in the world — Photobucket is 44th . As CEO of Fotolog, I'm obviously privy to more data, but focussing on proportionate growth — the Alexa link shows rapid growth for both sites. Comscore measures Photobucket with 28M uniques and us with 13M. Comscore is panel-based, and at Fotolog we are working with some other data shops to confirm this data.  We recently starting dropping Quantcast pixels on our site and they track us at 26M uniques — data sources aside, the point here is that both sites are large and growing fast. 

Site usage patterns tell a different story. See the table below with Comscore data from March — the average minutes per day is hightlighted. Photobucket averages 7 minutes per day while Fotolog averages 23 minutes per day. Fotolog does 261M total visits, compared to 90M for Photobucket. Media-wise Photobucket has 2.5BN photos, Fotolog has about 1/10th that number at 230M – but in order to maximize user response, Fotololg only permits one up load per day.  Photobucket also offers video, which Fotolog is targeting for the future. Socially, the sites couldn’t be more different, given Fotolog’s status as a destination with an emphasis on conversations.  Our site has more than 2BN conversations posted, approximately 10 per image. 

Data table

In terms of user profile, Photobucket and Fotolog are both very international. Alexa tracks 29% of Photobucket's audience as US-based (Myspace-related) with a further 5% in the UK (Bebo) and the remainder apparently pretty evenly spread worldwide. I do wonder how accurate this data is — as approx 60% of Photobuckets traffic is tethered to Myspace which in turn is mostly US traffic. I know in Fotolog's case the Alexa geographical ratings are different to our Google analytic ratings. Last month a fifth of our traffic was in Southern Europe (Spain, Italy, Germany), which doesn’t come across clearly on Alexa. Fotolog has members signing up every day from 70 different countries, with the bulk of our audience in South/Central America (where the viral growth first took off) and Europe. The site is growing in some European countries, month over month, at a blistering 28%. Numbers like that compound fast. And the growth is 100% organic, with no marketing or member incentives. 

So why did Newscorp buy Photobucket?

The first reason that is much cited for the transaction is defensive — News Corp. / Myspace bought Photobucket to make sure no one else bought them. News Corp. understands that the media on its social network is vital to the experience, and having a third party manage the bulk of the media on MySpace was a risk. This concern can only have been exacerbated with the rise of YouTube and its purchase by Google.   Moreover, Photobucket's push into video must be attractive for News Corp. as a foil for its competition with YouTube – it’s no coincidence that since that deal, Myspace has been so aggressively promoting its videos on its homepage and elsewhere. So media matters — but this is more than media or UGC – It’s also the most common form of digital personalization.   Taking photos out of their analog construct, they are a very simple form of digital customization, it’s far easier to take a picture of something than to render some customization in photoshop. On Fotolog we have tens of thousands of pictures of people's computer screens while gaming, or desktops, or pictures of people sneekers – Fotolog members have posted over 60,000 pictures of Converse / Chuck Tailor's — or custom images.  In other words, this is about personalization, and the camera or a "picture" is just a tool.  

Beyond this strategy my guess there is a broader opportunity — Photobucket is a photo and video tool that could become a web-wide locker for the storage of digital media. Just as eBay's acquisition of Pay Pal wasn't meant to just serve just eBay, my guess is that NewsCorp’s purchase of Photobucket isn’t just meant to serve MySpace.  The opportunity is to serve the web, I suspect that’s the broad strategy.   Granted, there are risks to a broader strategy — eBay didn't effectively execute and while Pay Pal has recently picked up share the first few years after that acquisition amounted to treading water at best.    The fact that Google is now driving into the payments business is a testament to that failure — eBay had the running room to be the web payments platform.   There is also an audience risk — Photobucket users might not pick it as a the service of choice for other media types, the audience may move on and News Corp. could be faced with a whole new dominant parasite on its host in 18 months.    Given all of this the deal once again distinguishes News Corp. as one of the media companies in the world driving headlong into building digital media assets that are indigenous, not extensions of existing franchises.

