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No signs that Microsoft is killing Yammer October 30, 2012

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Yesterday, Yammer did its first big customer event since being acquired by Microsoft. It pitched the concept of an “enterprise graph,” showed a lot of integration features for third-party software, and even made some room for Microsoft. GigaOM Pro analyst Stowe Boyd isn’t the only observer who likened some of Yammer’s work media API angles to those of Facebook, though Stowe thinks the approach is more like Socialcast’s.

Yammer aims to distribute its functions outside its “site.” I’d hate to call it a Google+ style strategy for social tech APIs, but while Facebook aims to extend its reach, it still soaks up huge amounts of (consumer) user time on its own properties. I don’t think Microsoft would be nearly as happy if Yammer technology shows up next to Salesforce.com apps at the expense of its own Dynamics CRM or SharePoint.

Meanwhile, Yammer is embracing beefed-up security and identity management standards, including various flavors of single sign-on.  All good. Integration is a key differentiator for enterprise collaboration. So even if Microsoft has to grit its teeth a little at the thought of competitors to its own services, it’s still doing the right things with Yammer. It’s not killing freemium pricing, and it might even be learning a little about cloud development.

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Still seeking social commerce October 29, 2012

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Fancy, a site that looks a bit like Pinterest, but invites brands and merchants to sell the items “fancied,” has raised an over-$26 million round of funding, according to SEC documents. Another social commerce play, Pickie, that aggregates social recommendations a bit like a Flipboard for shopping, announced it is launching on Apple’s App Store with a $1 million seed fund. And last week, Facebook closed down its Pinterest-like Collections test, claiming it was doing so not because it was a flop but because it was analyzing early results in preparation for re-launch as a real service.

We’ve written that Pinterest could likely thrive – if not challenge Amazon or eBay – by connecting some dots for merchants and retailers, even if it just scraped by on affiliate fees. But building a large company while being a middleman for other middlemen like retailers leaves pretty thin margins and/or requires huge scale. Some data show that Pinterest is highly engaging for would-be shoppers. And Facebook has its own data to make the case to sellers for its advertising, and its Offers product.

But most e-commerce is directed. Search, price transparency, and comparison shopping are complemented by reviews and recommendations, from friends or otherwise. Social commerce feels like impulse purchasing. Facebook storebuilder Payvment cites analysis that impulse purchases represent the majority of offline retail. But that’s impulse purchases made in stores, not in social gatherings or quasi-magazines. Social commerce that weaves threads across channels, where consumers shop as well as browse, will likely be the real payoff.

 

Running the online advertising numbers October 29, 2012

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Several big digital advertising companies reported their third-quarter results over the last week or two. Those reports reveal a few key trends: Google and Facebook are gaining share, mobile advertising is growing but still tiny and search-dominated, and slow progress in digital brand advertising means that television isn’t going away.

Google. Google’s ad revenue grew 16 percent to $10.9 billion. For once, its ad network sales grew faster (21 percent) than sales on its own sites (15 percent), although its own sites still make up two thirds of the total. That likely means that Google’s display ad network sales grew faster than search. While paid clicks were up 33 percent, the average cost per click was down 15 percent, which most observers blame on mobile search pricing. Google dropped broad hints, rather than clear guidance, about its overall mobile business, including Motorola, but it appears to be on the way to $2 billion/year in mobile search and advertising.

Facebook. Facebook’s ad sales grew faster than Google’s, showing a 36 percent improvement year over year to $1.09 billion. Facebook has a relatively small search business based on some revenue sharing with Microsoft, so it will probably maintain its number one spot in U.S. online display advertising this year. Some forecasters had been predicting that Google would take the lead, based on its ad network growth. Facebook revealed that it had over $150 million in mobile ad sales for the quarter. That figure is still only 14 percent of Facebook’s total, and much smaller than Google’s, but it relieved investors and might very well give Facebook second place in mobile ad revenue.

Yahoo. Yahoo’s display ad business was flat at $452 million. While search was up 11 percent to $414 million, that was due to guaranteed revenue from Yahoo’s search partner, Microsoft, rather than to organic growth.

