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Social platform players reveal diverging roles August 6, 2012

Posted by David Card in Uncategorized.
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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?

Digital won’t “evaporate” ad dollars February 27, 2012

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A new survey of advertisers and agencies generated some scary headlines last week. Talk centered around the idea that as ad dollars shift to digital media and marketing, the overall pie will shrink. Will digital marketing really decimate overall ad spending the way craigslist and Google crushed classifieds and the Yellow Pages?

Calm down. Let’s review the case. While newspapers have it tough, other big ad markets like broadcast and cable TV and direct mail are still pretty healthy, and technologies like targeting and social media advertising could still increase the value — and thus spending — of both digital and traditional media.

Why there is concern

Besides the examples above, there are some valid arguments for the “digital evaporation” case:

  • Pricing. The old “analog dollars become digital dimes” meme is true right now, and it is particularly damaging to newspapers. Infinite inventory online kills pricing. The report that the Society of Digital Agencies (SoDA) based the survey on claims that “a dollar or euro lost from TV and print budgets becomes 20 cents of digital,” though it is not clear how it came to that exact figure.
  • The end of Wanamaker’s 50 percent. The famous quote runs, “Half of the money I spend on advertising is wasted; the trouble is, I don’t know which half.” Even with never-ending arguments over digital measurement, there is no question that pay-per-click pricing is tremendously efficient for direct marketing, and auction-based pricing for search and display ads eliminates much of traditional media’s wasted spending.
  • Ad networks. Ad networks from Google, AOL, ValueClick and others make it easy for advertisers to reach a big audience cheaply (each can reach over 80 percent of the U.S. online population, according to comScore) compared with print and television. While they enable web media companies to sell otherwise unsold remnant inventory, they contribute to overall pricing pressure. Ad networks bring a pricing transparency that could do to ad spending what Expedia and Google did to the travel industry.

Reasons to be cheerful

But don’t panic just yet. First of all, there is only anecdotal evidence of budget shift. Overall ad spending has continued to grow throughout the rise of online. In the SoDA survey, more advertisers said that in 2012 traditional media spending would shrink (33 percent) than grow (22 percent), but the survey didn’t weight those responses for their actual dollar spending. And respondents also said they would increase (50 percent) rather than decrease digital spending (16 percent), again without weighting. Overall spending might go up; you can’t tell from that. And in fact reputable ad forecasters expect overall ad spending growth this year, with sluggishness attributed to the economy rather than digital shifts.

Call me an optimist, but I still believe in some as-yet-undelivered technology promise. Those digital ad efficiencies and networks covered above also accommodate better ad targeting. Couple that efficiency with auctions and target via behavioral and psychographic audience characteristics, and prices will actually go up. Advertisers and agencies I have worked with — including Cisco, Procter & Gamble and Intercontinental Hotels Group — will be happy to pay a little more for provable, better results in terms of brand lift, increased trial and better direct marketing conversion. A premium of 10–20 percent isn’t beyond the realm of possibility.

Yes, cable TV pricing is lower than broadcast, even though it is somewhat better targeted. But cable TV “targeting” today is contextual — based on content — and based on very simple demographics. That is nothing compared to what digital can deliver, and those digital technologies will gradually migrate to television. What is holding back spending is inertia, conservative agency buyers and a lack of experience in that kind of planning. But Google, digital buyers and direct marketers are gaining exposure at agencies and marketers. It is just a matter of time.

Social technologies also hold great promise. Underline “promise.” Facebook is the biggest social game in town, but it is surprisingly conservative in its advertising experimentation, relying mostly on cheap inventory for direct marketing. Beacon backfired, and now Facebook seems twice shy and overly concerned with user reaction. However, it might have to accelerate advertising with a looming IPO and rumors of first-quarter shortfalls.

Ultimately, integrating social elements with traditional media advertising will lead to increased spending. Advertisers will also pay more to amplify marketing messages via fans and influencers. Brand advertisers I have worked with like IBM and P&G are definitely intrigued with the two-way engagement social media can deliver, even as marketers use social technologies to save money on things like market research and customer service. Not all incremental social spending will go to media companies. They need to build out their own services, improve their analytics and develop agency partnerships to get their fair share. But not all the cost savings will come out of their hides, either.

