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Ah, so that’s why Twitter’s vision seems hazy October 9, 2012

Posted by David Card in Uncategorized.
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Jack Dorsey responded to the flattering New York Times profile of Twitter CEO Dick Costolo that sponsored questions like Mathew Ingram’s “Can you have a part time product visionary?” The answer, apparently, is no. Silicon Valley applauded when Dorsey, an original founder, returned 18 months ago to help set product – and strategy – direction for Twitter. But it seems he’s stopped doing that since January. Dorsey drops by on Tuesdays, much as he did prior to the comeback tour.

So feel free to blame this summer’s ecosystem-upsetting API policy changes on Costolo. Mathew points out that Twitter has separate product leads in charge of consumer products, advertising, and international. Does it really have an overall vision? Does it need one?

The answer to the second question is yes. Twitter is struggling a bit as it wrestles with its multiple roles in the social technology industry. Twitter is a media company – any organization that makes most of its revenue from advertising is, by definition. And while it is a supplier of APIs, those are used by third party developers more for their access to Twitter information than they are for access to core tech infrastructure services (the way Google’s, Facebook’s, and Microsoft’s APIs are used). That’s not necessarily a bad thing. Developers can get locked into those APIs, in a good way, just like they can with infrastructure. And Twitter may be able to build out its business in data licensing, though that doesn’t feel like its real focus.

No, that focus is on selling ads. I’m skeptical that Twitter’s ad sales are as big as eMarketer thinks they are, and Twitter’s really in no better position to sell mobile advertising than anyone else is. It’s a positive sign that Twitter is working with media companies who have richer ad inventories and bigger salesforces to sell them. But it lacks the agency and ad tech and services ecosystem of Facebook, the company that for all its grief is the real social media marketing power.

A social gaming manifesto August 13, 2012

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Zynga is in turmoil. Since its IPO, its stock has cratered, attracting public exposure of company morale problems that may be more than pockets of dissent. The company reorganized senior management, leading to the departure of its COO, veteran games exec John Schappert. Its emerging mobile strategy has failed to impress.

Zynga is the biggest fish in the social gaming pond, but videogame giant Electronic Arts is right up there on the charts, along with relative newcomers like King.com and Wooga. Disney never made much of Playdom in casual games, but its “Where’s my Perry” looks like it might be an iOS franchise. With increasing competition, it’s worth understanding whether Zynga’s troubles are unique to the company, or whether it is social gaming itself that is struggling.

Is “social gaming” a misnomer?

Tadhg Kelly, a game designer blogger, is on the money when he notes that most social gaming isn’t actually very social. Many so-called social gamers are just taking a quick break of time-wasting fun without necessarily involving a human opponent or collaborator. While there are unique characteristics to the current generation of social games – callouts to friends for help, integrated status updates – many are the natural successors to the kind of casual games like “Bejeweled” that have been around as long as the web. (And had paper-based predecessors before that.) In many ways, social networks are just a new vehicle to promote and distribute casual games.

Based on GigaOM Pro’s spring 2012 survey of U.S. online adults, social gamers and casual gamers have a lot in common. Twenty-five percent of online adults are monthly users of casual games – that’s a figure that hasn’t changed much over the years. Those casual gamers tend to be middle-aged women (61 percent female) and only 14 percent of them play multiplayer games like “Worlds of Warcraft.” Survey respondents who said they played games on social networks had similar demographic and behavioral characteristics. These social gamers make up about 15 percent of online adults and also skew female (60 percent) and middle-aged. Over half (58 percent) play casual games and 13 percent play multiplayer games. Thirty-six percent of mobile phone-owning social gamers play mobile games and 38 percent of casual gamers do so.

Social gaming strategies

Today, Zynga has built a billion-dollar business off of casual games built on Facebook’s social network platform. The company is metrics-driven – perhaps to a fault – in its effort to engineer games for frequent, casual usage, viral promotion, and virtual good sales to a relatively small number of heavy users. But there’s little evidence that those heavy users are classic hardcore videogamers or players of multiuser role playing games, so expanding into those genres probably won’t scale.

