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From the category archives:
Facebook Dominates Social Networking Landscape, Surpasses 250mm Mobile Users
Facebook’s dominance of social networking is on full display in the below chart recently released by Pingdom which shows every social network with over 1 MM daily visitors.
We expect Facebook’s membership to continue to grow, particularly in the less saturated demographics (55+) and in countries with lower penetration. But we also believe that there are massive opportunities for other networks that either offer a unique communications platform (e.g. Twitter), or meet vertical needs (e.g. LinkedIn for work, Badoo for dating).
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Also this week, Facebook had several major mobile announcements. The announcement that got the most press was the revelation that Facebook had surpassed 250 million mobile users.
The second, and more meaningful, was the rollout of a major upgrade to its mobile platform (m.facebook.com).
On March 31st, Facebook announced:
“Today we’re excited to start rolling out a major upgrade to m.facebook.com that delivers the best possible mobile Web experience no matter what device you’re using. Previously, we solved this problem by building multiple versions of mobile Facebook: m.facebook.com for less feature-rich mobile devices and touch.facebook.com for touch devices.
There are two major problems with this approach:
- 1. We were limited by the lowest common denominator for each site. We couldn’t use JavaScript and had device specific file size limitations on m.facebook.com. Supporting a wide array of touch phones of varying quality on touch.facebook.com limited our ability to use modern CSS and JavaScript APIs.
- 2. Every time we launched a new feature, we had to build it multiple times across different code bases: once for facebook.com, then again for m.facebook.com, touch.facebook.com, and in native applications as well. Honestly, we weren’t very good at doing this, so certain features were missing on different devices.
With the new m.facebook.com, users with high-end touch devices will see a rich touch-friendly interface; for users with feature phones, the site will look and work great.”
The bottom line is that the world’s dominant social network has a keen appreciation for the global secular trend to mobile, and is operating its business accordingly.
As a Facebook spokesperson stated: “We think it’s important to provide an excellent mobile Web experience. Now, whenever we launch new features on the mobile site, they’ll be available on any mobile browser, presented in the best possible experience. We’re excited to roll out the new m.facebook.com site to everyone over the next few weeks.”
Facebook Continues to Build Its Washington Presence
Undoubtedly, one of the major risks to Facebook remains government regulations. Anytime a company gets as big and powerful as Facebook, the company attracts government scrutiny like moths to a flame. Facebook clearly recognizes this. In fact, Facebook’s COO, Sheryl Sandberg, is a former Clinton administration official, and Facebook’s General Counsel (Ted Ullyot) is a former clerk for Supreme Court Justice Antonin Scalia. So it’s no surprise to see Facebook continuing to take the appropriate measures to make sure that Washington understands and appreciates their perspective, and is best able to place Facebook’s actions in the right context.
The latest rumored addition to the Facebook Washington team is Robert Gibbs, the former Communications Director for President Obama. Gibbs would bring an intimate knowledge of Obama’s agenda as it relates to the regulatory issues facing Facebook, as well as strong relationships within the administration. Obama is widely perceived to be a fan of Facebook. One of Facebook’s founders, Chris Hughes, played an important role in Obama’s campaign by heading the Facebook Connect integration. More recently, Mark Zuckerberg sat next to the President at dinner as part of a group of tech titans that dined with Obama in Silicon Valley.
While the fight over talented programmers gets the most press in the Valley, recruiting the right talent in Washington D.C. may prove a similarly important key to Facebook’s future success.
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GOOGLE RELEASES “+1” TO CHALLENGE FACEBOOK’S “LIKE” BUTTON
By Kerry Rice, Wedbush Analyst
Google introduced its new search feature, +1, Wednesday afternoon, which integrates recommended information from “friends” in a users search results. To utilize +1, users must have a Google profile, which is also where users will manage their +1 recommendations. The process is that when a user performs a search, the search engine results page will not only include the algorithmic search results Google is so well known for, but also +1 recommendations. The +1 recommendations will come from websites that the user has previously found helpful or from friends, such as contacts or IM chat buddies. We expect Google to also begin incorporating +1’s from Twitter, Flickr, and other social media sites.
