The Digital Asset Management Acquisitions continue to occur.
In a move that appears to be both a technology and customer rollup, KIT Digital a publicly traded company on NASDAQ (Symbol: KITD) acquired The FeedRoom for $9.8M and Nunet (from IMG Worldwide) for $11.1M totaling around $20M. KIT Digital provides end-to-end video IP technology and services, and with these acquisitions expands that capabilities with broader video and business oriented DAM offerings. The purchase of The FeedRoom is essentially equivalent to thier last round of funding. As part of the transaction, The FeedRoom's controlling shareholders -- NewSpring Ventures, BEV Capital and Velocity Equity Partners -- invested $4.0 million in KIT digital common shares, at a price of $11 per share, through the conversion of The FeedRoom Series F Preferred Shares purchased at closing.
The FeedRoom, a provider of Video and traditional digital asset management (DAM) solutions had acquired ClearStory Systems in December of 2008. At the time ClearStory's customers included Bristol-Meyers Squibb, National Geographic, and several others. I suspect that there would be concern from these large customers about the stability of their DAM vendor.
I'm not as familiar with Nunet, but if it's what I believe it to be, it is video asset packaging and distribution technology that was developed many years ago at IMG Worldwide to support many of their clients with establishing their brands and creating appealing web sites that utilized video. This would mark an exit for IMG Worldwide from the DAM space -- which always seemed to me as a sideline business.
Thursday, October 8, 2009
Wednesday, October 7, 2009
Give up sex or your cell phone? 1 in 3 would give up sex!
A survey done by Kelton Research for Samsung Mobile in several US cities shows that on average 30% of men and women would put their sex lives on hold for a year, rather than give up their cell phones for the same period. Overall, a greater percentage of women than men were willing to give up sex for a year than their phone.
The choice -- communication or sex -- was put to 300 people in several major cities. The results for some of these cities are below, drawn from different media reports.
In Denver 33 percent of women would put their sex lives on hold for a year to be able to use a mobile device. Only 20 percent of men would choose a cell phone over a steamy night.
In Boston, 31 percent of men and women would give up sex for a year rather than forfeit their telephones for the same amount of time, according to a study released this morning. When it came to the battles of sexes, 38 percent of Boston women were more willing than men to lose their libidos versus missing their mobile phones. Only 19 percent of men said they would be celibate.
A survey of D.C.-area residents by Samsung Mobile found that 27 percent of men and women would rather forgo sex for an entire year than give up their cell phones for the same amount of time. Women, 38 percent, were more willing than men, 9 percent, to give up sex to keep the phone, Samsung says.
In Chicago, women (36 percent) were more willing than men (15 percent) to lose their libidos versus missing their mobile phones.
Which would you choose? ... and Why?
The choice -- communication or sex -- was put to 300 people in several major cities. The results for some of these cities are below, drawn from different media reports.
In Denver 33 percent of women would put their sex lives on hold for a year to be able to use a mobile device. Only 20 percent of men would choose a cell phone over a steamy night.
In Boston, 31 percent of men and women would give up sex for a year rather than forfeit their telephones for the same amount of time, according to a study released this morning. When it came to the battles of sexes, 38 percent of Boston women were more willing than men to lose their libidos versus missing their mobile phones. Only 19 percent of men said they would be celibate.
A survey of D.C.-area residents by Samsung Mobile found that 27 percent of men and women would rather forgo sex for an entire year than give up their cell phones for the same amount of time. Women, 38 percent, were more willing than men, 9 percent, to give up sex to keep the phone, Samsung says.
In Chicago, women (36 percent) were more willing than men (15 percent) to lose their libidos versus missing their mobile phones.
Which would you choose? ... and Why?
Posting from the Sky! AA's Gogo Inflight Wireless
I'm posting this from the Sky! I'm on an AA flight returning from Detroit offering it's new Gogo Inflight Internet. It's complimentary but would be offered for $9.95 per flight -- a little pricey for a short flight, but probably worthwhile for a coast to coast US flight. I don't know it's offered overseas. For a business traveler (when they return to the air) this could be money well spent.
It's impressive. The speed is pretty good -- it's fast enough to watch a Yahoo! or ESPN video (my test cases), though the playback speed sometimes exceeds the buffer speed, making videos stop and go. Page loads are fast. I'm finding that occasionally, some page loads are incomplete, and emails containing embedded images load slowly or incompletely when asked to update the images (Thunderbird email option). However overall, for browsing web sites and doing email it's a very good experience.
