Hacked By Imam with love
Facebook has been making waves in the investment community with it’s massive success in mobile ad revenues. And they are just getting started. According to eMarkter, Facebook’s mobile ad revenue will top $2 billion in 2013, an increase of more than 300% from the less than half a billion dollars earned in 2012.
Unsurprisingly, Mobile developers and marketers were way ahead of Wall Street on this one, and it’s pretty much the biggest secret that everybody knows about right now.
Earlier in 2013, developers started playing with the Facebook mobile app install tools, experimenting with the different options. in the last week of Q1, 40% of the top 100 iOS and Android app developers bought Install ads.
Very quickly, it become clear to mobile acquisition experts that the pendulum in mobile app installs ads has shifted from ad networks to Facebook’s platform. I’ve talked to several marketers and growth professional, mostly in mobile gaming (where a lion’s share of the spending is happening today), and they are all basically saying the same thing – Facebook has the best ROI in the market right now. Most of them are spending at least 50% of our budget on Facebook, and some spend much more.
So why is Facebook is winning in mobile app installs?
First and all, the ad-unit itself seems to work well. The bigger picture in the ad does a good job, and the way the ad unit is integrated into the Newsfeed is effective. With current inventory fill rates, it seems that most users get one or two ads as they scroll through their mobile Newsfeed. That seems like an acceptable ad saturation rate for most users, resulting in less ad fatigue and better conversion rates for advertisers.
More importantly, Facebook has been able to do much more with targeting than most mobile ad networks out there have been able to do so far. Mobile Ad networks are facing technical barriers, driven by the constraints of the iOS and Android platform. With lack of robust tracking tools across apps, like pixels on the web, It’s difficult for ad networks to track users across apps and gather all the data they need. This results in smaller buckets of available targeted audience. For example, if a marketer is looking for a demographic of woman aged 34-45 interested in event planning, ad networks might provide some or all of the demographics and interest based targeting, but it’s virtually impossible to find an ad network that can deliver the ad to a significant audience scale like Facebook does.
Facebook has also rounded up the it’s mobile ad platform with a number of goodies. One robust capability is the “Look a like audience” feature, which is basically a shortcut to leverage 1st party proprietary data. It enables a marketer to target ads to users who have “Look a like” interests compared to the Facebook fan page userbase. It also allows marketers to retarget customers in the app through contact information, such as email addresses and phone numbers. This is a breakthrough for many marketers who have troves of data, but are having difficulties leveraging the data to have better targeting.
All this stuff adds up to a substantial advantage driving real value for app developers. Is this advantage sustainable?
For mobile Ad Networks it might be challenging to build an audience as wide and deep as Facebook has, without getting more flexibility from the platforms with tracking and data. Many marketers speculate that this might not happen on iOS at all (Apple seems to be taking the opposite route by tightening control over user data and removing UDID). Some think that there might be more flexibility on Google’s Android platform, but it remains an open question.
Google probably has its sight on the app install ad spending, and could use the Android platform data to build similar capabilities and go direct to market. With Facebook’s success, it’s almost eminent in my mind. It makes sense for Google to try to play the Mobile app install game – both on Google+ and through other mobile properties, as well as power other types of ads across Android apps. Apple with iAd is trying to do the same, but up until now Cupertino has not shown marketers that the ad platform is effective, and they need to up it’s game to get there.
All in all, it seems that Facebook has a winner for the short term, and maybe also for the long term.
For a couple of years now people have been fascinated by Social Networks and how they have impacted our lives. We have seen social networks raise to become some of the most prominent tech companies of our times – Facebook, LinkedIn and Twitter. When you think about it, it makes sense – People want to share, like and interact with others. Social Networks are the natural evolution of online interaction.
However, not all Networks were created equal, and they are not all “Social”. More broadly, in our lives there are three distinct networks that really matter – Social, professional and family (not necessarily in that order). The Social Networks, which can be divided to sub-networks (i.e. friends from college, friends from back home, etc.) was conquered by Facebook. The professional network, the digital extension of one’s rolodex, has been conquered by LinkedIn. The last big network that really matters is the family network.
The social Network builds-up on basic social behavioral needs – Sharing an exciting moment in your life, Peeking at a profile of a potential blind-date, and social conformity (You better like that wedding photo, or else…). Social Networks is where you go when you want to catch-up with your friends and see whats-up. Google+ is trying to rebuild the social network graph, and with the amazing tech machines called Google behind it, it’s bound to have an impact. A lingering question still remains – does the social graph need rebuilding?.
