The Social Internet

While I thoroughly enjoyed my time as a Wall Street analyst, compliance issues hampered my ability to blog on SecondShares.  Now that I’m back angel investing, I look forward to sharing thoughts and analysis on the social and mobile companies I refer to as “Social Internet” companies.  Just as the siloed internet companies disrupted the offline leaders (e.g. Amazon v Walmart), Social Internet companies that are BORN social, will disrupt incumbent firs internet leaders.  I first outlined my thesis in the only real thought piece I wrote a year ago.  I now update those thoughts in a deck “The Social Internet“.  While the deck is meant to be given live (which I love doing, as it’s such a fun dynamic topic to discuss), a lot of value can be derived by reviewing the slides.   Enjoy the deck, share it, and I look forward to future posts.

OBL Death & Royal Wedding Mark High Points for Social Media, Advertisers Take Notice

SOCIAL MEDIA BREAKS THE NEWS; AUDIENCE FLOCKS & ADVERTISERS TAKE NOTICE

Last Monday at 10:25 PM EST, Keith Urbahn, a former aide to Donald Rumsfeld, tweeted:

Figure 1: The Tweet Read ‘Round The World

Source: Twitter

From 10:45 PM – 2:20 AM EST, 27.9 million tweets were generated, breaking the record for the highest sustained rate of tweeting at an average of 3,000 Tweets Per Second (TPS).  During President Obama’s address, the rate of tweeting peaked at 5,106 TPS.  Notably, the record rate is 6,939 TPS which took place at New Years 2011 in Japan (a country with advanced smartphone technology).

YouTube views of President Obama’s speech exceeded 5.5 million views (his White House Correspondents Dinner speech got 7.2 million in five days, the most ever for a Presidential speech).

Figure 2: News of OBL’s Death Yielded Highest Sustained Rate of Tweeting Ever

Source: Twitter

While Urbahn’s tweet spread viral news of Osama Bin Laden’s death, Sohaib Athar aka @ReallyVirtual had actually “broken” the story hours earlier, unknowingly live-tweeting the raid from his first person vantage point in Abbottabad, Pakistan:

Figure 3: @ReallyVirtual Tweets OBL Raid Play-By-Play

 

Source: Twitter, via Namesake

Since his tweets were discovered, @reallyvirtual’s Twitter account surged to over 100K followers, from less than 100, and prompted the IT consultant to release a humorous FAQ page where he could direct countless inquiries.

Figure 4: @ReallyVirtual Has Attracted Over 100K Followers Since Tweeting His First Hand Account of the Raid

 


Source: TweetDeck

The previous week witnessed another occurrence of social media’s growing impact on real world events.

Mainstream media took advantage of the content being produced through social media by integrating the user-generated content during the royal nuptials.  Most notably, ABC broadcast the royal wedding live direct from its Twitter feed, while attempting to create an interactive experience between social media and its broadcast.

Figure 5: While The Internet Loved The Royal Wedding, The Flower Girl Was Less Enthused

Source: Today.com

ABC and Twitter came up with hashtags such as #RoyalSuccess and #RoyalMess to describe people’s reactions to dresses and to describe the #RoyalKiss.  Messages posted on both Facebook and Twitter were read from the screen, and a TwitterTracker was used to gauge user engagement in different aspects of the coverage.  As an ABC News executive commented, “Social media isn’t a novelty anymore, and you can’t treat it as such.  It’s not something you can even just do.  You have to constantly iterate and push things forward, and that’s what we’re trying to do.”

Figure 6: ABC Integrated Social Media To Provide More Complete Coverage of The Royal Wedding


Source: Twitter

Large scale planned events like the Royal Wedding or the Super Bowl attract new users to social media platforms and encourage enhanced interactions as users congregate to engage with the event.

Additionally, advertisers are increasingly embracing social media to insert their brands into the conversations around these major events.  We were particularly impressed by Unilever’s Magnum Ice Cream usage of the #RoyalWedding hashtag.

When Twitter users clicked on the #royalwedding hashtag, they were directed to the day’s Promoted Trend, which was sponsored by “Magnum Ice Cream.”  Clicking on “Magnum Ice Cream” then directed Twitter users to Magnum’s Facebook page (which now has over 1 million fans).

Figure 7: Unilever’s Magnum Ice Cream Social Media Campaign Yielded Massive Earned Media Impressions

Source: Facebook

Figure 8: Unilever’s Promoted #RoyalWedding Significantly Outperformed @ClarenceHouse’s #RW2011

Source: Twitter

Figure 9: Unilever’s Campaign Has Resulted In Owned Audience Which the Company Can Reach & Impact

Source: Klout

THIS WEEK IN TWITTER

Refocusing the User Value Proposition

 

Last week we highlighted the return to Twitter of co-Founder Jack Dorsey and indicated product changes would follow that would be designed to make the user experience more intuitive and useful for average users.  Twitter’s major problem today is “onboarding,” which is the process of taking a new user and helping them quickly understand Twitter and derive value so they return and become active users.  On cue, this week Twitter unveiled several new features focused on improving the on-boarding experience to convert a higher percentage of registering users to become active users.

 

On Monday, the company updated their search engine to ease the discovery of Twitter feeds that better match a user’s interests.  Previously, the Twitter search engine had to contain the key term in the user name.  Now, it seems Twitter has worked on indexing/profiling their users.