Casual gaming is a mature business in the U.S. Zynga and its social games competitors should follow these principles:

  • Manage the portfolio. It’s impossible to predict hits, so like other entertainment companies (movie studios, record labels) social games companies must manage a portfolio of titles, and jump on the ones that take off. Not every hit will be a franchise for sequels and spinoffs, so the key is launching lots of titles on a regular basis, doing as much analysis of them as possible, and vigorous cross-promotion.
  • Cultivate multiple revenue streams. Zynga has mastered virtual goods, but it needs to be more aggressive on sponsorship and in-game advertising. In fact, virtual goods-bartering shows a lot of promise as a sponsorship means. Facebook has enabled game and content subscriptions. That’s worth experimentation, but subscription may appeal more to hardcore gamers.
  • Build out the platform. I’ve given Zynga perhaps more credit than it deserves for starting to build its own platform. Successfully deploying APIs for technology and promotion to third-party game studios could help smooth out the ups and downs of the hits business, but only if social games platforms can generate revenues from licensing, advertising, or promotion fees.

Mobile might be different. Judging by the survey data, there’s reason to expect a similar number of mobile gamers will be high-spending “whales.” But that’s not proven yet, and apps stores are establishing a model of low-priced games rather than virtual goods. So mobile revenue experimentation is a must.

Question of the week

How can social gaming companies transition into mobile gaming?

Social platform players reveal diverging roles August 6, 2012

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Last week, Facebook and Twitter generated consternation within their respective ecosystems. Disgruntled developer Dalton Caldwell whined that Facebook found his app so potentially competitive that it “threatened” to buy him out. Meanwhile, Twitter had to apologize for temporarily shutting down a reporter who was helping feed a ruckus within its all-important Olympics-coverage network. These unrelated uproars illustrate key differences in the two dominant social media platforms. Facebook APIs channel data and technology services, but Twitter’s all about the data.

Both companies make social technology platforms that enable third-party developers using public APIs to build apps and services. Both platforms have spawned successful business ecosystems generating utility and value for mass-market audiences, app developers and web sites, and the platform companies themselves. Facebook has irked developers with its policy changes: particularly by making changes to how application activity gets shared among users, which can have a big impact on app traffic and promotion. Usually, it’s Twitter that gets accused of competing with its developers.

What matters for Facebook’s ecosystem

Although Google seemed only too happy to try to take advantage of whatever bad vibe Caldwell’s missive might create, the incident is a classic teapot tempest. This piece I wrote assessing the position of some social tech platforms and their ecosystems is still valid. For a thriving ecosystem, in addition to core technologies and support, would-be platforms need to give developers access to large and/or valuable audiences, distribution or even out-of-network syndication, data, and a way to make money.

Google has its own history of API inconsistency, but more important, Google+ hasn’t really clicked with users as a destination or place to use apps. And although Google is making some progress attracting marketers who value the potential for Google+ technologies to permeate other Google apps and affect search rankings, Google hasn’t connected its powerful ad networks to Google+ for developer revenue.

I doubt many developers fear that Facebook will compete with or buy them out, and an Instagram-like exit is an incentive, not a deterrent. Rather, a more serious Facebook platform issue is that its original platform poster child, the social games giant Zynga, is struggling lately. Zynga’s wounds are self-inflicted or the natural ebb and flow of managing a portfolio of entertainment titles. Zynga is experiencing sequel-itis and the fact that not all hits are instant franchises. But many see Zynga as a symptom of the Facebook platform’s vulnerability to increasing mobile usage.

This is premature, but worth monitoring. Mobile-only usage is starting to be noteworthy for Facebook, but some of that may be occurring in emerging markets where neither Facebook nor its ecosystem have business models to be damaged. And Facebook’s “sponsored stories” advertising format is showing early promise and can accommodate mobile usage. However, while individual gaming on mobile handsets is common, social gaming is less so. Neither has Facebook established its role in mobile app distribution or content discovery.

Twitter plays different role

Meanwhile, Twitter’s dust-up reveals the relative importance of the company’s roles within its own ecosystem. My GigaOM colleague Mathew Ingram writes equally about Twitter as an information utility, a media company, and a technology supplier. Yes, Twitter is a true platform, but its APIs are arguably far more important as a data source than they are as tools for developers building application functionality. The journalists, celebrities, and consumers that generate the content that flows through the Twitter network are a bigger part of the ecosystem than are third-party app developers.

So what are the takeaways from last week’s events? Facebook partners should stick close to the company’s budding mobile efforts, and experiment early and often. Caldwell’s concerns about Facebook’s business practices are overwrought, but questions about Facebook’s longer-term mobile platform and its ecosystem remain unanswered. And while Twitter is evolving its technology, developers should notice how much that evolution is about content display. Twitter may have some ideas about apps running within its platform, but Twitter’s most critical role is as an information and content distribution mechanism.