Lastly, people wonder what the Photobucket deal means in terms of valuation and monetization of social media sites. On this front, the acquisition is good news for Fotolog and our peers. In contrast to You Tube, Photobucket demonstrated that UGC could be effectively monetized, a path that we are following at Fotolog.   The market has valued highly a popular tool that facilitates social media networking communities.   That only reflects well on both the segment and both the destinations and tools associated with it.   

Hybrid waste

I am trying out the Canon TX1 hybrid cam. I am a big fan of hybrids — for the past couple of years I have used the Sony DSC M1 hybrid. This Canon promises a lot and thus far seems to deliver fairly well. The Camera is very stripped down and easy to use — but the ergonomics aren’t as good as the Sony, harder to hold and shoot with one hand. Stills are 7.1 pixels and other than the flash (which is weak) the stills are good. The face identification software does a really good job of finding faces — less clear whether the adjustments it does once it has found faces is worth much, but that strange allure of technology recognizing a human feature is enough to make one think it must be have some value.

Video is just weird. Canon promote this as an HD hybrid and sure enough the video is 720p, 16:9, 30fps. But it records in M-JPEG (Motion JPEG – basically a string of jpeg images?!). Hugely inefficient at encoding, gives you approx. 13mins of video on a 4 gig card? There is the advantage that you can pull a still from the video stream, which is kinda interesting if you want to wade through a gazzillon frames for the 1/30th of a precious second. But why M-JPEG, Divx or MPEG4? I suspect they wanted to (a) save on licensing fee’s — and (b) make sure the camera wasnt too good at doing video. The tension that hybrids have for Camera manufactures persist — if its too good then people wont need to buy two devices. But the choice is an interesting testament to how the plunging cost of storage continues to radically effect technology standards.

Resolution, from Thomas the tank engine to the Wii

Thomas that tank engine

I was thinking about how the resolution of an experience changes the experience.    Thoughts began while playing with my children.   My son loves to play with trains, small Thomas trains, small tracks you piece together and trains you push around.   For Christmas my brother asked me what my son would like and I thought that a battery powered train (see right picture) would be a hit.    It was but it also changed the way my children play with the trains.   With the battery powered train the focus became setting up the tracks in some form of circular shape and then watch them go round and round.    Play with the push trains had been much more imaginative, it was about setting up the tracks, creating narratives and pushing the trains around, speaking the narratives out loud.   Thomas the electric tank engine stopped most of that.    It was now about just watching him (the train that is) chug round and round the track, usually pulling cars, sometimes on his own.   Less creative, less social, less physical, and shorter time wise.   I was thinking how does the resolution of media and experience effect the experience of the media and play associated with it.   

It seems that like with comics if media or the experience isnt too polished, too finished, it leaves plenty of room for the human mind to fill in the gaps and engage in the experience vs. observe the experience.   This reminded me of a great interview with Brian Eno where he talked about the importance of leaving media and cultural products open and "unfinshed" (from 1995, I found the orgnial and posted it to findin.gs DB).  But it also seems like engaging kinesthetically with the play transforms it — as my wife said when i asked her why the play was different with the trains you have to push she said because they "have to be the motion" not observe it.        

The Wii, is unfinished, resolution is low, characters (in sports for example) are comic like and the physical engagement in the experience manages to trick the human mind, at least mine, that the experience is pretty much "real".   Its amazing what a little bit of sound and a slight vibration in the remote does — its sophisticated enough to telling my brain that the experienceis so close to tennis or boxing that its real.  Its interesting to think about how these somewhat rough, unfinished experiences are open enough to let one become fully immersed.    Like WOW vs. Second Life.   The environment is unfinished and pretty rough — but the experience is one of total immersion.    And medieval narratives are such a dominant underpinning in our culture that the moment you engage in WOW you have a narrative to engage with.   Second Life seems more polished, and it doesn't have a narrative overlay, much of it is about events and engaging people in living a "second life".      Now its time to get back to my weekend and leave this post, well — unfinished.

Jim Gray Missing / Amazon Mechanical Turk

Great example of what the turk can do — distributed application to search for a missing person on satellite images, takes 5 mins of time to sign in and search five images / details below: 

Amazon Mechanical Turk Jim Gray Missing: Help find him by searching satellite imagery Jim Gray Background On Sunday, January 28th, 2007, Jim Gray, a renowned computer scientist was reported missing at sea. As of Thursday, Feb. 1st, the US Coast Guard has called off the search, having found no trace of the boat or any of its emergency equipment. Follow the story here. Through the generous efforts of his friends, family, various communities and agencies, detailed satellite imagery has been made available for his last known whereabouts.