Question of the week

Would you pay more for better advertising?

Facebook store flops demand a shift in emphasis February 22, 2012

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Last week, a pretty negative Bloomberg story about Facebook storefronts got wide pickup. It described how GameStop, Gap, J.C. Penney and Nordstrom had closed their Facebook stores. Social commerce is doomed!

Well, not exactly. I have been bearish on how many commerce transactions stores on Facebook would generate since the concept of “f-commerce” was introduced, but that doesn’t mean retailers should give up. Instead, they should put their Facebook stores in the hands of their marketing and promotions staff and prioritize marketing objectives over sales.

I have described before how storefronts built on Facebook pages face at least two significant challenges. Most e-commerce arises from directed shopping that exploits the Internet’s searchability and price transparency rather than the impulse purchases a buyer might make on a social media site. And I have also suggested some ways to accelerate Facebook storefront success: in-stream promotion, social commerce integration and ties to brick-and-mortar loyalty programs. Plenty of smart companies are implementing the first two, but they are still thinking too hard about sales volumes. Just like daily deals, f-commerce efforts should initially concentrate on customer acquisition, engagement and loyalty.

Feeding the feed gains user attention

E-commerce sites like Ticketmaster, TripAdvisor and Fab.com were quick to take advantage of Facebook’s October Open Graph enhancements that enable “frictionless” auto-sharing of activities without a user creating a post or pushing a Like button. Social commerce believers like Yardsellr.com think it is best that promotions come from customers rather than marketers. And store builder 8thBridge reports that 90 percent of Facebook shopping activity comes from friends sharing with friends.

That approach makes sense, but it oversimplifies some issues. “Frictionless” sharing doesn’t show up in Facebook’s main news feed but rather off to the right, in the live ticker. That means those kind of shopping activities may be quick to appear, but they will also disappear just as speedily and likely won’t be called to a user’s attention by Facebook’s ranking algorithm. In contrast, Ticketmaster and Lucasfilm encourage their customers to pass the word — leading to new customers — and actively engage in logical social activities like group travel-planning or event-planning.

Another store builder, Payvment, is also using Open Graph, but not the way Spotify does, where every interaction with the app is broadcast. Payvment is conscious that shopping activities might require more privacy and user control than music listening. So Payvment is focusing on the new action verbs, like Want and Own and claims they are starting to catch on. But the new actions are mostly on apps or Facebook company pages and have not spread outside Facebook on the Web the way Like buttons have.

And friend-to-friend sharing faces other scale issues: Payvment concedes that most users don’t have enough friends to deliver the kind of volume that big retailers want. So it is promoting the idea of a “taste graph” that aggregates interests — as described by Likes, Wants and Owns — across strangers as well as friends. That would enable offer targeting and the personalization of Payvment’s mall of Facebook stores. It is an intriguing big data play, but companies like Groupon and LivingSocial, with far more resources and data than Payvment, have yet to pull off customized targeting that would improve sales conversion. These are longer-term payoffs.

It’s all about marketing

So before f-commerce stores can generate many sales, smart sellers are treating social commerce as a means of branding, customer acquisition and loyalty building. Heinz says a “get well” soup campaign in the UK generated the sale of one can of soup for every eight fans, and it had to buy plenty of Facebook advertising to deliver that much. Wisely, Heinz was more concerned with adding fans and generating PR than selling soup. Similarly, ad agencies and marketing firms like TBG Digital think that over time, those new action verbs will be a key part of Facebook advertising.

Meanwhile, retailers looking to get the most out of Facebook for the next 18 to 24 months should reassign some of the merchandisers and retailers working on their Facebook storefronts. They should move staff in marketing, promotions, advertising and customer acquisition onto the job. The measure of their success will come from metrics like new customers, visit frequency and brand lift. That is where advertisers and marketers have expertise. Then two years down the road, the retail experts can start thinking about total sales, conversion rates, cost of sales and other transactional measurement.

Question of the week

How else can retailers use Facebook?