Microsoft. Ad revenue from Bing, MSN, and Microsoft’s ad network business was up 15 percent to $655 million. Microsoft said search was up, but display ads down across the board.

The other big U.S. online advertising player, Aol, will report its earnings next week. Aol had over $335 million in ad revenue in the second quarter, with its ad network business growing twice as fast as sales on its own properties, and search (via Google) slightly down.

Key takeaways

Earlier this month, the Interactive Advertising Bureau released its 2012 first-half report, showing overall U.S. growth at 14 percent. That’s healthy compared to most traditional media categories, but slowing versus last year. According to the IAB, search still dominated, but mobile and digital video were each worth over $1 billion in first-half sales.

Search and free online classifieds decimated the newspaper business, but I would not expect online video and display advertising to gut the television industry anytime soon. TV is still best at delivering emotional messages to big audiences. The TV industry is likely to add targeting techniques learned online to multi-channel campaign selling sooner than online delivers mass-reach video. And much of the recent action in online advertising is in ad networks and real-time bidding. Those technologies better suit direct marketing, though they offer some efficiency in brand ad-buying.

Mobile advertising still feels like search right now, although Facebook is mixing some social flavoring with its direct-marketing mobile ads. Brand advertisers are still figuring out what to do with social media, whether it’s mobile or web-based. To-date, ads on social media have proven only modestly effective for direct marketing, and proponents believe branding is the true promise for the medium. Quite a bit of brand advertising spending depends on buyers measuring the efficiency of their buying, based on assumptions proven years ago on television. Testing for branding effectiveness achieved via TV and print is costly.

Social media could not only provide a vehicle for harnessing an audience’s social connections, but also a relatively cheaper way to test results by measuring interest and incorporating CRM data. Ad sellers who can put together programs for delivering and measuring that combination will make lots of money in years to come.

Mapping Session results: Mobile shopping October 26, 2012

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At last month’s Mobilize conference, GigaOM Research hosted a Mapping Session to probe attendees’ collective thinking on the most disruptive forces in mobile shopping. We wondered if the promise of mobile shopping depended on widespread adoption of nascent technologies like near-field communications, geofencing, or mobile payments, or whether other technologies could jump-start mobile transacting in the near future.

To kick off the session, GigaOM Pro analyst Phil Hendrix shared some early survey results he’s currently working on at immr. Phil surveyed consumers about what they find annoying about shopping in order to help companies and retailers address those irritants and prioritize commerce features. Consumers seem impatient: They said they were often bothered by long waits at checkout or by slow mobile site downloads.  Once they’d made a purchase, having the wrong product delivered was particularly frustrating, while going to a store and finding a desired product unavailable also rankled. Look for a GigaOM report derived from this research, and in the meantime check out a related Analyst Roundtable webinar “Retail in the cloud: Keeping shoppers in the store” where Phil adds a bit more detail.

Assessing market disruption

We often use Mapping Sessions to lay the groundwork for deeper analysis on emerging markets where we apply our Sector RoadMap approach. We’ve done Sector RoadMap reports on categories like the Platform as a Service market and work media tools. Sector RoadMaps are collaborative research efforts that match up competitors’ abilities to align with what we call Disruption Vectors, i.e., the key technology or market forces that drive emerging markets. Smart vendors can ride Disruption Vectors to gains in revenue or market share.

During the Mapping Session, we discussed a number of different trends and technologies that could act as the Disruption Vectors for mobile shopping in the near term. The panel, along with the audience participants, considered and rejected technologies such as gamification and hardware-driven services like NFC or point-of-sale payments devices. While these may play driver/inhibitor roles in the future, their near-term impact is less crucial to market development – the former due to mass-market irrelevance, the latter to lengthier deployment cycles. The consensus was that social technologies and loyalty programs would be more important but not among the key Disruption Vectors. Those, and their relative importance, are illustrated below.

Personalization. Session participants pointed out that, in contrast to web-based e-commerce, which is highly directed and driven by search, research, and price comparison, mobile shopping was likely to be more serendipitous or impulse driven. Yes, comparison shopping via showrooming is a very real phenomenon, but participants felt that personalization techniques such as well-targeted offers, shopping and wish list support, and reminders and alerts would affect the earlier, awareness and consideration stages of the shopping process, and drive people into stores.