Gogo strongly suggests a proper browsing netiquette: that users browse "appropriate" sites, and that you don't visit sites or do things that could "shock your neighbor" in the next seat. They also don't allow video phone conversations -- though I'm not sure how they police that.
The availability of in-flight internet access removes one of the last barriers to being connected all the time from anywhere... well that and a few dead cell spots in some of the canyons near Golden, Colorado and on route 3A near Winchester and Tewksbury Mass.
It's impressive. The speed is pretty good -- it's fast enough to watch a Yahoo! or ESPN video (my test cases), though the playback speed sometimes exceeds the buffer speed, making videos stop and go. Page loads are fast. I'm finding that occasionally, some page loads are incomplete, and emails containing embedded images load slowly or incompletely when asked to update the images (Thunderbird email option). However overall, for browsing web sites and doing email it's a very good experience.
Gogo strongly suggests a proper browsing netiquette: that users browse "appropriate" sites, and that you don't visit sites or do things that could "shock your neighbor" in the next seat. They also don't allow video phone conversations -- though I'm not sure how they police that.
The availability of in-flight internet access removes one of the last barriers to being connected all the time from anywhere... well that and a few dead cell spots in some of the canyons near Golden, Colorado and on route 3A near Winchester and Tewksbury Mass.
Yawning Explained: A cooling mechanism for the brain!
OK, so this post isn't technology or digital media related... but if we think of the human body as a pretty darn cool machine, then perhaps it fits. In any event, it appeals to my inquiring mind -- wondering for years, why people yawn.
Now researchers at Binghamton University believe that the primary purpose of yawning is to control brain temperature. Apparently our brains operate more efficiently when cool, and that yawning is a physical adaptation that has evolved to provide maximum cooling of the brain.
Apparently they studied Australian parakeets (so much for being called a "bird brain") because they have relatively large brains, live wild in Australia, which is subject to frequent temperature swings, and, most importantly, do not engage in "contagious yawning", as humans and some other animals do. Contagious yawning is thought to be an evolved mechanism for keeping groups alert so they "remain vigilant against danger", according to the researchers. Makes sense to me. It also explains why people yawn when transitioning from sleep to a waking state, and how yawning doesn't occur and in fact can be counter productive in certain circumstances.
The article concludes stating that this new study on yawning changes the popular notion that yawns are mere signs of boredom. On the contrary, a commentator on the study states that "yawning more accurately reflects a mechanism that maintains attention, and therefore should be looked at as a compliment!"
I wonder if it also works to cool off "hot heads"?!
The full article can be found here.
Now researchers at Binghamton University believe that the primary purpose of yawning is to control brain temperature. Apparently our brains operate more efficiently when cool, and that yawning is a physical adaptation that has evolved to provide maximum cooling of the brain.
Apparently they studied Australian parakeets (so much for being called a "bird brain") because they have relatively large brains, live wild in Australia, which is subject to frequent temperature swings, and, most importantly, do not engage in "contagious yawning", as humans and some other animals do. Contagious yawning is thought to be an evolved mechanism for keeping groups alert so they "remain vigilant against danger", according to the researchers. Makes sense to me. It also explains why people yawn when transitioning from sleep to a waking state, and how yawning doesn't occur and in fact can be counter productive in certain circumstances.
The article concludes stating that this new study on yawning changes the popular notion that yawns are mere signs of boredom. On the contrary, a commentator on the study states that "yawning more accurately reflects a mechanism that maintains attention, and therefore should be looked at as a compliment!"
I wonder if it also works to cool off "hot heads"?!
The full article can be found here.
Friday, August 7, 2009
News Corp. to blaze pay-to-read trail... will other Newspapers follow?
Rupert Murdoch's News Corp. plans to charge fees for its newspaper Web sites. While it is an about-face for Murdoch, who at one point wanted to make his Wall Street Journal on-line a free site, it is a very interesting development, and could lead the industry out of the misery it's been suffering for quite a while.
Newspapers have both toyed with and opposed this approach, concerned that it would turn away readers to other free news sites, or in some cases, arguing that the value of the content continued to be high enough to support enough traffic to maintain it as an ad-driven site. Some companies, like The New York Times has at times charged for past articles, but never for on-line daily access to "All the News that's fit to print!"