The social-media advertising ecosystem is shaping up August 8, 2011

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A recent batch of product and funding announcements (Webtrends and Nielsen, CrowdTap and Hearsay Social, respectively) points to a real trend: The infrastructure and business ecosystem for social-media advertising is developing rapidly. That’s good news for marketers and online publishers — and even for Facebook competitors — as a robust ad infrastructure is critical for growing the market beyond the $3 billion forecast for U.S. spending in 2011. The tools and systems rolling out will help the 800-pound Facebook, of course. But they will also be valuable to smaller social-media companies and even traditional media, and they will generate revenue for tools, data and agency services.

A year ago, I wrote that the winning strategies belonged to whichever companies could help big-brand marketers reach large numbers of their target customers, integrate social marketing with traditional media and measure campaign performance. Now the social-media ecosystem is adding resources around social marketing management and advertising measurement, two pillars of those strategies. For example:

Getting “social” on company pages

Today most social-media advertising comprises boring display units on inexpensive social-network pages. It’s not particularly “social.” But marketers use it to drive audiences to company pages that feature interactive conversations, video and coupons, and that can access Facebook’s feed to build recurring use through fan-friending. Last week Foursquare added self-service tools for its own company pages, while Google is still figuring out its approach for Google+.

Facebook uses its EdgeRank algorithm to filter its feed for user relevance. That can limit the company messages delivered, fiendishly encouraging ad buying to remind fans to visit. Reportedly, Facebook may be reconsidering that strategy, but regardless, tools and services that coordinate page and ad management will be the winners. The companies I mentioned are among the early leaders, along with companies like Efficient Frontier, iCrossing and Buddy Media. And last week, Facebook announced that it was opening up its advertising API that had previously been limited to a handful of partners. That means there will soon be more management, analytics and services companies able to leverage Facebook data.

Measuring social advertising

Social advertising tools and services will need to integrate data from multiple sources for campaign analysis and optimization. Gnip, which licenses and resells Twitter’s “firehose” data, says that two-thirds of its customers are social media agencies. But to work successfully, tools also need offline consumer and enterprise information (ExperianAcxiom) and third-party online-traffic analysis from the likes of comScore and Nielsen.

As noted, those two both have new social measurement services that feature the TV-advertising concept of gross rating points, or GRPs. GRPs are arguably a simpler measurement than online metrics that track unique individuals and interactions, and advertisers use them to measure their efficiency in buying TV time. While an online GRP might seem like a step backward, it is necessary to make big brands spend more of their overall advertising budgets on social media. They need to be able to compare online-advertising efficiencies and effectiveness with traditional media. Integrating a GRP with measurement techniques that gauge audience engagement — something brand advertisers will pay a premium for — will grow overall online spending.

All of this action in social advertising is healthy: Its business ecosystem is too immature to demand much consolidation or pick winners easily. A year ago, I thought big players like Yahoo and traditional media companies could garner social ad dollars due to their advertiser relationships, multichannel experience and ad-friendly content. But they’ve done little, and the social ad ecosystem will aid Facebook and smaller social players just as much.

Question of the week

What is needed to grow social media advertising beyond $3 billion?

Facebook Patent Hints at Social Search Plans March 21, 2011

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Last week Facebook was awarded a patent that covered essential elements of social search. Patents don’t always predict products, but this one was acquired by Facebook when it purchased intellectual property from Friendster, which perhaps indicates new and active intent. Is Facebook is building an alternative to Google? Possibly. Let’s examine the state of social search and its potential implications for online media.

There is a “social will replace search” theory that runs something like this: Overwhelming amounts of data, along with SEO gaming, make Google’s traditional approach to ranking results less effective than it once was. And driven by social networks, a passive, feed-based user interface is usurping the old “seek and search” style of online navigation.

The big search engines like Google and Bing are already incorporating social signals into their ranking schemes, and into how their results are presented to users. It’s likely, in fact, that both social and search will co-exist as navigation modes. Some observers may have over-interpreted back-and-forth traffic among top sites (Google, Yahoo, MSN, Facebook) as an indication that Facebook drives more viewers than Google. A lot of cross-site traffic for them is the natural flow of an online session — check mail, headlines, social network — rather than a search- or feed-directed path. And sometimes a user’s friends aren’t the best source of relevance. Seeking medical information rather than a preferred dentist, or a convenient airline ticket rather than a fun vacation destination, will remain directed queries based on authority and the breadth of information coverage.