Question of the week

Which social media platform is more vulnerable?

Potential Microsoft-Yammer impact June 25, 2012

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There’s still no official declaration by Microsoft – or Yammer – that it would acquire the social work media company for over $1 billion. While some observers labeled the social enterprise acquisition frenzy “lunacy,” others called this potential match-up the “smartest deal of the year.” As with all acquisitions and mergers, it’s all in the details of execution, but this potential combination makes a lot of sense.

What it means

Microsoft’s own SharePoint enterprise collaboration platform is notoriously difficult to deploy. Yammer is just the opposite. And Yammer, like several other freemium, cloud-based collaboration tools, has built integration hooks into its activity stream to pull from and feed back into Microsoft applications, as well as those of Salesforce.com, SAP and other enterprise software offerings. Yammer offers social network-like work media functions including user profiles, project and user “following,” a feed-based user interface, and basic content and file sharing. Yammer, having raised $142 million, claims to have 5 million users at over 200,000 companies, although likely 20 percent or fewer are paid seats.

If the deal goes through, there will be lots of talk of integration. But this is one case where a “bolted on” solution might pay off better for Microsoft than slowing down Yammer’s so-far successful strategy of plugging in to multiple other applications and platforms, including Microsoft’s. And when Microsoft talks integration, it doesn’t necessarily move swiftly. Microsoft spoke warmly about opportunities to connect its Lync unified communications scheme with Skype, with little to show for it so far. A longer-term integration differentiator could lie in searching and connecting the new data silos being created by the proliferation of work media applications.

And which Microsoft product set would benefit most from Yammer integration? SharePoint is the most logical starting point, but Microsoft’s Dynamics CRM suite beckons as does Office and its cloud-based Office 365 variant. Microsoft has been most successful when it builds out horizontal platforms like Windows, Office and SQL Server that third-party developers can leverage for functional (CRM, accounting, HR, manufacturing, etc.) or industry-specific applications. By that reasoning, Yammer fits SharePoint better than Dynamics.

A horizontal approach would keep the door wide open for developers, systems integrators and distributors to take the Yammer/Microsoft combination far and wide. Though some observers think Microsoft will kill Yammer’s freemium business model, it would be wiser to maintain a free entrée point. Microsoft needs to figure out how to exploit this model; freemium is here to stay.

Whom it affects

There is a wide variety – not to say confusing proliferation – of social enterprise players in the market. They tend to fall into types:

Enterprise social networks. Yammer sees companies like Jive Software and Telligent as its main competitors. Those two are ahead of Yammer in adding features and applications to customized their offerings for community marketing, internal and external collaboration and some of those business functions mentioned above. Another player, Atlassian has focused smartly as a platform for software developer collaboration. While Microsoft would add resources to Yammer, those companies are better positioned to compete than is NewsGator, whose current business model depends on adding services to SharePoint.

File-sharing content management and collaboration. Companies like Alfresco and Box have built out far more content management features compared with Dropbox and others that have yet to move far beyond file-sharing. Still, simple collaboration tools have managed to gain ground with line-of-business managers that can’t wait for IT support. If Microsoft doesn’t wreck Yammer, it may be able to wall off enterprise incursions by these companies, and relegate them to small-business and midmarket buyers.

Socialized ERP. Salesforce.com’s Chatter looks a lot like Yammer, and Salesforce can position itself as a credible cloud solution compared with Microsoft. Microsoft must keep Yammer as a horizontal platform play, and resist too much of its own – rather than third-party – application integration. Ironically, Microsoft could play the “open systems” ecosystem card against Salesforce and Oracle’s Webcenter. Oracle pitches Webcenter across all its software, but it’s really its applications-focused cloud computing tactic versus Salesforce.

Socialized enterprise software infrastructure. IBM Connections add social integration to its infrastructure and communications software, much as Tibco employs tibbr. They’re “bolting on” social media to their own offerings, where VMWare is trying to build out a platform with Socialcast. Socialcast, as the more general-purpose offering, is more vulnerable to the Microsoft/Yammer potential.

Key takeaway

Microsoft should focus on keeping Yammer a horizontal platform and learn how to adapt to freemium pricing rather than obsess over deeply integrating Yammer across its product lines. If it does, this could be a powerful combination in work media.