The proliferation of +1’s should increase the relevance of search results, and could increase search query volumes and key word prices. Initially, search queries will continue to return primarily algorithmic results. However, next to each search result will be a +1 button. If this button is clicked by a user or a user’s friend, the recommended search result will begin to appear in the users or users’ friends search results pages in following similar search queries. Additionally, even if the user or none of the user’s friends have clicked +1 for a particularly search, Google is able to indicate how many other users clicked on the +1 for a particular search result, highlighting that others have found a search result useful. The anticipated result of +1 is that users receive the improved search results because the recommendations come from people who matter to the user, at the right time (when user is actually looking for information about that topic), and in the right format (user’s search results). We believe the more relevant search results driven by +1 could propel search query volumes higher for Google. We also believe that websites users find relevant should have a higher search ranking, which could increased the price of keywords and ultimately drive revenue for Google.
Google has not forgotten about ad revenue as we expect +1’s next to ads to also be introduced. Google is expected to initially place +1’s alongside search results and ads in English searches and only on Google.com, but in the weeks ahead +1’s will begin to appear in other Google products and sites across the Internet. The +1’s should not change Google’s quality score, but are likely to be used when determining organic search rankings. Additionally, Google intends to extend the +1 to website owners to make it easier for users to recommend content without leaving the site, similar to Facebook’s “Like” button.
We expect the +1 to take time to roll-out as this new feature remains in Google Labs for now.
Steps to try +1 on Google:
1) Create a Google Profile
2) Visit to Google.com/experimental
3) “Join” the +1 experiment
4) Search on Google – after a few minutes the +1 icon should appear in the results
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We once lived solely in an offline world. This offline world developed over millions of years globally, and over hundreds of years in the United States. Over this time, there emerged a number of companies that came to dominate their particular line of business.
The fabric of this offline world changed forever when the Internet burst onto the scene in 1994. Like with most new technologies, the Internet’s early adopters were not the entrenched companies. Rather, we saw a wave of new entrants become the first users. As opposed to earlier technical evolutions which developed over years, the pace of innovation brought about by the Internet had never been seen before, and as a result new companies that harnessed its fullest potential experienced unprecedented growth.
Amazon, not Walmart, was able to become the dominant online retailer because the core competencies needed to succeed online were ingrained in Amazon’s DNA. Amazon was an Internet company that retailed; Walmart was a brick-and-mortar retailer first and focused the vast majority of its resources on its physical stores. Walmart simply had bigger fish to fry and figuring out the emerging Internet was not a priority. Conversely, Amazon focused solely on the Internet and every strategic decision was made through a prism with a singular focus.
Of course, it was not just Walmart. Many of the offline leaders were unable to evolve to become the leaders of their verticals in the new Internet world (which we refer to as The First Internet):
We are now in the next revolutionary stage which we believe to be as dramatic as the leap to Internet from offline: THE SECOND INTERNET (aka The Social Internet)!
Once again, there are distinct competencies demanded and, as a result, we believe that this revolution will usher in a new set of companies, with the Second Internet in their DNA, which will come to dominate their verticals.
Over the last number of months we have discovered a large set of potential winners who are already scaling at unprecedented rates in their verticals (like Amazon was unprecedented relative to Walmart) and, if they can continue to execute, are poised to create massive shareholder value.
In this report, we highlight just a few that are well positioned to become market leaders in The Second Internet.
While we believe that most First Internet winners will not transition to become Second Internet winners, we believe that LinkedIn, given its social networking DNA, has the opportunity to also be a major beneficiary of the Second Internet.
What Makes The Second Internet So Different From The First Internet?
The Second Internet is not just about a transition to something new; it represents a revolution brought about by disruptive business models that we believe, when combined with the mobile computing revolution, will usher in another period of great wealth creation.
HOW BIG? HOW DISRUPTIVE?
Over the past seven months, we have met with social media companies that impressed us for a variety of reasons. Over and over again, what continues to stand out most is the incredible rate of growth these companies are achieving by leveraging social media platforms where hundreds of millions of users are already tightly connected.
facebook, Twitter, and foursquare are the Second Internet’s leading platforms, and most successful Second Internet companies are leveraging these platforms (as well as email which remains the dominant sharing tool) to drive user engagement. Because these platforms have opened their APIs, programmers can develop applications that extend the interconnectivity and utility. Thus, new applications that leverage the existing platforms can scale at rapid rates, as witnessed by the unprecedented growth of Zynga’s Cityville which reached 100mm+ players in just seven weeks (vs. 20mm sales for one of the best video games of all time Call of Duty: Modern Warfare):
As these early Second Internet companies have flourished, leading First Internet companies have often felt the pain. The Alexa chart below shows the 40%+ drop in players at MiniClip, a leading First Internet casual gaming site.