Social Search Competitors

If Facebook’s creating a social search alternative, Google is the big target; it has, after all, over $25 billion in search advertising revenue. It both integrates and segregates social technologies. Personalized social search that displays content shared or posted by a user’s friends is buried under More Search Tools on Google’s results page. It puts real-time search — licensed Twitter results and what public Facebook content it can crawl — a little higher on the page, and sprinkles in a few real-time results on its main results pane. With its existing strength in ad networks, Google is in the best position to build out real-time advertising.

Microsoft’s Bing, which isn’t really gaining ground on Google yet, has partnered with Facebook to gain more access to Facebook data like friends, status updates and Likes. Bing’s results feature Facebook and other social content a little more prominently than Google’s do, but Bing also offers a separate social content-only search function.

Other social search players include Topsy, which searches real-time content and keeps a deeper archive of tweets than Twitter does, and blekko, which uses human editors to create authoritative indices of results, partly by blocking what they determine low-quality sites. WOWD was building a social search engine, now concentrates on personalized feed filters. OneRiot ceded its real-time search to Topsy while it attempts to build an ad network.

What Facebook Might Do

The Facebook patent covers ranking and displaying search results by their popularity among a searcher’s contacts and those removed by a few degrees of separation. In fact, Facebook nearly does this already. When users start typing in the search field, Facebook auto-suggests content that’s been Liked by the user’s friends. Carefully adding friends of friends would expand the results index.

Facebook could be thinking of using its patent offensively to gain licensing royalties. But although Google’s patent portfolio isn’t as big as Microsoft’s, it’s pretty diverse, and even contains a lot of social technologies. So maybe the patent’s just defensive.

Building a full-blown search engine requires attempting to index the entire Web. Even if Facebook relied on its users to do the indexing, the results would be spotty. Facebook search would no doubt do well on entertainment, baby photos and sports trash talking. But that medical content and those travel arrangements would likely remain thin. Chances are, Bing remains Facebook’s search engine strategy.

Question of the week

What is Facebook’s social search strategy?

Where Will Zynga Go Next? February 21, 2011

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Last week began with stories that social game maker Zynga was raising $250 million at a valuation north of $7 billion. By the end of the week, the company was close to raising twice that, at a $10 billion figure. But bubble talk aside, why would anyone think Zynga was worth that much?

“Gamification” is an early contender for this year’s buzzword, as companies apply game mechanics to businesses as diversified as media, shopping and job hunting. Zynga is the most prominent exemplar of social gaming. Bing Gordon, who used to head marketing for Electronic Arts and is now a Zynga investor, says Zynga combines four disruptions in one: social media, analytics, alternative payments and apps ecosystems. And Zynga may only represent the tip of the social gaming iceberg.

Why Zynga Dominates Social Gaming

Zynga says 45 million users play its social games on a daily basis. Building off Mafia Wars and poker, the company has delivered a consistent string of hits with franchise titles like FarmVille, and spun off even more successful sequels like CityVille.

Its games run primarily as apps on Facebook, where it dominates the apps charts. Zynga coexists successfully — if a little uneasily — with Facebook. When Facebook changed how games could access its news feed, Zynga had to find other customer acquisition tricks. Now it combines lots of Facebook advertising with aggressive cross-promotion. When Facebook required apps companies to adopt Facebook Credits as their currency system, Zynga integrated the one it had built for itself.

Another factor in Zynga’s success is its multiple revenue streams. Most of its estimated $850 million in sales comes from selling virtual goods like power-ups and farm critters. But the company is growing an advertising business based on sponsorships, and even has licensed accessories.

Competitors abound, but so far Zynga has fended them off. Disney has struggled to master social gaming even after acquiring Club Penguin, and traditional videogame leader Activision doesn’t want to get in the business. Electronic Arts does, via its Playfish acquisition, but only 20 percent of its revenues are online or digital.