The same challenge holds true for News Corp, who owns The New York Post, The Times of London, and the British tabloid The Sun. The company has some experience with this -- the Wall Street Journal Online is one of the most longstanding, successful paid sites around. However, the WSJ serves an affluent and business focused customer base, and an industry where money is freely paid for the best information. Will the same hold true for The Sun? Will the working-class, everyday Brittish reader of The Sun, pay a few quid for the on-line version? The jury is out.
My thought is that it comes down to access and value. Murdoch believes that others will watch and follow suit. If people can't access what they love or are habitually used to for free, and can't get it elsewhere, they will ultimately pay to continue the loyalty rather than give up their habit. So I believe this can work, but pricing will continue to be key. The case can be made that people were willing to pay for it before, and all that has changed (more or less) is the delivery means -- web vs. print. Why should information from a good, well researched or trusted source (even if it is a tabloid) be free? Everything costs something to produce, and the consumer will always be the judge of its cost -- they will vote their loyalty and need, with their wallets.
This could be a way out of the woods for newspapers and potentially magazines. It depends largely on the industry cooperation (dare I say collusion?) to really make this transition successful. The more willingness and "cooperation" among sites to charge, the more the consumer gets the message in concert that a change is afoot and it's not just one maverick News corporation. This transition could take some time as some papers sit on the sidelines and watch (as they've done for much too long)...but it also could happen very quickly. Newspapers need some rapid changes to address revenue. They've done business as usual for too long and many are paying or have already paid dearly for it. This is a relatively and potentially technically easier transition, as most already have web sites and web teams.
Yes, they'll likely get the business model or subscription price or approach wrong here and there, and there will be some pain in the transition. But it will be less painful than what they've been going through because many have been unwilling to experiment with Web subscriptions and other models, and now they're paying for that lack of "R&D". If many move en-masse, with more companies trying out various models, there will be a more rapid coalescence around successful models, and a quicker transition for the industry. So there are lots of good reasons to move together than to wait. One might even ask, "What have they got to lose?"
Some high value, free content sites may benefit from increased traffic that could come at the loss of traffic to others. It could also affect aggregators like Yahoo!, MSN and others, who won't have access to the better content anymore, but they will still serve as referral sites for the papers (as they are for the WSJ where much of their presented content on Yahoo! is actually a teaser, with the core of it still within the walled WSJ garden).
This is a development worth watching... or reading about. The question is whether we'll have to pay to read the details from our favorite sites.
Newspapers have both toyed with and opposed this approach, concerned that it would turn away readers to other free news sites, or in some cases, arguing that the value of the content continued to be high enough to support enough traffic to maintain it as an ad-driven site. Some companies, like The New York Times has at times charged for past articles, but never for on-line daily access to "All the News that's fit to print!"
The same challenge holds true for News Corp, who owns The New York Post, The Times of London, and the British tabloid The Sun. The company has some experience with this -- the Wall Street Journal Online is one of the most longstanding, successful paid sites around. However, the WSJ serves an affluent and business focused customer base, and an industry where money is freely paid for the best information. Will the same hold true for The Sun? Will the working-class, everyday Brittish reader of The Sun, pay a few quid for the on-line version? The jury is out.
My thought is that it comes down to access and value. Murdoch believes that others will watch and follow suit. If people can't access what they love or are habitually used to for free, and can't get it elsewhere, they will ultimately pay to continue the loyalty rather than give up their habit. So I believe this can work, but pricing will continue to be key. The case can be made that people were willing to pay for it before, and all that has changed (more or less) is the delivery means -- web vs. print. Why should information from a good, well researched or trusted source (even if it is a tabloid) be free? Everything costs something to produce, and the consumer will always be the judge of its cost -- they will vote their loyalty and need, with their wallets.
This could be a way out of the woods for newspapers and potentially magazines. It depends largely on the industry cooperation (dare I say collusion?) to really make this transition successful. The more willingness and "cooperation" among sites to charge, the more the consumer gets the message in concert that a change is afoot and it's not just one maverick News corporation. This transition could take some time as some papers sit on the sidelines and watch (as they've done for much too long)...but it also could happen very quickly. Newspapers need some rapid changes to address revenue. They've done business as usual for too long and many are paying or have already paid dearly for it. This is a relatively and potentially technically easier transition, as most already have web sites and web teams.