The professional network is quite different. it’s social to the extent that people use it to communicate, but what drives the interaction is very different. It’s not about sharing a moment, it’s more about reaching a goal – Getting an introduction, finding your next exciting position, or poaching a key employee from a competitor. It’s business oriented and driven by a different set of wants and needs, which are not really “social”.
The Family Network is different then anything that came before it, and is even less “social”. Think about how families interact and what they do – families sit down for dinner 7pm, they ask “where are you? when will you be here?”, and they share their lives in different, more intimate, way.
That is exactly why the family network requires a completely different approach. it’s about a private network – not about shouting out to million of fans on Twitter, It’s about staying in sync – not about liking a cool filtered picture, and it’s about people you communicate with daily – not about a random friend you met 10 years ago at a party and can’t even remember why you like.
One big network has been left on the sidelines. Time is ripe for that to change.
Credit for most (if not all) of the inspiration for this post goes to Chris Hulls, CEO at Life360.
In late 2010 I wrote a blog post about how Facebook could easily be worth $100B. Some of my colleagues called me up and did nothing short but claim that I must be crazy. That’s perfectly fine. I have a feeling that I’m going to get even more calls about this post. My rationale isn’t built up from an analyst’s financial model or from leveraging traditional market sizing techniques, it’s mostly based on intuition about how Facebook can become the key player in the world of Online marketing and advertising.
Google is the leader in performance and direct response advertising, converting users wants and needs to e-commerce transactions and sales leads. Facebook competes with Google on direct response and is becoming more and more effective in doing so by leveraging the Social and user’s click-stream data, capturing a growing portion of Google’s market.
However, Facebook’s untapped potential is actually in brand advertising, a space that currently has no clear winner and will account for almost half of total online advertising spending in 2015, according to e-marketer.
Brands already get it and are willing to pay; But Facebook hasn’t yet found the right model to fully incorporate them. The value of positive engagements between consumers and brands shared across the social space is hard to match, and Facebook will find ways to scale the monetization of that on facebook.com across fan pages, ads and the newsfeed.
Analysts focus on revenues from ads delivered on Facebook.com, and Facebook has just started maximizing its potential there, but Facebook has not yet turned to monetize one of its greatest assets – the Open Graph.
Hundreds of millions of users are using Facebook’s open graph capabilities across million of websites (including most of the top sites in the world). More than 10,000 sites are adding the Open Graph capabilities each month. “Login with Facebook” is no longer an option – it’s a must.
Additionally, Facebook captures endless piles of data about people, their lives, and their friends. Think a lifetime worth of data and then multiple that by over 800 million users. Big Data indeed. This staggering amount of data will enable Facebook to deliver ad targeting capabilities which are unparalleled, optimizing performance and accuracy better than any marketing tool seen before. Whether this happens or not depends mostly on execution, not on the conceptual capability to deliver those tools. The data is there.
This all leads to Facebook having a unique opportunity to create an unparalleled display ad network outside of Facebook, adding social targeting to help drive up revenues. With this strategy, there is no reason why Facebook can’t control the same portion of the market in online branding as Google does with direct response. Facebook can eventually match Google ad revenues with a combination of brand and direct response ad products, inside Facebook.com and in many leading destination sites outside of Facebook. With other revenue streams, such as payments for virtual goods, Facebook can even outpace Google.
Compared to Google, Facebook’s business is potentially more defendable. In Search, Google dominance is driven by excellence in monetization, a powerful brand and great technology. However, Google does not “own” search, it just executes better than anybody else in the search world. as technology progresses Google’s tech advantage is becoming more incremental compared to some of its competitors, and can be potentially disrupted. It’s going to be crazy hard to disrupt Google, but it’s doable.
Facebook is not in the same boat. Social is already an inherent, must-have, layer in everything online – websites, mobile apps and smart TVs. Facebook “owns” Social, and in its dominance is driven by a powerful network affect. Technology is not the key driver here. Many can potentially try to create a social network service that outperforms or delivers more features than Facebook does, but it doesn’t really matter. What matters is that all your friends are on Facebook.
At this point in time, Disrupting Facebook requires more than a just better tech or flawless execution. It requires a paradigm shift to a whole new era of online computing, and even there it’s pretty safe to assume that Facebook will be all over the place.
So, whether it takes 12 month or 5 years, it’s pretty much inevitable – Facebook, as mission critical piece of our connected identity stack, will increasingly find ways to monetize its position and would be worth more than Google today at $200B.
This post is a guest post – an open letter to Facebook – written by a good friend, Guy Azar (http://il.linkedin.com/in/guyazar). Guy has been working hard to build a business on top of Facebook, helping brands promote themselves on the platform.