What’s Next for Zynga?

Here’s what Zynga’s likely to do to maintain its momentum:

  • Expand its distribution channel: Zynga will add complementary channels to Facebook. It has signed up Yahoo and may be working on establishing its own site. A Zynga gaming hub would help in launching more mobile games and might even attract third-party studios.
  • Improve its advertising platform: Others are experimenting with offers as virtual currency “cash,” and Zynga hasn’t done much with in-game product placement. I’m skeptical that its customer data is useful for ad targeting yet, so an analytics play may require Zynga to deliver different styles of interactivity via quizzes, other entertainment formats, or shopping.
  • Create an affiliate network: if Zynga creates a gaming hub, it could achieve and track that needed variety of activities. Likewise, its virtual economy could embrace other kinds of goods, both digital (music, books, videos) and otherwise (offers, affiliate e-commerce, coupons).

How Others Can Respond

Social gaming has moved beyond critical mass into mass-media territory. There’s room for innovation from Zynga competitors like the gaming companies named previously, as well as companies like Google, MySpace, and others:

  • Without a hub, Zynga has to rely on advertising and cross-promotion. Consumers recognize the brands of entertainment titles and artists, not studios  — aside from Disney. That means others can build hubs, and/or use Zynga’s own distribution tactics.
  • Unlike previous online casual games, social gaming attracts both genders. Besides poker, there should be social gaming genres that appeal to hardcore-gamer guys but aren’t World of Warcraft. How about fantasy sports on social networks?
  • Likewise, someone should aggregate other time-wasters, and perhaps specialize them for women. GetGlue’s check-ins for watching TV shows, movies, and music could play here. And LivingSocial is missing an opportunity to integrate daily deals with its Facebook apps like Visual Bookshelf.
  • SCVNGR and, to a degree, FourSquare, mix location-based services with games around collecting things and leaderboards. They should add more rewards and loyalty programs, and explore other gaming experiences, like gambling and multiplayer competition.

Question of the week

How can companies compete with Zynga?

What Facebook Messages Is Really After November 22, 2010

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It’s not email. That’s what Facebook CEO Mark Zuckerberg said at last week’s introduction of Facebook Messages. He called it “a modern messaging system,” and half-jokingly added that the next generation of users would gradually drift away from email. But what Facebook is really trying to establish with its unified communications hub is presence management, which is why Facebook Messages feels at least as much like IM as it does email.

Driven by enterprise-oriented companies like Microsoft, IBM/Lotus and later Google, email evolved with the addition of PIM features like contact management and calendar integration. Those companies, along with consumer-focused ones like Yahoo and AOL, added spam filtering and began to integrate other communication types and transports, including instant messaging and voice. At the same time, the corporate companies built up collaboration facilities, beginning in the ’80s with Lotus Notes, and more recently with services like Microsoft SharePoint and Google’s ill-fated Wave.

But Facebook is moving in a completely different direction.

Intimacy and Immediacy

Facebook Messages focuses on intimacy and immediacy at the expense of formality, flexibility and history. Yes, Facebook’s social inbox pulls in different message types, but it weaves them into a thread that’s based on the sender rather than the topic, similar to IM or texting on a smartphone. To encourage immediate and recurring use and response, Facebook Messages eliminates subject headers and address look-up. Inbox folders are Friends, Other and Junk. That’s it.

And the approach isn’t aimed at only consumer (rather than professional) usage. Rather, it de-emphasizes important consumer communications like billing, newsletters, one-to-many emailing and forwarding. That’s because it’s more important in the long run for Facebook to be its users’ launchpad for personal communications and presence management than it is for the feature to be the management tool for all communications.

The Real Objective: Presence Management

By presence management, I mean the tools and platform a person uses to announce his availability to other people (and, potentially, to ‘bots and services). A powerful, unified presence manager would also enable the user to express how he’d like to communicate, and to manipulate that “how” and “when” availability to different types of contacts. Early examples of presence management tools were AOL’s IM and chat (though Buddy Lists didn’t make that availability very flexible) and Caller ID. Today’s email and social network apps also contain such tools.

