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Pinterest: signs of staying power February 13, 2012

Posted by David Card in Uncategorized.
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Everyone’s favorite “it” startup, Pinterest, got a slap on the wrist last week for sneakily snagging affiliate fees from users’ links. But there is no mistaking the social curation site’s growth and momentum. Will Pinterest be a fad that flashes and burns, as Turntable.fm shows signs of doing, or will it end up a midsize link sharer like Digg or Reddit? It is worth examining Pinterest’s growth, usage, influence and money-making potential for startup lessons and marketing opportunities.

According to comScore, Pinterest reached the 10 million monthly user mark faster than any other U.S. site. And that is while it remains an invitation-only affair. The average Pinterest user spends more time with the site (80 minutes per month, says comScore) than other social media like Twitter, LinkedIn and Google+ (each under 25 minutes), although it is no Facebook (7 hours).

Pinterest’s audience is a little concentrated — on a desirable young female demographic — but I wouldn’t call it a niche. It is well beyond the early adopter, Silicon Valley crowd that still dominates Quora. Of course, Pinterest faces the risk of faddishness, but it has at least a little guaranteed user lock-in. It takes a long time to kill a photo site, as Flickr’s survival in the face of Facebook demonstrates. But users may deem a group of collected images less valuable than personal photos.

Smart tech implementations

Social curation is a real phenomenon, but not everyone wants to curate. Pinterest enables easy off-site sharing with a simple browser plug-in, even before it has established a Facebook- or Twitter-like “pin this” distribution network. No doubt over time Pinterest will display Pareto principle–style 80/20 distribution of viewer to sharer. But Pinterest encourages passive usage with friend- and topic-following at a user’s first experience along with regular reinforcement.

Pinterest has been smart in how it uses Facebook. Its Facebook log-in and app uses Open Graph auto-sharing features to juice demand for invitations. Yet pinning images into “boards” helps encourage Pinterest usage on its own site rather than just within the Facebook news feed. There is some talk of Pinterest APIs, but the company hasn’t articulated what you could call a platform strategy yet. Still, Pinterest has demonstrated wise tech moves that will gain it a bigger audience, induce usage and exploit Facebook.

Rating Pinterest’s influence

Pinterest’s highly visual layout has already inspired imitators like Lady Gaga’s social networking site, also invitation only. But reports of Pinterest’s influence in driving traffic to other websites are based on a fairly dubious study from a referral tracker with medium-size reach. That said, anecdotal evidence from sites like Time Inc.’s Real Simple magazine suggests that Pinterest could play a big role. Media companies and retailers are rapidly building out their presence on Pinterest. The Wall Street Journal is using the site for its Fashion Week coverage, and Pinterest has caught the eye of the New York Times, possibly at the expense of a Facebook app from the Times.

What about revenues? Right now Pinterest doesn’t show advertising or charge companies to camp out on its site. And it also does not give them an efficient vehicle for finding or promoting that presence. Pinterest uses Skimlinks to insert itself in the path of affiliate deals. It attracted some criticism for not telling its users it was doing so, but most users won’t miss the potential pennies they might collect from retailers. In contrast, that might actually add up in the aggregate for Pinterest. It is unproven so far, but with scale those fees might prove a quicker social commerce payoff than Facebook stores or dedicated shopping communities like Kaboodle, without Pinterest’s having to do the hard work of a real retailer like the similarly visual Fab.

I will disagree with Forrester interactive marketing analyst Darika Ahrens, who says marketers should ignore Pinterest in 2012. On the contrary, they should get on board quickly, before Pinterest starts charging for company pages. The company may never do so — neither Facebook nor Google do — but I wouldn’t be surprised if it is considering it. It should charge media companies and build out paid pages for brands. Because although you might think its visual displays would be extremely brand-advertiser-friendly, those advertisers may shy away without guaranteed placement and safety from potential copyright violations. They would be more comfortable paying for their own space, especially if Pinterest would spend some of its $27 million in funding on audience analysis services.

Though Pinterest hasn’t talked much publicly, its actions reveal a smart startup with staying power. Its growth is working across a broad audience, and its tech choices enhance that growth. And Pinterest is starting to show some power in driving traffic to other sites. A little emphasis on marketing support could add dollars alongside its affiliate revenues.

Question of the week

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

Posted by David Card in Uncategorized.
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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?