Location sensing. Location and context are components of personalization as well. Simple things like QR codes and mobile apps that access catalog info and user reviews will have a bigger near-term impact, but GPS-targeted offers and geofenced stores excited the room. Perhaps we’ve all got Minority Report – or ShopKick – on the brain.

Big data. Data analysis can feed personalization, but companies can also dig deep and recognize patterns they can mine to craft pricing and inventory management strategies in stores to complement mobile access and offers. Established players with access to cross-channel purchasing information like Wal-Mart, Best Buy, McDonald’s, and the credit card companies are better positioned to mine that big data than are startups like Foursquare or Groupon.

Payments. Mobile payments systems may depend on creating cross-merchant or -category loyalty programs for adoption. So far, the convenience angle hasn’t accelerated consumer or merchant deployment.

Convenience features. This category represents a catch-all for cloud-integrated services like in-store pickup, checking inventory availability, faster checkout, etc.

We also discussed loyalty programs and various social media and social commerce angles, but they didn’t resonate with the session participants as much as the Disruption Vectors described above. There’s a bit of redundancy in that list, and some technologies are means to others’ ends. We’ll continue to refine our analysis of the sector. Meanwhile, Mike Wolf describes the results of another Mobilize Mapping Session on navigating the appconomy in this post. Previous Mapping Sessions kicked off the PaaS Sector RoadMap and looked at how Infrastructure as a Service could commoditize other IT sectors.

Feedback

We welcome your feedback on these disruptive trends, and on what might accelerate the success of mobile shopping. Have we missed or mis-emphasized anything that you believe will be key to driving the sector over the next 12 to 24 months? Continue the discussion by leaving a comment below.

Mapping Session Panelists

  • Phil Hendrix, GigaOM Pro analyst, Founder and Director, Institute for Mobile Markets Research (immr)
  • Laurie Lamberth, GigaOM Pro analyst, Founder and VP, Business Development, Lamberth & Associates
  • David Card, VP Research, GigaOM Pro

Facebook Q3 delivers, shows a hint of mobile October 24, 2012

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Facebook reported solid results for its third quarter. Its ad revenue growth outpaced Google’s, as I expected it would, and Facebook showed that it can make at least a little money off of its mobile users. The market (over)reacted favorably, just as it had over-expressed its concern.

Ad sales were up 36 percent year over year, to $1.09 billion. Mobile advertising represented 14 percent of the total. Some observers think Facebook might even be able to command higher ad pricing for mobile than for its web advertising. Facebook is now probably the number two seller of mobile advertising, after Google. All that shows, really, is how immature mobile advertising is, and how search-dominated it’s likely to be for the near future. Facebook’s real money comes from its website, and it still needs to work on proving to brand advertisers that social media is effective.

And although Facebook’s payments revenue grew year over year, it is down sequentially. Nearly all of that comes from Facebook’s cut of virtual goods sold by social games. Zynga, Facebook’s biggest source of payments, is between hits, and struggling a bit.

Yahoo Q3 still seems sluggish October 23, 2012

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Yahoo’s mediocre third quarter seems to have pleased Wall Street. Profits came from an asset sale, and its most important business – online display advertising – was flat at $452 million after paying out revenue-sharing (ex-TAC). Search was up 11 percent to $414 million, but only because Yahoo continues to get guaranteed revenue from Microsoft. Its search business is not growing organically, despite its “upside” potential.

Google’s quarter was “disappointing,” but it grew advertising (search and display) 15 percent on its own sites and 21 percent on partner sites. Google partners use both its search and display ad network, but that growth was probably driven by display. Yahoo’s woes come not from losing money but from stagnant growth. But critically, Google continues to gain share against Yahoo in display ad sales. Facebook is set to report its results later today, and will almost certainly gain share versus Yahoo, and probably against Google. Facebook may even be growing mobile ad sales.