Question of the week

Who’s most at risk from a Microsoft/Yammer combination?

Browser wars, part IV May 29, 2012

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Yahoo seemed to be taking a page from an old 20th century playbook last week when it introduced Axis, its browser/search hybrid app for iOS. And there’s a rumor circulating that Facebook might be looking at acquiring Opera. Does this mean we’re about to enter “Browser Wars, Part IV?”

Eighteen months ago, I wrote a short piece of analysis arguing that browsers don’t matter anymore. My thesis was that major technology platform providers like Google, Apple and Facebook weren’t using browsers as a key distribution channel or developer strategy for their APIs. Browsers might still play a role, I wrote, by offering a development platform to help alleviate fragmented operating system markets like mobile phones and connected TVs.

Has much changed since then? Microsoft has lost a little market share in desktop browsers, but the most established market tracker still has Explorer with a 30-point lead over Firefox and Chrome. OS and browser are tightly integrated for mobile phones and tablets, and we might even see that pattern re-emerge in desktop operating environments.

Yahoo’s chances

So what is Yahoo trying to accomplish? Shouldn’t the troubled portal be concentrating its allegedly mobile-first strategy on apps that have a chance? Like, for instance, its Livestand newsreader? Oh wait, it just killed Livestand.

Axis is getting surprisingly good reviews. (So did Livestand.) But when implemented as an app for iOS, it’s less a full browser than a skin on Apple Safari. Axis uses Safari’s rendering engine, and doesn’t override Safari when other browser-related functions come into play, like posting updates or photos. Axis is an intriguing search and web navigation app that presents page images rather than links as results, remembers a user’s search history across devices and enables a personal home page.

Axis gives a slick demo on an iPad. But page thumbnails are an inefficient way to display search results on smartphone screens, and there’s no evidence that Yahoo is tuning results for mobile use by, for example, re-ordering results based on GPS data. The success of Axis will depend on whether users perceive its approach to be fun or offering utility. Axis may be fun to use on a tablet, but it doesn’t stack up well against recent social search initiatives from Microsoft or Google easy-answer utility.

Surprisingly, although Yahoo is talking about the potential of Axis advertising, it’s not showing any ads or paid search results right now. That’s odd, since tablet ads might command a premium for their novelty and potentially rich interaction. Yahoo’s leaving money on the table and potentially taking away revenue opportunities for Microsoft, its search partner.

Browsers as platforms

If Axis catches on, it might increase usage of Yahoo search and content. But Yahoo appears to have wisely abandoned any notions about being a technology platform provider. It is not using Axis as a package of APIs connected to Yahoo services upon which third-party developers build apps.

Facebook is a another story entirely. I’ve written before about why Facebook would like to deploy its platform on devices via a somewhat site-centric HTML5 strategy, to ease multiple-OS support and get around app store restrictions. Its intent to buy Instagram and its own Camera app probably indicates bridge tactics toward that longer-term strategy.

Right now, Facebook mobile performance is poor. For security reasons, Apple restricts how apps use Safari’s rendering and JavaScript engines. Safari and other browsers use just-in-time compiling that enables applications to run faster by optimizing on-the-fly for particular hardware configurations. Opera also relies on a fast rendering engine and server-side caching for performance. Facebook might indeed benefit from access to those kinds of technologies. If it does acquire or build a browser, though, Facebook should “disguise” it as a speedy app, rather than trying to steal usage away from the device’s default browser.

Question of the week

Does Facebook need to own a browser?

Potential Facebook-Instagram impact April 16, 2012

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It’s been a week since Facebook announced its blockbuster $1 billion planned acquisition of Instagram, plenty of time to sketch out what it means for Facebook and the mobile social media environment. Don’t be too quick to assume that Facebook is abandoning its HTML5 mobile strategy in favor of apps. As a defensive move, the acquisition would lock down Facebook’s strong position in photo-sharing, leaving little room for would-be competitors, but it gives Facebook few new weapons and no new revenue opportunities.