New Dynamics and Economics Are Altering Strategies:
Second Internet companies are thinking about marketing differently; executing strategies that convert paid media into free customer acquisition. Whereas the traditional Cost Per Click Search Engine Marketing methods typically become more costly over time, social customer acquisition methods can spread virally and become more efficient with scale.
As a result, owned media has been scaling at tremendous rates:
In order to put the Venn diagram above into context, let’s take a closer look at The Huffington Post — a Second Internet company, with social in its DNA, that is generating massive earned traffic as it inexorably marches to ever greater scale at a pace that far outstrips its competitors:
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To help understand what is “social” about The Huffington Post, let’s look at Sunday’s lead story:
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The lead story is written by the AP, with content coming from CNN, Reuters, Fox News, MSNBC and others. People can debate the quality of the content, but we are contented with the belief that you don’t become the thirty-third most trafficked site unless a lot of people approve of the content you are providing.
Equally important to Second Internet companies is the engagement of the audience. By mid-afternoon on Sunday, the lead story on the Huffington Post had 9,748 comments from their massively engaged audience.
But it doesn’t end there. The first two commentators have their own followings that further amplified the impact of their comments:
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Murphthesurf3’s 2,322 “Fans” are people who have connected with him or her on The Huffington Post, friended Murph on facebook, or who followed Murph on Twitter. A “Fan” can then set preferences for when they want to be contacted by The Huffington Post.
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Second Internet companies leverage the social connections of their users to drive traffic back to their site, driving further engagement, without flooding the member’s social network with spam. What’s the reward for Murph for all this participation/commenting? First, s/he has built an audience. In addition, the Huffington Post has awarded him or her with six badges. Financial incentives are not necessary; instead Murph is motivated to participate by the opportunity to be recognized as HuffPost Super User and to attract an attentive audience. Murph has earned STATUS, which is the dominant currency driving the Second Internet.
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This example exposes an important implication of the evolution that is occurring online: while the first Internet is primarily powered by Search, the Second Internet has opened another key path for accessing content — Social Discovery. Unlike Search, with Social Discovery, ideas and topics are pushed to the user, thereby planting the seeds for new interests in the user’s mind.
Social discovery is particularly impactful as a “word of mouth” mechanism for uncovering content and companies are trying to find ways to maximize the opportunities to spread their brand through the persistent conversation. Notably, the NY Times which recently announced it would charge users who wish to read more than 20 articles per month, is allowing all clicks generated on Twitter and facebook to freely bypass this newly installed paywall.
Some are bemoaning this new phenomenon. At this year’s TED Conference, Moveon.Org President Eli Pariser posited that the personalization of the web is making us less smart by only providing information that fits into already narrow perspectives.
Our original thesis when we launched coverage of Google last August, was that the more social a site, the greater the percentage of traffic that originates on facebook relative to Google. Our thinking has evolved, however, and we now recognize that social discovery and search work in tandem. Social discovery helps expose individuals to new concepts, and search then helps an individual refine the understanding of concepts that are of interest.
Quora, a highly social Second Internet question & answer property is capitalizing on this behavior by providing a platform for people to ask and answer questions, and earn status in the community by doing so. Quora also effectively leverages the facebook and Twitter connections of its users to drive traffic back to the site. As a result, the site is scaling rapidly:
However, the content created by Quora is generally not timely. Below are three questions that we had outstanding notifications on the day of this publication:
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This socially created data has significant long-term value. But how will people find the data once it’s been in their Twitter and facebook feed? We believe that significant amounts of socially created content will be found via Google/search. In fact, the Quora’s clickstream data from Alexa, shows that Google is driving more than twice the traffic to Quora than is facebook.
However, we recognize that facebook is driving massive amounts of traffic, and that sites that have a large element of discovery (e.g. YouTube, LivingSocial) will have ever-increasing percentages of traffic coming from facebook:
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As facebook continues to enhance functionality on facebook.com, as well as its social plug-ins that are being implemented by millions of websites, it will continue to grow the percentage of audience it sends to other sites. Two weeks ago, facebook introduced a new plug in for comments on sites. The community sports blog network SB Nation (which has a guest post later in this report), has seen referral traffic from facebook grow an astounding 400% on the sites on which the new system was incorporated!
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