So why did investors react so positively? They’re probably happy to see new CEO Marissa Mayer looking comfortably in charge, and saying she’s going to shift resources into mobile development. I dunno. Mobile advertising is barely getting started. I’d rather hear more about ad targeting, brand advertiser products, and what Yahoo intends to do about ad networks.

 

Aol’s Alto shows some UI innovation October 22, 2012

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Last week, Aol started showing off Alto, a new spin on email that’s all about design in the service of ease of use. Back in the day, Aol introduced millions of consumers to email and to the web, but Alto looks very modern in a Pinterest-y, tablet-friendly way. Alto is more than just a pretty face, though, and it’s worth evaluating the user interface techniques that it employs. Good developers copy; great ones steal, regardless of source.

Although early previewers call it an app, Alto is a cloud-based service that acts as a front end for a user’s existing consumer IMAP email accounts. Aol positions Alto against Gmail in particular. Alto’s primary differentiation is a very visual, uncluttered UI that auto-sorts email in real time into “stacks” based on predefined categories like retailers, photos, attachments, daily deals, and social notifications. Users can create their own stacks pretty easily, but as Google Circles have shown us, even simple drag-and-drop group creation is too much work for most consumers.

Tradeoffs in power versus ease

From the descriptions I’ve read of Alto, it seems that once messages are assigned to stacks – defined by topic, sender, and Alto’s interpretations – it stays in that stack and only in that stack, and similar messages will go there, too. Aol’s objective was to simplify and unclutter an inbox; it says its analysis shows that most users don’t bother with folders and routing rules. I’m sure that’s true. While I admire the ability to apply more than one label to a message in Gmail – something that’s hard to do with folders – I expect I’m a more obsessive user than most.

Innovating in UI is a tricky balance of introducing the new without alienating the old, especially when working with existing applications and user behavior. And many user interfaces can’t bridge the gap between easy-to-learn and practical-to-use. Alto looks like it’s done a fair job on this balancing and bridging. Alto is also on-trend in its use of metadata and visual cueing to add context. And although it doesn’t look like Twitter, Facebook, or Yammer, it’s essentially delivering a real-time feed.

Missing out on unified communications

While it can pull in and present multiple email accounts at once, Alto falls short as a unified communications hub. Aol’s traditional email integrates instant messaging – something that’s a future feature for Alto – and Alto only makes the slightest nod to social media by sorting social update email messages. It doesn’t seem to offer anything in the way of persona or identity management.

Alto seems to have achieved its design objectives of favoring ease of use over power for general users. But it’s hard to imagine it being a serious contender in unified communications. This version of Alto doesn’t have any apparent business model: Aol execs hint at ads near the retail stack or premium services, but Alto doesn’t even feature portal content aggregation to drive user traffic. Smart developers should study Alto and evaluate their own tradeoffs between function and design. Aol has made some nice compromises in Alto, though it’s hardly a new paradigm.

The GigaOM RoadMap event is all about design, UI, and connectivity. It’s scheduled for November 5 in San Francisco, and I’ll be moderating a breakout Mapping Session on next-generation user interfaces. I hope to see you there.

Questions: When Facebook fails October 21, 2012

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Remember “pokes”? How about Facebook Questions? Facebook is famous – or is that “notorious”? – for promoting a ship it fast, fix or kill it, apologize later, development strategy that is common in the cloud computing era. Nothing shocking there. But it’s always worth looking at Facebook flops for indicators of social media uber-trends, as well as what Facebook takes seriously (or not).

Re-positioning Questions as a brand page feature might indicate, as Inside Facebook noted in the linked story above, that it could end up being a premium service for marketers. If Facebook could add meat to such an offering, by adding analysis tools that would give marketers insights into how their fans feel versus the mainstream, it could justify charging. Hard to see how that happens if Questions only occur within brand pages.

Several stories point out that Facebook Questions wasn’t a Quora-killer. Who cares? The nearly-irrelevant Quora is far off of Facebook’s radar. As it should be. Facebook couldn’t make Questions into an easy-to-use communications utility for users. That doesn’t bode well for Facebook’s search efforts, whatever they might be. Regular readers know I don’t think Facebook really wants to challenge Google.