What it means

It’s too easy to say Facebook will steer its mobile strategy towards apps and away from mobile access to HTML5 websites. Letting Instagram thrive as an app still fulfills the three strategic objectives I said Facebook needed from mobile: ubiquitous access and high frequency usage, a common cross-platform user experience, and distributed technologies that reinforce its platform. Facebook is still counting on HTML5 to minimize development fragmentation across mobile operating systems and the web. Especially since such a framework would better allow it to apply its Credits virtual currency and payments system broadly, without giving Apple, Google or Amazon a cut. Facebook is trying to encourage app and web integration with discovery services, test suites and streamlined payments. Instagram’s limited use of its own APIs could tie into Facebook’s own social services.

Instagram’s app is simple and elegant, two things you don’t hear about Facebook’s app or its mobile website. But Instagram also uses core social networking techniques that shouldn’t be overlooked. In his post on the announcement, Facebook CEO Mark Zuckerberg differentiates between sharing photos with friends and family versus sharing based on interest. And Instagram uses asymmetric following as Twitter does, rather than Facebook’s primarily two-way following system. Over time, those social networking technologies could add more to Facebook’s social graph than additional location data.

My initial reaction to the announcement was that Instagram might be worth a billion dollars to someone, but not to Facebook. I thought the two companies’ customer base probably had a lot of overlap – so that Facebook wouldn’t necessarily be gaining 30 million new users – and that thousands of Instagram photos were already stored on Facebook pages. Recent figures from AppData suggest that 22 percent of Instagram users connected their app to Facebook. That overlap will increase as Instagram gains more mainstream users: Contrary to potential backlash fears, Instagram received an additional growth spurt from the Facebook announcement on top of its first Android app. Already 96 percent of U.S. social network users, ages 18 to 34, uses Facebook, according to our GigaOM Pro 1Q2012 consumer survey, so there’s minimal Instagram headroom.

Instagram doesn’t have any revenue streams itself, so it won’t solve Facebook’s lack of mobile monetization. Facebook has resisted showing ads on its mobile app or mobile website, and seems more likely to show in-stream promotions than mobile display ads or interstitials between photos. What Instagram does give Facebook is a near dominant position in photo-sharing, both mobile and online. Both Om and investor and Hunch co-founder Chris Dixon saw Instagram as Facebook’s biggest competitive threat.

Whom it affects

Google missed out on a chance to gain social media customers and attack a core Facebook stronghold. But Instagram won’t add enough user data to Facebook’s interest graph to weaken Google’s.

Twitter reportedly tried to buy Instagram, and it would have welcomed the user growth and bulked up its own nascent ambitions in photo sharing and storage.

Apple doesn’t make many apps, but desktop photo manipulation and management is one of them. Instagram would have been an easy fit, offering lots of integration opportunities and bringing much-needed social DNA to Apple.

Yahoo’s Flickr is still a huge web repository for photos – including ones taken with Instagram – that could have benefited from a mobile user base.

Other smartphone photo apps like Hipstamatic and Eyeem don’t have the size or growth rates that Instagram has. There’s very little reason for any of the previous group of companies to buy any of them rather than building their own app.

Other social startups might now be in play if the bigger companies above decide they need social media users. But Pinterest is really the only one with size, growth and potential ease-of-monetization. And Facebook still has plenty of money and stock.

Key Takeaway

Although Facebook is still committed to an HTML5-based mobile web strategy, keep an eye on whether it shifts towards a series of single-function mobile apps as a medium-term bridge tactic.

Question of the week

Who is the biggest loser from a Facebook-Instagram match?

Web development: Does Google matter? April 2, 2012

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These days, the digerati are not showing a lot of love for Google. Last week, a Gizmodo piece summarized much of the criticism of the search giant, and encouraged others to pile on. There was much scoffing – if not outright derision – for Google initiatives: a consumer activity log, a forthcoming cloud drive and a possible online hardware store. If Google has lost faith among Silicon Valley pundits, does that mean it has lost relevance for web developers?

Mat Honan’s Gizmodo essay says Google is losing consumer trust as it shifts its focus from search towards integrating Google products with Google+ as glue. I suspect few mainstream consumers are aware of most of the sins Honan enumerates: e.g., end-running Safari settings, favoring its own products in search results, settling with the Justice Department over Canadian pharma ads, scraping data from a Kenyan business directory. They’re certainly not abandoning Google products like search (66 percent market U.S. market share), Android (46 percent) or Chrome (19 percent and growing). But Honan’s sense that Google has violated its Don’t Be Evil credo is echoed by a former Google engineering director, who agrees that Google’s business objectives take precedence over technology innovation.