Facebook significant changes to fan page platform, soon to take full effect on March 30, literally made the fan page as commercially effective as a personal profile. Many existing connection, engagement tools and techniques have become obsolete as a result. Most providers will take weeks to months to restore the usability of their products & services, and achieve partial effectiveness, at best, in continuing to promote their brands and customers.
This excludes, off course, the inner circle of providers such as Buddy media, Involver and others who were in on the hot details well in advance, just enough to be ready on time.
This is the classic move of the platform player: every once in a while making a few smart changes, which gradually snuff out revenues from the echo-system and further empowering platform revenues. Day by day this is causing fan page developers to clearly understand that we will never be able to build a big business on top of Facebook in the long run. Once our business is big enough, the platform will make changes, leaving us, the echo systems inhabitants, with just enough revenue to keep going.
One could say that this change shows how Facebook is facing the final countdown on earnings / IPO move. In fact, Facebook is probably desperate enough for short term profits that they are willing to make long term sacrifices on account of all the providers who leverage the platform. They are hurting the same echo system they were so smart to build in the first place, with their open APIs, available information, and overall pro-developers approach
Facebook knows that the true long term goals are beyond connecting a brand to a person. They wish to function as the main personal history and ID source for each and every one of us. This is their long term goal and its implications are beyond Economical. The vision they will only be realized by fiercely defending user privacy and provisioning commercial actions.
They are life changing, and the vast economical sides effects of this future are more than beneficial.
But the long path is jeweled with many financial challenges. Social media value is proven for corporations, mainly in Marketing: branding, accelerated buzz \ WOM generation, lead generation, customer relations and support, engagement, satisfaction, churn indicators, all decreasing CPA or increasing LTV in some way or another.
However, it seems as if the social media monetizable values are NOT clear for the social media platform itself.
Facebook latest move is, from my point of view, a BIG signal to developers. A big question mark. That question should be reflected back at Facebook – “What is our business model with brands?” and it’s derived from the more basic question mentioned above: “what function in people’s lives does Facebook fulfill?” and “what commercial aspects of people’s lives do we intend to facilitate?”. Facebook should moderate every commercial act over its platform, But they can contribute to the creation of the ethical, legal, foundations of it, shifting some responsibility back to the Brands & businesses. Once it is acknowledged culturally and legally that brands and businesses are responsible for their use of their user’s personal information.
So what will it be? Why can’t Facebook charge businesses for their commercial presence and activity? Facebook has the means to measure the connection, engagement and actions users perform with brands and businesses. With so many valid indicators, why can’t those indicators serve as the pricing and business model for brands and businesses on Facebook?
it makes sense – presence itself could to be billed for. With that model Facebook will be better aligned with it’s developres echo system, effective leveling the playfield by letting any developer share revenues with Facebook when their bring brands that engage with users on Facebook.
To summarize, as a fan page builder I am very disappointed with Facebook. letting the providers take the fall for their monetizing challenges. Instead they could come up with a vision in which presence, connection, and engagement indicators will function as billing meters. That could provide us the liberty to go back to the work with relevant customers who are interested in engaging users at a brand’s fan page, deliver a special customer experience, exclusive information, opportunities and offers, and share them with the brand and with fellow customers.
Another ex-fan page builder.
Social Gambling (i.e. Zynga Texas-Holdem Poker, the world’s largest poker site of any kind) has been around for years now with virtual currency, but only recently has the media picked-up this theme and started playing around with it, drawing parallels to social gaming, and suggesting the Zynga might actually switch to real currency.
Investors and corporates, however, have been going back and forth with this for a while now and a few recent acquisitions in this space include Playtika and Double Down Interactive.
Harrah’s, a unit of Caesar’s Entertainment Corporation, acquired 51% of social games developer Playtika Ltd. at a company value of $90 million. This acquisition is astonishing by almost every measure, as it is the largest acquisition of an Israeli online gaming company, and for a company that has been around for less than a year(!). Meanwhile, Double Down Interactive, creator of multi-game app Double Down Casino, was just bought by International Game Technologies in a deal worth up to $500 million.
The potential in Social Gambling should come as no surprise to anyone.
Gambling is inherently social (think about any casino game, other than maybe slot machines), and social gaming (i.e. Farmville) has much in common with gambling.
One very good example of how close social gaming is to gambling, and how it basically triggers the same kind of brain reaction, was recently posted here.