Yes, they'll likely get the business model or subscription price or approach wrong here and there, and there will be some pain in the transition. But it will be less painful than what they've been going through because many have been unwilling to experiment with Web subscriptions and other models, and now they're paying for that lack of "R&D". If many move en-masse, with more companies trying out various models, there will be a more rapid coalescence around successful models, and a quicker transition for the industry. So there are lots of good reasons to move together than to wait. One might even ask, "What have they got to lose?"
Some high value, free content sites may benefit from increased traffic that could come at the loss of traffic to others. It could also affect aggregators like Yahoo!, MSN and others, who won't have access to the better content anymore, but they will still serve as referral sites for the papers (as they are for the WSJ where much of their presented content on Yahoo! is actually a teaser, with the core of it still within the walled WSJ garden).
This is a development worth watching... or reading about. The question is whether we'll have to pay to read the details from our favorite sites.
Wednesday, August 5, 2009
Sony poised to drop price on new ebook reader; pressure Kindle
Sony is poised to dropped its prices on its new Sony ebook reader to $199 according to the article on Yahoo Finance. This will certainly spur more sales of ebook readers, breaking the first psychological price barrier (under $200). I think, however that $99 is the key psychological level... Whoever gets there first could dominate the market ... perhaps in time for Christmas!
With songs and content distributed with DRM there were 3 factors: price, ease of use, and security. Initial DRM implementations were fat, slow and overly secure. Apple won this game when it went for a ligher version of digital rights which was secure but easy to use (and also was relatively quickly broken by hackers...no matter), priced songs at $0.99 and provided easy access to them, and with a relatively inexpensive device. I think ebooks could follow the same pattern. Here the 3 factors are: price, ease of use, and distribution.
The availability of ebook readers is obviously critical which is why I believe the $99 barrier is key. At that price, I believe consumers will be much more willing to try it out. Secondly, there's got to be enough interesting content to buy on it. Here's the opportunity for publishers of all kinds. Yes, it's a little serving of which comes first the chicken or the egg, but it's time to begin to see that the devices are coming and the market will follow, so start getting your content ready now. Most eBooks are around $10. I'm not convinced this is the right or even final price. In fact, I think it's a starting point. Part of it is a carry over of paper-based publishing pricing to the digital world, just as we saw with digital music -- publishers trying to get as high a price as possible (if I recall correctly originally some music publishers started at $4.99 or $3.99 per song). I think we'll ultimately see lower, tiered pricing, but that could be a while, just as it was for music.
Sony's support of the open ePub standard format potentially gives it an initial advantage, as more people can more easily publish to it. From a publisher's perspective format won't matter as much as distribution -- the broader the better. Initially, publishers will likely choose whichever format and on-line or other 'venues' give it both the lowest production cost and the best distribution. Once production costs are reduced, by more automated production processes (and the technology for that is just emerging now), distribution will reign alone.
Like the initial iPods, these devices have to be connected to a computer. Wireless access should be part of the devices, which will stimulate more sales and opportunities for serial and episodic works, and enable impulse buying.
Ultimately, a key ingredient in the success of these devices will be which ever gives the reader (the human, not the device) the best experience of reading. I think there's still lots of room for experimentation here -- on both the device side, and on the content side. Yes, it should be easy on the eyes and easy to read, navigate etc. but it could also do more in terms of layout and images. There's room for growth there in both the devices and the ebook format standards.
This is a positive development in the market for both the consumers and the publishers. Now let's see how Amazon and the Kindle responds.
References:
NY Times article here: http://www.nytimes.com/2009/08/05/technology/personaltech/05sony.html
With songs and content distributed with DRM there were 3 factors: price, ease of use, and security. Initial DRM implementations were fat, slow and overly secure. Apple won this game when it went for a ligher version of digital rights which was secure but easy to use (and also was relatively quickly broken by hackers...no matter), priced songs at $0.99 and provided easy access to them, and with a relatively inexpensive device. I think ebooks could follow the same pattern. Here the 3 factors are: price, ease of use, and distribution.
The availability of ebook readers is obviously critical which is why I believe the $99 barrier is key. At that price, I believe consumers will be much more willing to try it out. Secondly, there's got to be enough interesting content to buy on it. Here's the opportunity for publishers of all kinds. Yes, it's a little serving of which comes first the chicken or the egg, but it's time to begin to see that the devices are coming and the market will follow, so start getting your content ready now. Most eBooks are around $10. I'm not convinced this is the right or even final price. In fact, I think it's a starting point. Part of it is a carry over of paper-based publishing pricing to the digital world, just as we saw with digital music -- publishers trying to get as high a price as possible (if I recall correctly originally some music publishers started at $4.99 or $3.99 per song). I think we'll ultimately see lower, tiered pricing, but that could be a while, just as it was for music.