Fundamental tensions

My GigaOM colleagues Bobbie Johnson and Barb Darrow point out how Google’s business practices lead to vulnerabilities with the developer community. Bobbie airs the complaint of a startup founder that Google gets developers hooked, then abandons or, worse yet, competes with them. Barb shows how Google must combat a feeling among developers that its current business focus means that some core technology platform services could be abandoned on a whim.

And Google’s platform strategy is shifting in a way that could alienate developers. Google has long been a pioneer in web technology platforms, through standards organization participation (W3C), its own APIs and services (search, Maps, AdWords) and casual mash-ups like embeddable YouTube videos. Over the years, Google has delivered its platform through widely distributed services rather than depending on a web destination for housing third-party applications. Google’s search site was in the business of driving users to other sites rather than holding onto them for extended sessions.

But several factors are driving Google towards creating web destinations, exposing fundamental tensions between its destination and services that make developers uneasy:

Back to basics

Google could restore a lot of developer faith if it re-learned one of its own lessons and adopted a few from Microsoft. Google’s Android strategy proves that the company knows that platform-building requires long-term investment. That’s why its decision to raise API licensing fees on Maps was puzzling and risky. Historically, not only has Google been liberal with its API licensing, it was the first platform that came with a ready-made revenue stream for developers via its ad networks. Google just introduced a revenue-sharing survey service for online publishers as an alternative to paywalls. That service would work just as well for apps.

Unlike Microsoft, Google has been open with APIs, but too hands-off with developer tools and support. Google’s Go programming language has never caught on, while it is slowly rolling out APIs for Google+ apps. Spending some more money and resources on developer support, including packages of training, tools and its popular analytics offerings could gain Google a critical edge over Facebook. Facebook’s app momentum comes from its audience growth and unique technologies; it hasn’t done a particularly good job cultivating developers.

Google’s search, unified communications, mapping and visualization technologies are still leading-edge. Developers are still interested in Google technology – tickets to its June I/O developer conference sold out in 20 minutes. Tying some revenue-sharing and support programs a little tighter would sweeten a lot of the bad taste left by recent business practices.

Question of the week

What can Google do to spark developer interest and trust?

Facebook’s app ecosystem is still missing a piece of the puzzle January 23, 2012

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At its f8 developer conference last September, Facebook CEO Mark Zuckerberg laid out a grand vision of a new class of lifestyle apps enabled by Facebook’s technology platform. Last week, at a subdued event that attracted far less media coverage, Facebook sketched out its progress and showed some 60 apps. Facebook’s apps ecosystem is showing positive signs of evolving, but it still lacks an effective marketplace for app promotion and monetization. Such a marketplace would reinforce a virtuous circle: It would attract more developers and help generate more money for them and for Facebook.

Signs of progress

You will recall that one of the powerful — and potentially creepy — features of Facebook’s Open Graph was “frictionless sharing,” where apps could automatically post user activity without requiring the press of a Like button. Facebook has done some fine-tuning to its privacy and auto-sharing controls, including prominent instructions on how to opt in and how to focus sharing among particular friends, even for existing apps. But Facebook still mostly relies on users’ increasing acceptance of activity broadcasts. That seems appropriate for all but the most privacy-conscious rights organizations.

Facebook also has opened its apps approval process, offering simple guidelines that appear less restrictive than, say, Apple’s App Store. Facebook claims it wants to open up the ecosystem, but it remains to be seen if it has the staffing needed to enable speedy approval for hundreds of apps.

Developers appear to be excited about Actions, a key new technology from September’s announcement. Actions expands the vocabulary of sharing beyond Liking and Sharing to shopping-oriented terms like Own and Want as well as the media-focused Listen and Read, adopted successfully by the first wave of new apps like Spotify (which has added 4 million users since f8) and Yahoo (which has enjoyed a sixfold increase in referrals). Developers like Facebook store builder Payvment think these new Actions will better suit commerce and shopping than Likes, while others like Foodspotting expect them to broaden the type of activities people use their apps for. Even if generating transactions on a social network remains a challenge, Facebook’s new tech seems to be gaining developer attention. Ticketmaster’s new app even mashes up Actions to present concert information based on listening behavior, a smart idea.