See if this sounds familiar to you: To play, you put currency into the game. You then pull the knob and wait for the result. When the result is presented, you are rewarded with a cacophony of exciting sounds, attention-grabbing images, and some form of currency. You also have the opportunity with each play to win a rare prize of significantly higher value than the value of the currency you contributed to play the game.
That sounds a lot like a slot machine, right? Wrong. It’s the basic action loop in FarmVille.
Here is the same description again, but this time, with FarmVille specific details: To plant a crop, you must first spend resources on the seeds. You then plant the seeds and must wait for them to grow. When you harvest the seeds, you are rewarded with a cacophony of exciting sounds, attention-grabbing images, and some resources. You also have the opportunity with each play to win a rare prize of significantly higher value than the seeds that you purchased.
Couple that with the distribution channels available in Facebook and other Social Networks and here comes “Online Social Gambling”. Many online gambling sites have been dying to leverage the social customer acquisition channels for ages now, but have been barred by Facebook’s reluctance to approve gambling content, to avoid legal complication in the US. Those companies are more than willing to pour billions of dollars into customer acquisition in Facebook, just because they knew that they will optimize those acquisition channels to reach a rock-bottom customer acquisition cost. Social will also help drive stickiness and time spent, increasing the customer’s life-time-value in the game.
With the new Obama administration ruling that opens the door for states to allow some online gambling we are bound to see a slew of companies move aggressively into this space. Some of the more obvious candidates include PartyGaming.com, traded on the London Stock Exchange; Betfair, and other operators, like Bodog, Bet365 and 888.com. After all, there are billion of dollars to be made in this business…
In the last two weeks the Social Media monitoring scene has been virtually lit on fire.
With Salesforce snatching Radian6 for approximately $276 million in cash and $50 million in stock and shelling out another $10 million in stock and $4 million in cash to Radian6′s founders, and Visible Technologies raising an additional $6m in cash, it seems that this space is ripe for consolidation and a lot more action.
A good question to ask would be whether this market is actually part of the “bubble” that is developing in Silicon Valley (or at least that is what experts are saying) or has some real substance to it – Does a price of $326 for Radian6 really makes sense? is the potential market this big?
My intuitive answer is no (for this market being part of the “bubble”) and yes (for the market opportunity). I think it makes sense to assume that this market will be as big, if not even bigger, than the Web analytics market is now (Forrester reports that Web Analytics spending are around $600m annually). There are some indications supporting those thoughts:
Although I’m a fan of integrating as many social platforms as possible in external sites and application, it’s clear that marketers are sometimes forced to focus their efforts and budgets on one platform or the other.
Having a clear strategy and goals in place can help make smart choices. For example, if you are planning on integrating social authentication in your site or app you will probably want to consider a wide range of authentication providers, including Google and Yahoo, but if your focus is on sharing user activities and driving traffic, you are probably debating whether you want to integrate Facebook, Twitter or both. In this post, I’ll try to focus on driving traffic to external websites and applications and compare between the two platforms.
Facebook has 600+ million users, compared to 180 million Twitter users. But is user reach the critical factor in deciding which platform you should integrate more tightly? it really depends.
A young startup that is trying to maximize traction and word-of-mouth, targeting tech-savvy early adopters with minimal costs, might consider Twitter as your top option, while a mature brand, which targets teens, will probably consider Facebook as a top priority.
The fact that there are so many Facebook users out there is not always positive. With Facebook you get a larger audience that includes consumers that might not be in your target segments. This requires potentially leveraging targeting technologies to reach the right audience and you might need to put in more effort in outreach to drive clicks.
On the other hand, Twitter conversations have gaping holes in the middle, often leaving Twitter users hanging with just bits and pieces, and leaving them with quite a bit of questions. This could potentially be a con for the brand conversation you are trying to develop on Twitter. Also, Twitter have had a history of security breaches and uptime issues that are just trouble for services that integrate with them.
A recent study done by SocialTwist, in which they analyzed more than one million links on both platforms, indicates that Facebook’s shared links average only 3 clicks, while Twitter’s embedded tweets generate 19. There might be a few good explanation for that:
For B2B marketers, Linkedin might offer an interesting opportunity as well. Back in April 2010, the business-oriented social network gave users the ability to follow companies in addition to following users. Even before that, Linkedin added newsfeed activities, such as “like” and “comment”, very similarly to Facebook’s newsfeed, and enabled users to integrate their Twitter accounts into their LinkedIn feed.
My overall feeling (unfortunately, I don’t have any data to back this, it’s just a hunch) is that all those features have substantially increased user engagement on the platform. LinkedIn, like the other platform has API in place that enables sharing links, and as professionals spend more time engaging with LinkedIn, I wouldn’t be surprised to find that the platform can deliver good results in driving interest for business products.