 

Tied into the push of helping its users find interesting content, on Wednesday, Twitter released a new homepage with the new call to action of “Follow your interests”:

 

 

 

Permission Marketing Helping Sites Leverage Social Graph To Better Monetize

Guest Post by Liza Hausman Vice President of Marketing, Gigya

In 1999 “Permission Marketing” was the buzzword of the year when Seth Godin wrote a book about “turning strangers into friends and friends into customers.” As Godin told marketers, “By talking only to volunteers, Permission Marketing guarantees that consumers pay more attention to the marketing message. It serves both customers and marketers in a symbiotic exchange.”

 

Today, technologies like Facebook Connect and Twitter for Websites are helping to create a new concept of permission marketing. Using these technologies on their own sites, businesses are able to establish a permission-based relationship with their users and customers that complements their efforts on Facebook, Twitter or other social sites.

 

The Huffington Post is the poster child for this new social-data-based permission marketing approach. Readers raise their hands by using their existing Facebook, Twitter or other social identity to register, giving HuffPo access to data with which the site can socialize the user experience. Readers can see what their friends are reading and sharing on their site, giving them a powerful social filter for relevant content. It also means The Huffington Post can sell advertising on their own site based on everything they know about the user from a social perspective.

 

 

 

 

The Huffington Post’s application of Facebook Connect and similar technologies to create a social news experience has been the key driver of its phenomenal traffic growth over the past year plus. Social advertising is also a key source of its revenue growth.

 

But it is the layers on top of the Social Sign-on foundation that are the most promising for the future of advertising. In addition to basic demographic targeting, sites could offer advertising based on interest data, targeting fans of True Blood or Android.  Sites could also sell against social influence and activity — factors such as the number of friends, their propensity to share and their history of driving new visitors to the site, or even the number of items “Liked” as an indicator of engagement.  Reward programs driven by game mechanics are a key part of the nurturing process in this new model, where a loyal, engaged and most importantly non-anonymous audience is the new currency of marketing.

 

Challenges do remain, but a permission-based approach will be a competitive imperative, and those that are able to embrace and experiment with its possibilities will be able to more effectively increase customer value, command higher CPMs and ensure their social efforts deliver real ROI.

 

Peeling the Onion To Understand Lifetime Value of Social Media

Guest Post by Matt Monahan, Epic Social Director

 

 

Long before the Social Web was invented, email marketers and search marketers were building scalable, sustainable businesses by understanding two simple principles; their customer’s life-time value (LTV) and their customer’s acquisition cost.  The customer LTV principle has not evaporated along with the many industries disrupted by the Social Web, but it needs to be re-embraced to ultimately define an acceptable acquisition cost for fans, followers and owned audiences on the Social Web.  Measuring LTV can be like peeling an onion if you don’t know how to slice the data. Below are a few measurement tips we give marketers:

 

  1. Measure sales through tweets and status updates:  Use URL shortening services to track click volume and conversions from your posts on Facebook, Twitter and anywhere else you can freely communicate with your customers.  Each click generated through an owned audience channel, like a Fan Page, is a click you didn’t have to pay for elsewhere.

 

  1. Offer a native point of sale: If you are selling products online, why don’t you have your store available on your Fan page?  Anytime a user has to click out, you have lost some.

 

  1. Survey your customers after they have purchased: Use a service like KissInsights to survey customers after they have made a purchase.  Ask them if they are on Facebook, and if the are a Fan of your business.  There is a lot you can learn about where to be spending your marketing dollars based on where your customers are coming from and what they think of your product.

 

  1. Start measuring and attributing value the less obvious metrics:

 

Every time you post an update to your Facebook Fan page, your customers are being reminded you exist.  Those impressions and the imprint you have left on the mind of your audience in not valueless; start to think about how much impressions, likes, retweets, video views and comments mean to your brand, start to measure how much attention you are creating, and start to realize that the cost avoidance created through your owned audience is worth something.

THIS WEEK IN PRIVATE SHARES TRADING

Facebook Value Stays Steady at $77.8B

 

The market for trading private shares is still in its infancy, and while there are hundreds of private companies with shares available for trading, Facebook continues to dominate trading actively, with Twitter, Groupon, Linkedin, Zynga & Yelp also getting investor attention, but with limited trading activity to date.

 

For the fourth straight week, this week’s Facebook auction took place on Wednesday and cleared at a price of $31.50 implying a value of $77.8 billion.

 

 

 

 

Other Private Company Trading Activity:

  • Twitter (230 million shares issued):
    • 70k shares traded $32 on 3/28/2011 implying a $7.4 billion valuation.
    • 27k shares traded $31 on 3/16/2011 implying a $7.1 billion valuation.
    • 35k shares traded $34.50 on 3/4/2011 implying a $7.9 billion valuation.

 

  • Groupon (300 million shares issued):
    • 25k shares were traded at a pre split price of $47.67 or a $7.2 billion valuation on 3/10/2011 (Groupon shares have split 2:1 resulting in 300 million shares issued)

 

  • Zynga (310 millions shares issued):
    • $9.3 billion valuation implied by trade on 2/26/2011

 

  • LinkedIn (91 million shares issued):
    • $2.8 billion valuation implied by trade on 3/21/2011

 

THIS WEEK IN FACEBOOK

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).

 

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. 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. 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.