Missing marketplace

My GigaOM Pro colleague Greg Sterling wonders if Facebook is poised to challenge Apple and Google in app stores. Facebook’s app ecosystem has already produced Zynga, a bigger company than Apple’s biggest star, Rovio, but I would estimate Facebook’s yearly take from virtual goods sales is measured in the low hundreds of millions of dollars, while Apple’s apps and music sales approach $1 billion a quarter. That is partly a function of app volume, but, just as important, Facebook lacks a store or marketplace to focus app discovery and sales.

Facebook told Sterling that a marketplace “would probably make sense at some point.” OK, but pointing to apps from an About menu link is no substitute. Right now, Facebook depends on Likes and frictionless sharing by friends to drive app discovery. Facebook filters a very limited number of app activities into a user’s news feed: Users spend the plurality (27 percent) of their Facebook time there, but Facebook doesn’t want to clutter or spam their major communications stream. The company is adding features to display app activity on profile pages, where users spend 20 percent of their time. In other words, Facebook is working hard on viral app discovery among friends, but it has a weak story for a user who wants to explore related interests outside his own circle of friends.

What Facebook needs is an app store with the necessary merchandising. Facebook should copy Apple, Amazon and Best Buy. That means featured products, apps ranked by category and popularity, sortable consumer ratings and reviews, and a merchandiser’s “editorial” voice as well as algorithmic promotion, sales on virtual goods, and so on.

Facebook’s marketplace should also do something that the others don’t. It should emulate paid search listings and enable developers to buy prominent promotional positioning via auction. Sure, that entails some serious effort, but Facebook has tons of user behavioral and preference data it could use to enforce paid link relevance to eliminate scams, spam and irrelevant promotions. This would be bold app store differentiation, and perhaps Facebook is nervous about appearing to be “for sale.” But paid promotions aren’t payola if they are transparent and fair, with enforced relevance.

An effective apps marketplace would accelerate the growth of Facebook’s ecosystem and add revenues for Facebook and for developers. With its expanded Actions that crucially work outside the Facebook site, Facebook could effectively extend its marketplace web-wide and build momentum for a potential mobile network.

Question of the week

How else could Facebook juice up its apps?

Why we should separate the real platforms from the pretenders December 5, 2011

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Everybody wants to be a platform. Spotify, the hot digital music service, is the latest company to sketch out a platform strategy. But building a real platform takes more than throwing out a few APIs and saying, “have at it.” To achieve business objectives like revenue growth, customer acquisition and network effects, would-be platform suppliers have to deliver audience, distribution and revenue potential.

Tech market observers use the term “platform” in a variety of ways. What I’m talking about here is a technology platform with application programming interfaces (APIs) that developers and sites use to build or enhance their own applications and services. On the consumer web, even a company with an industry-leading audience is vulnerable to competitors that supply better platforms. Myspace’s failure and Yahoo’s malaise are attributable to Facebook’s and Google’s platform prowess. Though both companies have or had big audiences, neither built out APIs that would enable distribution, data access or unique technology integration.

A successful platform delivers the following business benefits to its supplier:

  • Low-cost features. Spotify will instantly add a handful of compelling music features (discovery, touring info, lyrics) with minimal development costs.
  • Customer acquisition and retention. Facebook’s games and news apps increase usage duration and frequency, and its syndicated Connect and Like services both attract new users and bring them back regularly to the site.
  • High-margin revenue. Developers like Zynga that use a platform to attain a large audience and big sales don’t complain too much when Facebook takes a 30 percent cut.
  • Network effects. All of the above, along with viral sharing features like Follows, Likes and updates, encourages continuous connections between users and developers. That reinforces the core business and can lead to lock-in and platform dependency for developers and users both. Facebook claims to have 9 million businesses using it for promotion.

To attract developers, a platform must deliver something they want. That can be access to a big or specialized audience, core technologies and services developers can’t build themselves, and/or data, as well as distribution and potential revenues. Here is how some of the platform players in consumer and social media stack up. (A similar analysis framework applies to mobile, e-commerce and enterprise platforms.)


As illustrated, Spotify is delivering a medium-sized audience in a targetable music-fan context, and it has enabled app discovery and sharing. But it falls short on most measures.

Google’s major platform innovation was to deliver an easily accessible revenue stream to its search partners via revenue-sharing from its ad networks. Oddly, it hasn’t done this — yet — for Google+, as it wants to build audience first. Syndicated Google+ services promise indirect revenue benefits through search engine optimization. None of the players are particularly good at developer support, but Google has the strongest analytics tools offering.