Sony's support of the open ePub standard format potentially gives it an initial advantage, as more people can more easily publish to it. From a publisher's perspective format won't matter as much as distribution -- the broader the better. Initially, publishers will likely choose whichever format and on-line or other 'venues' give it both the lowest production cost and the best distribution. Once production costs are reduced, by more automated production processes (and the technology for that is just emerging now), distribution will reign alone.
Like the initial iPods, these devices have to be connected to a computer. Wireless access should be part of the devices, which will stimulate more sales and opportunities for serial and episodic works, and enable impulse buying.
Ultimately, a key ingredient in the success of these devices will be which ever gives the reader (the human, not the device) the best experience of reading. I think there's still lots of room for experimentation here -- on both the device side, and on the content side. Yes, it should be easy on the eyes and easy to read, navigate etc. but it could also do more in terms of layout and images. There's room for growth there in both the devices and the ebook format standards.
This is a positive development in the market for both the consumers and the publishers. Now let's see how Amazon and the Kindle responds.
References:
NY Times article here: http://www.nytimes.com/2009/08/05/technology/personaltech/05sony.html
Tuesday, July 7, 2009
The Financial Value of Social Networking -- is it the Emporer's New Clothes, again?
When I told people I was writing a blog, several said to me: "You have to write about social networking!" OK, I will. Here's my current view...
I've long appreciated the power of the social network. I was first introduced to it about 30 years ago by my uncle, who asked me, "How far do you think you are from contacting anyone in the world?" What a great question! It was his version of concept of "6 degrees of separation". He was fascinated by the natural chain of relationships. Over the years he kept in touch with so many people, and naturally his network turned out to be very large, influential, and global. I learned that through him I was one person away from the Minister of Education in China, thus two away from the Chinese Premier, and at one point, one person away from then President Reagan.
In the early 90s to pass the time while traveling on a business trip, a colleague and I would try to derive arbitrary chains of movie actors, by finding common films in which they appeared with other actors. Not soon afterward, much to our amusement, the Internet Movie Data Base or "IMDB" as it's known, emerged and the Six Degrees of Kevin Bacon game began (a trivia game based on the assumption that any actor can be linked through his or her film roles to actor Kevin Bacon within six connections). It now survives as the "Oracle of Bacon".
Since then Social Networking has been more formally defined and elaborated on. It's taken a number of forms -- from the business oriented "LinkedIn"
Recently I've found my wonder has increased -- I wonder if social networking sites are financially viable independent businesses? For many of these I find myself asking "Where's the beef?" (to quote a very old McDonald's commercial). There's currently a lot of excitement, hype and hyperbole about Social Networking, and for many of these sites (e.g., LinkedIn, Facebook, Twitter, Ning). I'd qualify much of the industry as going through the "Hype Phase" of the Gartner market evolution curve. That happens before it peaks, then the valley of dispair occurs, then the real growth and viable use of a technology occurs.
The power of social networking is obvious to me. To obscurely summarize and quote the sci-fi book Dune: "the Worm is the Spice the Spice is the Worm" that is, "the Network IS the power, the power is the network". Any social network has an intrinsic power and value for all its participants. It is inherent in the sharing of common interests, values, information or ideas that each individual network provides to participants, the feeling of belonging, and the relationships that exist or get freshly established.
However, I wonder about the the financial value of the social network. How does someone take this living, vital "thing", this community, and make money with/from it? Every investor in social networks believes there is money to be made there... somehow... But thus far few have really demonstrated it -- in terms of profitable and sustainable businesses.
Then this morning I came across Jim Goldman's timely "Social Networking's 'Naked' Truth" article on CNBC. He nailed my concerns almost exactly. He writes:
"Are we staring another dot com boom/bust right in the face? When it comes to social networking, that very well might be the case since it appears this emperor has no clothes.
...
Look, I don't argue the power of social networking sites. Facebook is addictive, even magical to millions. Same goes with MySpace, and Twitter, and LinkedIn, and Digg, Badoo, Classmates, Bebo, Flixster, Friendster, Orkut, and hundreds of others. They are powerful, fun, convenient. They offer value. And they build connection. Look no further than the Michael Jackson news tsunami to see how social networking affects our lives and drives information.