Choice, end to end control, distributed innovation and that iphone thing

A lot of chatter about the iphone — just read Dave Winer's piece — lots of conspiracy theories about how real the Job's demo was and people are starting to focus on the question of how closed the platform is.  Jobs has said that the platform will allow third party development but it will be "restricted" and managed — like ipod games.  Apple believes that in order to get a product into market — out of the box — end to end control of the hardware and software experience is the easiest and fastest way to deliver something that works to users.   This worked in the case of the ipod — it wasnt the first MP3 player to hit the market, it was just the first to work as seamlessly as it did, from the device to the pc.   There are smart phones of many flavors out there today — but they all require a lot of setup, maintenance etc.  The iphone is clearly going to be different — take a look at the Pogue's list of what is does and doesnt do.    

Last year I lived in Italy for six months and I made some notes about what an insanely mobile the country was — 57M people with 70M cell phones.   There are more mobile phones here than fixed lines, estimates are that 18% of the population have cut the cord (chk). Kids and couples walk around listening to cell phones playing music, like 30 years ago people would walk around listening to a radio.    Someone we know was chatted up by a waiter at a restaurant — for follow up, he offered her a SIM chip instead of offering his phone number.   SMS is everywhere and its far more conversational than in the US. The rates and pricing plans push people to SMS.    Wifi is fairly available and the cell co's are clearly nervous about voip / skype – 3 (Hutchison Whampoa) has an offer in market for $15 a month unlimited voip calling to over 25 countries from your handset.    And in Italy Apple has next to no presence (as of 06 they had no stores and next to no market share).  In Italy Apple has next to no presence (as of 06 they had no stores and next to no market share).

Over time the iPod functionality needs to merge into the phone.     Yet Apple has created a business model that is based on tethering hardware to software and reaping all of the margins on the hardware.    The result is that music that I have "bought" on iTunes isn't transportable to other non apple devices.   I really haven't bought it, its a rental agreement – with the a right to listen to that music on 5 apple pc's / devices.  Jobs knows that the ipod is close to its peak and its time to move the ball — the question in my mind is whether open and unlocked alternatives — palm, symbian, rim and even linux phones can out run Apple. 

The pressure points are in my mind (a) apple's dependency on the ipod and its related business mode — the iphone needs to have everything the high end ipod has (focus will be on music, video and phone — watch how they execute on core ipod features (eg: access to itunes store from the device (which today is not available), music and video sharing (also not available)) and then non ipod functionality.    The phone is a messaging device, music and ipod functionality needs to balanced against great messaging capabilities — voice and text (Phones outside of the US are used more for messaging that voice — calling them phones is a cultural artifact — they are messaging devices with voice as a secondary features)   (b) apple's tie to cingular (2 years), and the associated restrictions this brings with it (re: no voip, open wifi roaming, no HSDPA/3g, requirement for a 2 year contract, no unlocked alternative etc.)  (c) the tension between a closed end to end platform with controlled innovation vs. an open platform with distributed innovation and lastly (d) the execution of the hardware / device and the lack of a keyboard.  If this is mostly a media device Apple will miss the broader market. 

I have no doubt people will buy this product — it seems like a beautiful piece of hardware and simply postioned as the highest end ipod it will find a market —  just like the nano or video ipod.  But neither the nano or the video ipod defined a new category — they were devices in a long stream of innovation that started with the orginal ipod.   The iphone needs to define a whole new stream of innovation independent from the ipod.  And the business model will likely also have to evolve — in more developed markets (south korea the flip has occurred to a subsription model, $5 a month for all the music you want / can eat).     I am going to be watching the pressure points listed above to see whether similar to the ps3 vs. Wii the lowend offer some real alternatives, without all the restrictions that Apple's business model now imposes on it as the category leader – the mobile world needs to see some real innovation and what I saw last week suggests that not going to come from Apple.