To summarize, choosing Facebook because everybody else does it is not always the right answer. One best practice would be to have a clear understanding of your target audience and use publicly available data to figure out in which platform your core audience spends more time in, helping you deliver more bang for the buck.
Although I guess this is wide spread knowledge for most Social Media professional, I think it’s worth discussing some of the stats about Social Media related traffic on external web-sites from a different point of view (note: “external websites” in the context of this post are traditional non-social network sites).
Here is a graph from a recent Technorati post highlighting traffic driven from Social Networks to blogs:
The data, which is probably focused on the most important goal for marketers and website owners – driving traffic from social networks to their sites, shows that the mass of traffic is driven by Facebook and twitter. It’s very conclusive – Facebook and Twitter are by far the most effective platform to target, but there are two good questions to ask are: to what extent is this true for websites implementing social connectivity strategies? and is this traffic content related?
Moving forward, I assume that Google, Yahoo and most of the platform above, would do a very good job in prominently showing social activities on their platforms to promote content discovery and outbound clicks. everybody would have a “stream” – This is a must for those platform to survive in a world dominated today by Facebook and Twitter. If that actually happens, some of the marketers might find it more effective to promote user activities on other platforms, as they would offer a lower “price”. Assuming that each item shared by users has some “cost” associated with it (especially if it is an incentives share) an interesting data bit for marketers would be the the cost of a lead gained from sharing activities or advertising in all other platforms.
Here is some more data from Gigya (disclaimer – this data is not super up-to-date). Unlike the Technorati data, those stats are not blog focused:
Distribution of shared items
There are far more companies providing identities with which users can sign-in to 3rd party websites, so that data looks different from sharing data, and also looks different by site type:
Share of Authentication By Platform:
This indicates that users actually share and authenticate using diverse Platforms, if they actually are given a chance to do so (depends on whether the website has implemented sharing and authentication to other destinations). The data actually drives right into the heart of Gigya’s value proposition – enable users to choose which destinations they want to connect and share to, and then track and optimize the conversion rate of share to traffic to realize which platforms are effective in driving traffic for your site.
I’m guessing some websites would experience that the distribution of users authenticating and sharing by platform varies according to the site’s content and target audience. If your website targets an older demographic user segment you may find that Yahoo and Linked-in are actually a favorite connectivity destination for your users, potentially leading to lower costs associated with acquiring leads from those platforms and making them an important part of your social marketing strategy.
Intense discussions about the new era of Social in web and mobile have been all over the place this week. Those discussions are, rightfully, getting tons of media traction.
It started with the announcement of the new sFund from VC Kleiner Perkins Caulfield & Byers, who joined hands with Facebook, Amazon.com, and Zynga to announce a new $250 million fund for social networking startup (You can read more about that here: http://www.businessinsider.com/live-facebook-to-announce-new-vc-fund-2010-10#ixzz13DmAQGTd).
The new fund met with some criticism led by Chris Dixon, a leading angel investor, who kept shredding Kleiner Perkins initiative on twitter (you can see his tweets here: http://twitter.com/#!/cdixon). Chris basically suggests that Kleiner’s dedicated social startup fund is late to the party.
Thinking about Chris Dixon’s response and the opportunities out there I can’t help but wonder that:
- Nobody has yet to figure out how to successfully use Social Media for e-commerce. It’s clear that this is one of the Holy Grails of Social, yet no disruptive solution or technology has showed up. Not only have we not seen the first generation of successful Social solutions for e-commerce, we aren’t even seeing beta solutions that deliver solid value.
Unlike Brand Marketers, online retailers want performance based solutions and are willing to pay handsomely for leads that convert into paying customers.
- Social Network brand marketing tools have made a huge leap forward in the last year, but there are many optimization challenges ahead. This space is young and growing and we will surely see more disruptive technologies that would grab more advertisers’ dollars.
Chris surely recognizes that those opportunities are out there. True, Social is not all new and it’s already here, big time, but the industry is still pretty young and will probably see a lot of game changing products in the future.
Unfortunately, it took a long time for players in the industry to understand where there are headed to and what works best, but now as some of the key concepts are unveiled it’s officially the first round of the new web – the social web. Round 2 and maybe 3 are probably around the corner and it seems that there are many opportunities out there for entrepreneurs and venture capitalists.
I would bet a small amount of my money on Kleiner Perkins Caulfield & Byers new sFund. Would you do the same?