The valuations are mind boggling -- especially for those sites which have little or no revenue to show for the massive investment. It's very clear that what social networking sites do is make visible and tangible the "power of the network" -- the common interests, and chains of relationships between people. Outside of the Internet, these are invisible webs of people that span geography and time, and provide real power and real value. Thus the Web versions of them, make them visible, tangible, and thus accessible, perhaps moreso than when they were invisible. That has value. But whether that power and that intrinsic value can be tapped and turned into "real money" has yet to be fully determined.
Thus far, very few seem to know how to extract financial value out of these social network sites (as Jim points out with MySpace, for example). People know how to invest in them, and make a buck by selling them to someone else who will continue to invest. But like selling baseball cards to each other -- it's only worth what someone will pay for the printed player -- but in earnest has little value more than the cardboard it's printed on. Only a few have really demonstrated how to generate money from the site, from the network, and none to my knowledge, have yet shown a profit. Of course, the argument can be easily made that "it's too early..." to demand profits from them. Ummm... Ok. That too was said of the dot-com era's e-commerce sites. And, yes, the same was said of Amazon -- which lost lots of money -- until it finally turned a corner and finally became the sole and dominant virtual merchandise mart, that now turns a pretty penny as profit. But that is only one company of the multitude that started in the dot-com era. So I expect the same to hold true here.
Viable Business Models?
From a business model perspective, advertising-based is severely overrated for social networking sites. Investors are naive if they think that networks will survive and thrive with the addition of web advertising. I'd argue it's counter the social network culture: Web advertising turns people off by infiltrating, distracting and detracting from their social networking experience. The intent is to increase, enhance and expand their use and the value of the network -- not the opposite, which advertising typically does. Twitter appears to be shying away from advertising -- it would certainly destroy that medium! Facebook recognizes this and is experimenting with "engagement ads" integrated into the social networking experience. I'm still not convinced of this.
I am, however, a fan of the potential of "virtual currency". The network has value and people can exchange services within the network either in real money (e.g., dollars, pounds sterling etc.) or as virtual currency -- where the site acts as it's own virtual country and creates it's own virtual currency, (including an exchange mechanism and exchange rate) which can be bought with real money, and used within the confines of the site (or possibly other sites). Facebook is experimenting with this approach as well. Facebook has it's own internal virtual currency, growing out of its "credits" system, that is currently restricted to the company's internal "Gifts" application. At some point soon, Facebook plans to make the Facebook currency system available to developers (using Facebook APIs) which could produce a significant new source of revenue by taking a cut of the transactions as real money is used to purchase the credits or other currency usable only on Facebook. I think for this to fully work for participants there'd also have to be a way to reconvert the currency back into real money and withdraw it from the Facebook virtual world. I wonder if Facebook will allow this...real banking operation or leave it as the more advantageous, one-way, use-it-or-lose-it, gift-card approach.
It is not at all clear to me how Twitter will ultimately make money. Twitter essentially provides access and visibility to into what used to be invisible commentary on things (events, products, etc.) -- the instant communication, the messages, to participants sharing an interest. For many, it provides an instant pulse on a topic, product, service or event, and creates and sustains communities of interest. It enables people to emerge as influencers/message makers and as followers/message consumers. It allows company's to monitor sentiment of their products, brands and services -- which is a huge value to businesses. Thus it's great for building and monitoring a brand (personal, corporate, political -- doesn't matter), but how will it build revenue? From a technology standpoint, it's not unlike the Telco providers who charge for SMS messages... which is essentially what Twitter provides a short (140 characters) message service. But it would be extremely difficult for them to now charge users for it as they've established the bar at "free". Thus I expect it would be difficult to get users to pay monthly or annually to tweet. So... what do they do? Perhaps at some point they'll charge to search the tweet history, though Microsoft is now doing that with their new Bing search engine, for free. Perhaps they'll charge businesses for access to the system -- charging for the right to monitor sentiment on their products and services. It's clear that brand management and monitoring has real value to businesses, who are now increasingly using Twitter as part of both their marketing and customer service/support functions.
Other potentially viable models such as charging for membership, subscription, or for certain capabilities or services I believe are possible -- but the challenge is that the bar has already been set at "free" for most of these sites. Some sites, like LinkedIn, charge for additional services, a model which could work for a number of sites, but the additional services must offer real value to the participants and the community.