If Facebook establishes Messages as a user’s primary tool to manage presence across multiple communications vehicles, it would be an incredibly sticky app, with huge customer lock-in potential. Facebook contacts are beginning to play an increasingly important role across communications. That’s one reason Facebook doesn’t want users to share them. Facebook Groups could be a step towards a presence-aware buddy list. For instance, after 6 p.m. a user could make himself instantly available for family, but available to co-workers only via email.

How Should Competitors React?

Email’s not going away, for many reasons. Even teenagers want their online shopping receipts, and likely won’t route newsletters to their Friends inbox.

Microsoft understands this, and the difference between corporate and personal email. It should continue to build collaboration into Outlook, bridges between Outlook and Hotmail, and make sure its Messenger presence infrastructure interoperates with Facebook’s.

Gmail is an extensible apps platform, and a Gmail address is a hub domain for non-communications apps. Google’s aggressiveness in voice communications might give it an advantage over Facebook in mobile presence management.

Yahoo and AOL need to integrate voice communications deeply, and push hard to get their IM apps used on smartphones, with ties as strong as possible to SMS.

At one point, carriers like Verizon and AT&T looked like they could play a role in presence management, or establish their address book as a user’s most critical one. But they’ve built little off those bases.

Question of the week

How can companies compete with Facebook Messages?

How to Make MySpace Relevant (Again) November 1, 2010

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In the realm of might-have-beens, MySpace had even more promise than Friendster. But unlike Friendster, MySpace remains salvageable. Though it shouldn’t try to challenge Facebook for social network leadership, it can still be a valuable consumer media business, if not a technology driver. Here’s how — and why.

When MySpace supplanted Friendster as the leading social network, it did so by delivering an entertainment and communication combination, along with an early embrace of social media plug-ins and mash-ups. It became the de facto home of music artists and had an early lead on Facebook in ad targeting. But while MySpace stagnated under News Corp. and a Google ad deal that guaranteed revenues without encouraging advertising innovation, Facebook built a real platform of NewNet technologies. MySpace must return to its roots, and its recent relaunch hints that it might just do that.

What’s Good About the Relaunch

MySpace’s relaunch is smart in its focus. It’s trying to rebrand itself as an entertainment hub with a lot of social elements, rather than as general-purpose social network; it aims to complement rather than compete with Facebook.

MySpace has accommodated Facebook and Twitter updates, but it’s questionable whether much of its audience will use such features to aggregate social communications. That said, MySpace has adapted feed-based user interfaces in what appears to be a unique fashion: Users can toggle between magazine- and TV-like modes as well as a conventional stream. This mix of active and passive entertainment discovery — users already get update streams from friended bands, studios, entertainment personalities, etc. — could prove a useful launch pad for MySpace fans to spread comments and recommendations outside of as well as within the network.

What’s Still Needed

MySpace still has a large — if declining — U.S. audience that is younger and more geographically diverse than the web average. Various traffic data companies show it reaching 40 to 60 million people monthly (though that’s almost half the size of Facebook or Yahoo). To keep that audience entertained, MySpace must innovate on the following:

  • New ad vehicles. Two years ago, MySpace attracted attention with a campaign for luxury brand Cartier that integrated musicians like Lou Reed and Marion Cotillard. Today, MySpace gets rich homepage campaigns (with trailer, showtimes, behind-the-scenes info) for movie openings — Lionsgate’s “Saw 3D” for Halloween, of course — and big banners on its channel homepages from the likes of Samsung, Sprint and Fox Television. But it needs to create unique social sponsorship opportunities involving games, contests, interaction with stars and re-distribution outside the network.
  • Social commerce. MySpace delivers full-track music streaming that enables affiliate purchases on Amazon. But it needs to build out a marketplace for artist merchandise, and should consider adopting gimmicks such as Groupon-like daily deals and group purchasing. Easy-to-build storefronts from Payvment make sense. It should also be a leader in cross-category virtual currency for games and downloads.
  • Outbound syndication. MySpace wisely acquired viral music service iLike. But it needs more ways to spread content outside of its own site. It should copy, partner with or acquire GetGlue, a startup that offers Foursquare-like check-ins and badges for web entertainment content.

