Archives: April 2008

Yesterday Henry Blodget unveiled the new SAI 25 which values the top 25 startups. At the top of the list was Facebook, bringing in a valuation of $9 billion. Didn’t Microsoft value Facebook at $15 billion though? Well yes but as most people know, Microsoft over-valued Facebook. So how about the other Silicon Valley darling, Twitter?

Silicon Alley Insider valued the company at a measly $75,000. The companies are also pegged to the Nasdaq and have valuations updated in real-time via the SAI 25 Live. Many of the valuations are way off the mark and many have no realistic basis. It’s a great attempt though.

As Erick Schonfeld points out, “SAI gets at its $125 million valuation for Digg by “splitting the difference” between a $200 million buyout rumor we reported and the $60-to-$80 million that Kara Swisher came up with. Splitting the difference between two rumors is not exactly the height of financial analysis.”

Regardless of the varying valuations, Blodget has definitely furthered the game of estimating private startups in the Valley. It’s a fun game but nobody will win until the startups get acquired.

Andy Robinson, a basketball star at University of Buffalo, was kicked off the team after posting an ad on Facebook looking for a fellow student to write his paper. Apparently he was able to figure out Facebook’s SocialAds program in order to post the following ad:

I am paying anybody who have read the book ‘there are no children here’ by Alex Kotlowitz $30-40 which in some classes you have to read at UB (even more money if you have to read the book a little more!!) to write a 3-4 page paper, on a couple questions which was assigned.

Given that Andy was not a grammatical whiz it probably would have been better had another student written the paper. Looking for a challenging university to get into? I don’t think University of Buffalo will meet your standards. Then again, perhaps Andy had someone else write his application essay. Following his notification of being indefinitely suspended, Andy Robinson made the following statement to the University:

I realize I made a mistake for which I take full responsibility and realize I must regain the trust of my teammates, fellow student-athletes and coaching staff. I have brought disappointment in myself and the university and for this I am truly sorry.

In addition to being apologetic, it appears that Andy experienced a drastic improvement in his grammatical skills. Have Andy’s dreams of one day playing in the NBA been totally destroyed? Not necessarily. The coach stated, “We will evaluate his position on the team based on any university action, as well as him meeting expectations placed on him by the Division of Athletics and the men’s basketball program.”

If you are looking to commit a crime or just break the rules, you may not want to advertise your intention on Facebook. So for all those potential criminals reading this blog, here’s some advice: don’t promote your intentions. Your likelihood of getting caught increases drastically if you buy ads looking for an accomplice. Just a thought!

Yesterday there was a lot of discussion surrounding the CPMs that Facebook application developers are receiving via various ad networks. While I am working on my own project to more accurately monitor run rates on Facebook ad networks, for now, the sample provided by Justin Smith is sufficient enough to come to the following conclusion: why buy branded Facebook ads when you can launch an application yourself?

I had the opportunity to speak with Naval Ravikant of VentureHacks.com earlier today and he stated that as a whole, CPMs on social applications are going down because there is too much inventory. Chances are good that growth in inventory is going to continue to outstrip the growth in brand advertising. This is bad news for most application developers. So how do application developers make more money?

Well, one way is to hire a sales team but for individual developers this is typically unrealistic. So what are they to do? Well if you have enough targeted inventory, you might be able to get into Federated Media but you better have millions of page views on your application and your application must be something that brands will want to place their name on. Honestly the best option for developers is to get acquired and work with a larger development team.

Most developers can’t expect a million dollar pay out though because their application is going to have decreasing cash flows given the decreasing CPM scenario. Given that apps are basically annuities with decreasing cash flows, the sooner you sell, the better. So who are the people making money in the current environment? Companies with a substantial sales force that are doing direct brand outreach are the winners because they have their fair share of inventory to pick from to fill new branded applications.

So what should brands do? What they already are doing! Brands are creating engaging applications and driving users to their applications with cheap inventory. Do you see any better options for application developers?

According to a story published in the Gulf Times, a Dubai based firm is in the process of developing software that will make it easy to restrict access “to groups on Facebook deemed to go against the social, moral, cultural and religious values of the United Arab Emirates.” This reminds me of similar tools that are already in place at a number of companies around the country that block Facebook as a whole.

This new software appears to be a more selective filtering system. Rather than building a tool that blocks the entire site, the company will build tools that help filter groups and applications based on the Telecommunication Regulatory Authority Internet Access Management Guideline which will be introduced later this year to the country. The new application will help block offensive applications such as “Phone Sex For Girls in UAE” and the “Alcohol Appreciation Club.”

Facebook never strays far from controversy with groups including one I previously wrote about which had numerous photos of girls getting drunk. It’s clear that foreign countries that don’t support freedom of speech will face continuing challenges through social networking sites which are effective tools for spreading free speech.

This past weekend I was browsing through the Facebook applications directory and came across the “Send Ben & Jerry’s” application. My initial response was that this is yet another gift giving application. I then noticed that close to 4,000 people had used the application the previous day and almost 200,000 people had installed the application. This is an impressive number for a general Facebook application.

The reality is that non-generic versions of standard Facebook applications can actually succeed. Apparently popular brands can produce simple applications that grow virally. I would have thought that gift giving applications have already been dominated but it appears as though some applications are still figuring out ways to launch and succeed. What extra features does the Ben & Jerry’s application provide that traditional gift giving applications doesn’t already have?

Truthfully, not much. The one addition is the ability to unlock other gifts based on the volume of ice cream that you send to your friends. I decided not to barrage my friends with a bunch of Ben & Jerry’s ice cream goodness but it looks like a lot of other people are. If you want to send ice cream to your friends as well, check out the Send Ben & Jerry’s application.