So for me, it's more a matter of timing for the larger sites, those which have demonstrated the ability thus far to grow and sustain the growth of thier networks and communities. However, until some of these sites can demonstrate a real return on investment (ROI) and sustainable business & profitable models, I cannot help but agree that social networking is powerful and useful to the participants, but to most of these investors, financially "naked" as Jim Goldman suggests.
I've long appreciated the power of the social network. I was first introduced to it about 30 years ago by my uncle, who asked me, "How far do you think you are from contacting anyone in the world?" What a great question! It was his version of concept of "6 degrees of separation". He was fascinated by the natural chain of relationships. Over the years he kept in touch with so many people, and naturally his network turned out to be very large, influential, and global. I learned that through him I was one person away from the Minister of Education in China, thus two away from the Chinese Premier, and at one point, one person away from then President Reagan.
In the early 90s to pass the time while traveling on a business trip, a colleague and I would try to derive arbitrary chains of movie actors, by finding common films in which they appeared with other actors. Not soon afterward, much to our amusement, the Internet Movie Data Base or "IMDB" as it's known, emerged and the Six Degrees of Kevin Bacon game began (a trivia game based on the assumption that any actor can be linked through his or her film roles to actor Kevin Bacon within six connections). It now survives as the "Oracle of Bacon".
Since then Social Networking has been more formally defined and elaborated on. It's taken a number of forms -- from the business oriented "LinkedIn"
Recently I've found my wonder has increased -- I wonder if social networking sites are financially viable independent businesses? For many of these I find myself asking "Where's the beef?" (to quote a very old McDonald's commercial). There's currently a lot of excitement, hype and hyperbole about Social Networking, and for many of these sites (e.g., LinkedIn, Facebook, Twitter, Ning). I'd qualify much of the industry as going through the "Hype Phase" of the Gartner market evolution curve. That happens before it peaks, then the valley of dispair occurs, then the real growth and viable use of a technology occurs.
The power of social networking is obvious to me. To obscurely summarize and quote the sci-fi book Dune: "the Worm is the Spice the Spice is the Worm" that is, "the Network IS the power, the power is the network". Any social network has an intrinsic power and value for all its participants. It is inherent in the sharing of common interests, values, information or ideas that each individual network provides to participants, the feeling of belonging, and the relationships that exist or get freshly established.
However, I wonder about the the financial value of the social network. How does someone take this living, vital "thing", this community, and make money with/from it? Every investor in social networks believes there is money to be made there... somehow... But thus far few have really demonstrated it -- in terms of profitable and sustainable businesses.
Then this morning I came across Jim Goldman's timely "Social Networking's 'Naked' Truth" article on CNBC. He nailed my concerns almost exactly. He writes:
"Are we staring another dot com boom/bust right in the face? When it comes to social networking, that very well might be the case since it appears this emperor has no clothes.
...
Look, I don't argue the power of social networking sites. Facebook is addictive, even magical to millions. Same goes with MySpace, and Twitter, and LinkedIn, and Digg, Badoo, Classmates, Bebo, Flixster, Friendster, Orkut, and hundreds of others. They are powerful, fun, convenient. They offer value. And they build connection. Look no further than the Michael Jackson news tsunami to see how social networking affects our lives and drives information.
But with hundreds, even thousands of these sites out there already, with many attracting millions in venture capital, I simply ask, Where's the return on the investment? What's the business model to MAKE money and not merely to attract investment?
These sites generate enormous news coverage but next to nothing in profits. Somehow, we're descending into a kind of Back to the Future scenario where eyeballs and headlines become flimsy substitutes for business models and profit streams.
I don't know, but it seems like hype is eclipsing hope when it comes to social networking. We've seen this all before. And paid a dear price for the busting bubble. The valuations being bandied about for these sites defy reason. Social networking might be cool, but where's the beef?"
This summarized very clearly and succinctly most of my concerns, and I found myself in substantial agreement. There will be a lot of fall out from all of these social networking sites. As with any new technology market segment, a lot of money will have been invested, and far fewer than one in ten will be successful that is, sustainable on their own. I do believe that a few will find a way to dominate some segment of the market as has been the case with other prior internet-centric businesses (e.g., Amazon, eBay).The valuations are mind boggling -- especially for those sites which have little or no revenue to show for the massive investment. It's very clear that what social networking sites do is make visible and tangible the "power of the network" -- the common interests, and chains of relationships between people. Outside of the Internet, these are invisible webs of people that span geography and time, and provide real power and real value. Thus the Web versions of them, make them visible, tangible, and thus accessible, perhaps moreso than when they were invisible. That has value. But whether that power and that intrinsic value can be tapped and turned into "real money" has yet to be fully determined.