Neither Twitter nor LinkedIn focus their platforms on getting apps for their site. Twitter’s platform is all about spreading its content and data to other sites, either through liberally open APIs (though the terms may shift) or licensing via Gnip and Datasift. It’s up to developers to make money. LinkedIn’s content and data syndication is aimed at increasing usage. Its pitch to sites would be stronger if it could build out a professional marketplace beyond hiring or if it exposed more customer information gleaned from its desirable professional audience.

Clearly, Facebook is the current master of the online consumer platform. Its balance of a semipermeable walled garden and widely distributed off-site technologies creates a potent potential for network effects. It doesn’t share ad revenues, but its Credits system enable cross-developer commerce. Companies building consumer platforms would be wise to emulate its tactics and offer competitive differentiation via support, revenue-sharing and specialized audiences.

Question of the week

Which companies are building killer platforms for other market segments?

Zynga’s Project Z could be the next big game network October 17, 2011

Posted by David Card in Uncategorized.
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Social gaming star Zynga hosted its first-ever press event last week, where it showed a handful of new games and dropped big hints about a “Zynga Direct” strategy that could ease the company’s dependence on Facebook. Zynga didn’t give a timeline or details about “Project Z,” but it is building a gaming destination site, and potentially offering platform services for other developers. Does Zynga want to be a game distributor rather than just a studio? It sure sounds like it, so let’s examine how that might play out.

Building a gaming network would benefit Zynga in two ways: It would give Zynga more control of its own destiny, and it would smooth out revenue swings that depend on releasing a constant flow of new hits.

If Zynga and Facebook are in a co-dependent relationship, Facebook has the upper hand. Zynga derives nearly all of its revenue from Facebook traffic while Facebook users spend only 10 percent of their time on apps in general. Facebook takes a 30 percent cut of the virtual goods Zynga sells — Zynga’s main revenue source — via its Credits program. And Facebook can control viral game promotions, though it has traffic guarantees built into its agreement with Zynga.

But blame a slight slowdown in Zynga’s recent growth on a lack of new hit titles, rather than Facebook Credits. Like other entertainment studios, Zynga must successfully manage a portfolio of titles where the business is dominated by hits. During Zynga’s recent half-year, franchise titles FarmVille, FrontierVille and CityVille produced $77 million, $71 million and $47 million in incremental revenue, while all its other games totaled $78 million of the growth.

At the press event, Zynga assured people that it wasn’t divorcing Facebook. I suspect Zynga will leverage Facebook platform services and APIs, rather than creating much new technology. Zynga promised that Project Z would incorporate core Facebook Connect technologies, and its brand new HTML5 gaming engine is optimized to support Facebook’s mobile strategy.

What could Zynga add to create a social gaming network? Here are a few ideas:

  • Game destination hub. Zynga could act as the central hub for games played on social networks or mobile devices. Like Xbox Live, it could build out arenas, leaderboards and cross-game contests focused on social gaming.
  • Promotional opportunities. Zynga offers other games an alternative to depending solely on Facebook’s ever-changing news feed. It could create a Google search-like ad marketplace or paid listings, options Facebook and the apps stores have resisted.
  • Game identity with connectivity. Zynga will give gamers a game-centric persona or identity that still leverages Facebook Connect. It will support new Connect features like Wants and Owns in a less cluttered real-time stream. Ultimately, Zynga could wean games off Credits by offering better rates and encouraging a virtual goods exchange.
  • HTML5 engine. Zyngs could license its new engine to developers, a practice common in videogames, or to ad agencies looking to build advergaming “branded entertainment” sponsorships.
  • Advertising. Zynga could offer richer advertising vehicles to developers than Facebook, and actually share the revenues with developers. It should offer sponsored genre channels and cross-game sweepstakes and couponing.

App stores aren’t any fun, and social networks are crammed with communications and other features. Today, big gaming companies rely on Facebook for their social games distribution. Electronic Arts might try to weave titles from its proposed PopCap acquisition into its sluggish Pogo.com site, but it runs its other social gaming acquisition, Playfish, like a studio. Disney’s Playdom hub hasn’t really gone anywhere. So if Zynga can demonstrate better promotional vehicles and revenue opportunities on its own social gaming network, developers will have to take notice. Competitive games notwithstanding, Zynga could instantly offer a better story for game developers than Google+.

Question of the week

What are Zynga’s chances at building a social gaming network?