Who Should Care

With its young audience of entertainment consumers, the potential rebirth of MySpace is important to the following types of companies:

  • Entertainment marketers. This includes artists and managers, movie studios and theater chains, and TV networks. This is a base MySpace can hold onto.
  • Youth marketers. With proper sponsorship innovation and entertainment tie-ins, marketers like Coke, Pepsi, Aeropostale, Nike, etc. could open their advertising pocketbooks.
  • Ad networks. It’s not clear whether News Corp. will include MySpace ad inventory with the Fox online ad network it’s selling to optimizer The Rubicon Project.
  • Competitors. Facebook should have no worries; in fact, MySpace should adopt much of Facebook’s platform, and tie in tighter to its social graph. MySpace will compete with Yahoo, MSN and AOL for youth audiences.

Question of the week

What steps should MySpace take to make a comeback?

Could a Social Strategy Save Yahoo? October 4, 2010

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The turmoil at Yahoo may be reaching crisis proportions. Stagnant sales growth was one thing, a lack of strategic clarity another. And now, senior executives are leaving in droves and there are calls for drastic action that include merging with AOL immediately.

But could a healthy dose of social networking be the cure to what ails Yahoo?

Possibly. The search giant appears to be missing out on social and mobile, the current twin drivers of consumer tech. I’ll leave mobile for another analyst, but here’s how Yahoo could gain some momentum in social media.

Recognizing Yahoo’s Assets

A prime reason for Yahoo’s social sluggishness was its inability to integrate its existing assets with a social flavor: Flickr, Delicious, Answers and its communications products like Mail and Messenger. These properties could still be put to use, but what are truly Yahoo’s powerful assets?

  • A large, loyal audience. According to Compete, Yahoo’s still in the top three in terms of online audience reach and user time on its sites. And as recently as a year ago, it was still consumers’ second-favorite online brand, behind Google.
  • Leading content and communication properties. Yahoo has leadership positions in important, ad-friendly online content categories like news, sports, women’s content and entertainment, as well as those communications services, according to Compete data.
  • Advertising expertise. Yahoo is a leader in online display advertising and has a large, experienced ad sales force with solid relationships at agencies and advertisers. Yahoo is especially good — for an online media company, at least — at brand advertising.

Building Out the Feed

Just about every company online should add some social spice to its site, but in Yahoo’s case, an aggressive dose could help the company maintain its huge audience and advertising leadership position. It’s too late for Yahoo to build a new social network from scratch. Rather, Yahoo should try to regain the momentum of its original portal role as the entry point or start page for the Internet by playing an aggressive role in the emerging age of feed-based user interfaces.

  • Integrated interface. Yahoo should continue and accelerate its feed and update aggregation strategy, but move it beyond just surfacing connections on the homepage or near content and email. Once upon a time, along with AOL, Yahoo taught mainstream users how to use directories and search for web navigation. Now it must more aggressively offer a feed to its audience — one that may be more familiar with traditional, search-heavy ways of  content discovery. Facebook is mainstream, but Twitter is not. Yahoo could help move mainstream audiences back and forth across search, browse, and stream consumption styles. A medium-size acquisition, say, TweetDeck or Seesmic, could help.
  • Ads around feeds. Yahoo should then apply its content, relationships and targeting capabilities atop or near the resulting UIs and experiences to create unique “advertorial” around that aggregation. Yahoo’s content farm acquisition, Associated Content, can work here, too, in addition to creating SEO bait. Yahoo has long worked with creating customized content experiences for brand advertisers and promoting marketing case studies and benchmarks.
  • Social ad network. Yahoo’s already in the ad network business (although there is concern about its publisher efforts) and it should rent out its resulting social ad platform to other sites. Most social media startups can barely spell “advertising” and might welcome the assistance. True, Facebook is already building out an ad platform with social targeting and a home for advertiser content. But it doesn’t have the richer store of seasonal and evergreen professional content that Yahoo has, nor its trusted content brand. And Facebook says it’s not building an ad network. At least not yet.

Related Research: Four Lessons From Yahoo’s Slow Demise

Question of the week

How could Yahoo use social media to get its mojo back?