Thus far, very few seem to know how to extract financial value out of these social network sites (as Jim points out with MySpace, for example). People know how to invest in them, and make a buck by selling them to someone else who will continue to invest. But like selling baseball cards to each other -- it's only worth what someone will pay for the printed player -- but in earnest has little value more than the cardboard it's printed on. Only a few have really demonstrated how to generate money from the site, from the network, and none to my knowledge, have yet shown a profit. Of course, the argument can be easily made that "it's too early..." to demand profits from them. Ummm... Ok. That too was said of the dot-com era's e-commerce sites. And, yes, the same was said of Amazon -- which lost lots of money -- until it finally turned a corner and finally became the sole and dominant virtual merchandise mart, that now turns a pretty penny as profit. But that is only one company of the multitude that started in the dot-com era. So I expect the same to hold true here.
Viable Business Models?
From a business model perspective, advertising-based is severely overrated for social networking sites. Investors are naive if they think that networks will survive and thrive with the addition of web advertising. I'd argue it's counter the social network culture: Web advertising turns people off by infiltrating, distracting and detracting from their social networking experience. The intent is to increase, enhance and expand their use and the value of the network -- not the opposite, which advertising typically does. Twitter appears to be shying away from advertising -- it would certainly destroy that medium! Facebook recognizes this and is experimenting with "engagement ads" integrated into the social networking experience. I'm still not convinced of this.
I am, however, a fan of the potential of "virtual currency". The network has value and people can exchange services within the network either in real money (e.g., dollars, pounds sterling etc.) or as virtual currency -- where the site acts as it's own virtual country and creates it's own virtual currency, (including an exchange mechanism and exchange rate) which can be bought with real money, and used within the confines of the site (or possibly other sites). Facebook is experimenting with this approach as well. Facebook has it's own internal virtual currency, growing out of its "credits" system, that is currently restricted to the company's internal "Gifts" application. At some point soon, Facebook plans to make the Facebook currency system available to developers (using Facebook APIs) which could produce a significant new source of revenue by taking a cut of the transactions as real money is used to purchase the credits or other currency usable only on Facebook. I think for this to fully work for participants there'd also have to be a way to reconvert the currency back into real money and withdraw it from the Facebook virtual world. I wonder if Facebook will allow this...real banking operation or leave it as the more advantageous, one-way, use-it-or-lose-it, gift-card approach.
It is not at all clear to me how Twitter will ultimately make money. Twitter essentially provides access and visibility to into what used to be invisible commentary on things (events, products, etc.) -- the instant communication, the messages, to participants sharing an interest. For many, it provides an instant pulse on a topic, product, service or event, and creates and sustains communities of interest. It enables people to emerge as influencers/message makers and as followers/message consumers. It allows company's to monitor sentiment of their products, brands and services -- which is a huge value to businesses. Thus it's great for building and monitoring a brand (personal, corporate, political -- doesn't matter), but how will it build revenue? From a technology standpoint, it's not unlike the Telco providers who charge for SMS messages... which is essentially what Twitter provides a short (140 characters) message service. But it would be extremely difficult for them to now charge users for it as they've established the bar at "free". Thus I expect it would be difficult to get users to pay monthly or annually to tweet. So... what do they do? Perhaps at some point they'll charge to search the tweet history, though Microsoft is now doing that with their new Bing search engine, for free. Perhaps they'll charge businesses for access to the system -- charging for the right to monitor sentiment on their products and services. It's clear that brand management and monitoring has real value to businesses, who are now increasingly using Twitter as part of both their marketing and customer service/support functions.
Other potentially viable models such as charging for membership, subscription, or for certain capabilities or services I believe are possible -- but the challenge is that the bar has already been set at "free" for most of these sites. Some sites, like LinkedIn, charge for additional services, a model which could work for a number of sites, but the additional services must offer real value to the participants and the community.
So for me, it's more a matter of timing for the larger sites, those which have demonstrated the ability thus far to grow and sustain the growth of thier networks and communities. However, until some of these sites can demonstrate a real return on investment (ROI) and sustainable business & profitable models, I cannot help but agree that social networking is powerful and useful to the participants, but to most of these investors, financially "naked" as Jim Goldman suggests.
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