Do not track at your own risk October 15, 2012

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The headline of this story in Advertising Age reads: “Microsoft Takes Heat From Coke, P&G For ‘Do Not Track’ Browser.” Yet, several paragraphs into the piece:

Asked if the controversy would affect his advertising relationship with Microsoft, P&G Global Brand-Building Officer Marc Pritchard replied: “Nah.”

The Coke exec doesn’t exactly take Microsoft to the toolshed, either. I wouldn’t be surprised if Microsoft were hearing some grief from advertisers, even if they and publishers are using industry organizations like the ANA to express their discontent. A default Do Not Track setting does potentially throw off the mechanisms for ad targeting, especially from third-party networks and data providers.

Microsoft’s attempt to take the privacy high ground may ultimately alienate some advertisers, but the media seems to be blowing this story up a bit. After all, no one’s decided how the Do Not Track policies actually work yet.

Social media threads require weaving October 15, 2012

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Last week a pair of thoughtful posts and some announcements from Facebook were a reminder that the social web is more complex than you might think. Burned by Groupon, Zynga, and Facebook, investors have soured on consumer social media companies lately, perhaps thinking that all the good opportunities have been figured out, and the growth days are over. Far from it.

The ways that consumers use social media and the way developers and marketers harness its audiences and underlying technologies is still evolving. Smart companies must recognize social media provides threads they can weave into more traditional marketing, media, and commerce programs. It’s too simple to think of Facebook, Twitter, and YouTube as slightly updated versions of the mass-market websites – and their accompanying business models – that we have understood for the past 10 years or more. Facebook, for instance, is not just Yahoo 2.0.

Social doesn’t just mean “social sites”

Yes, Facebook seems to have wisely adopted some tried-and-true digital marketing techniques. It is adding to the value of its advertising inventory – and raising prices – by enabling it to be more easily used in re-targeting campaigns. But the reason it’s a relative latecomer to this practice, and why Facebook is still missing easy opportunities by offering conventional branding formats for big advertisers, is because the company is still trying to prove the effectiveness of new and truly different social marketing techniques.

A post by Jaap Favier lays out an ROI model for social media marketing that uses customers in bars as a metaphor. Read the post; it’s not the only way to evaluate social media, but it points out some of its key benefits relative to traditional media. Meanwhile, Alexis Madrigal points out in The Atlantic that if you run your analytics properly, you’ll see that a great deal of social content promotion comes from sources most people don’t associate with “social media,” including email and instant messaging from older online brands.

Thinking of social networks as social media sites gets a company only part way there. Facebook’s latest plan surrounding Open Graph actions for user- and developer-initiated sharing apply to apps that run on its site, even if “Collections” doesn’t look like much of a threat to Pinterest yet. But, possibly more important, these platform tweaks can be used by apps that run elsewhere on the web and on mobile devices.

Multi-channel weaving

I recently had conversations with two unrelated companies that offer services that help companies weave these various social threads together across channels:

  • Shopigniter recently updated its promotions management system for retailers. The company offers a bundle of cloud services that resemble a lightweight content management system for merchandisers with analytics and shopping cart accommodation. It enables a higher degree of interaction than conventional posts within the Facebook stream – although Facebook’s own analytics may not capture those actions, so EdgeRank promotion might need some help. Shopigniter works across Twitter and Pinterest, too, and looks competitively priced relative to six figure custom campaigns done with digital agencies.
  • SocialTwist is a company with app server roots that builds a cross-channel offer-promotions vehicle for big packaged goods and financial services customers like Sara Lee and CapitalOne. SocialTwist primarily focuses on coupons for both customer acquisition and retention. It integrates and tracks across the usual social media suspects as well as IM and email, which still drives over half of interactions. It has a similar pricing model to that of Shopigniter.

The ecosystems supporting social media marketing continue to produce new companies, and big players with their eyes on social CRM make acquisitions. The social platforms themselves continue to evolve at a rapid pace. All this swirling around social marketing and content discovery adds complexity, but it also means opportunity. Expect to see further expansion in the space before any serious consolidation.