Looks like the venture funding is still flowing for Facebook applications. The immensely popular Friends for Sale application has received $4 million from Lightspeed Venture Partners. At its basic level Friends for Sale doesn’t really have much of a business model but they are currently one of the most popular games on the site. So what does this new round of funding mean? It means that we have a new serious competitor in the world of social gaming alongside with Zynga and Social Gaming Network.

According to Justin Smith it was a “healthy double digit” valuation. Double digits? I’m assuming they mean in the double digit millions meaning that they probably gave away a large portion of their business in this first round of funding. $4 million can go a long way for a team of developers though and this adds more validity to the rapidly growing social gaming industry.

Take a look at Adonomics and you’ll see that Friends for Sale is the 6th most active game on Facebook currently. According to Alex Le, one of the founders of Serious Business, which owns Friends for Sale, this game is one of the “first in a series of games build directly around your relationships with friends.” According to Techcrunch, “the company could grow to 12 engineers without raising any financing.”

Looks like the team over at Serious Business Inc. have some serious plans for large expansion. It will be exciting to see what games the company rolls out in the near future.

While the following video doesn’t have much that stands out to me, one thing has really grabbed my attention: how much Facebook has become an integral part of many peoples’ lives. I had a good 30 minutes of conversation last night with two individuals who enjoy Facebook chat but could give you hours of feedback on what the downfalls are.

Thanks to Amanda Mooney for posting the video. It’s a great example of how much Facebook chat has already had on at least one college girl’s life (not so sure about the other girl though!).

Facebook chat rolled out yesterday but apparently some users are already tired of it. Jesse Stay just contacted me to tell me about a new greasemonkey script that he hacked together that blocks chat for Facebook users. Personally, I’ve kind of enjoyed the limited amount of Facebook chat experience I’ve had so far aside from the fact that it’s limited to the browser. I’d like to have a standalone Facebook chat clients as well as an email client.

Seriously I have no idea what’s taking Facebook so long to roll out an updated messaging system but the current one is horrendous. My current inbox on Facebook has over 250 messages and there is no hope of recovery. Anyways, aside from my Facebook inbox, having a tool to blog Facebook chat could be useful for many. The only problem is that even though the Greasemonkey script will block chat, your friends will still be notified that you are online.

Receive a message? You simply won’t receive it causing your friends to assume that you have now ignored them and no longer want to speak to them ever again. This is the risk you take when you play with greasey monkeys. Still though, for those that have 5,000 friends (or close to it), signing on to Facebook can be a detriment to your health with an instant influx of 30 plus messages taking up your entire screen. For those few that have friend overload, I’m sure that this tool will come in handy.

Update
As a number of people pointed out in the comments, apparently there is a way to simply go offline. All you have to do is go to the right hand side of the Chat bar and click “Go Offline.” Figuring out how to use chat would definitely be a good idea, prior to building applications around it

Last night, Pete Bratach announced the addition of real-time notifications integrated into chat. As soon as an application sends a notification to a user, they will be immediately notified in the chat bar on their screen. This new addition has the potential to increase the conversion of users from notifications to application installs. I’m sure it will be a welcomed addition to developers.

No change is necessary for developers. Some may decide to increase their use of notifications though because the previous integration points for notifications didn’t seem very effective (at least from my personal experience). Pete Bratach states, “We realize this change requires a learning period for our users. During this time some of them might not respond to notifications as they did before. To offset this, we’re working on ways to introduce users to the new notifications interface.”

It will be interesting to see if notifications become an increasing source of application installations. Right now it’s impossible to predict what will happen but this is a welcomed addition to the application integration points on the Facebook platform.

There was a panel at the Web 2.0 Expo today in San Francisco titled “The Facebook Platform: Finding Success in the Facebook Economy.” So far all signs depict a negative image of the panel. Not of the panelists per say, but that all the panelists were bitching about the state of the Facebook platform and the lack of money in the “Facebook economy.” When the platform launched we instantly saw a number of millionaires made overnight and when you can smell money in the air, you can guarantee that VCs are prowling around and entrepreneurs are trying to sniff out opportunity.

This ridiculous world of Web 2.0 is filled with risk takers, some of whom take so much risk, what they participate in should be considered gambling. Attend one of the Web 2.0 conferences and you are sitting among a sea of gamblers who will all jump at the opportunity to share with you what their strategy is. I too am one of those risk takers and everyday I share with you what my strategy is. There is nothing any of us in this industry like more than sharing with you our thoughts on the world because occasionally we are proven right.

Somewhere I once read that Nietzche said, “Out of chaos comes order.” We are slowly witnessing that take place in this landscape. The real businesses are floating to the top and a few that have been quick to adapt are also keeping their heads above water. While some have found beauty in Chaos, within the chaos you will find aggressive individuals who don’t play by the rules and will do anything to get to the top. That’s how you win in the wild west and that’s how many of the leaders have risen above.

Joyce Park, co-founder and CTO of Renkoo, claims that Facebook has “built a system where you can only win by cheating.” Don’t hate the player Joyce, hate the game. The reality is that Facebook is not a place for the faint of heart. It’s a landscape filled with aggressive risk takers that know how to win when everybody is trying to play dirty. There is a rapidly growing graveyard to support those that have failed to create sustainable business models and are running on a treadmill that will soon be unplugged.

That is the cycle of venture investment and entrepreneurial spirit. It’s not all winners and it’s not all pretty. One thing it is though: insanely fun.