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Facebook is transforming a lot of social media companies right now with its platform release, and its getting a lot of well deserved coverage.

Marc Andreessen put up a good post yesterday analyzing the facebook platform . He comes up with a few interesting conclusions which I paraphrase below but you should read the whole thing.

1. (Open) Platforms always beat (closed) applications, therefore Facebook platform is a winner and an advantage over Myspace

2. Facebook did a pretty good job of it.
– Its technically sound
– Its highly viral
– Third party widget/app developers have economic freedom to keep 100% of revenues

3. If you’re not large or careful success can beget failure as usage volume overwhelms your servers

4. Underground apps are being released outside the Facebook application directory (due to issues or bottlenecks with application approval)

and they need to find an alternative way to seed their growth

On 1. and 2. I agree, but with a quibble. As Seth Goldstein points out:

In 1999 I sat down with Brad Silverberg of Ignition VC who Microsoft recruited out of Borland in the early 90’s to become the lead developer and project manager of Windows 95. Never has there been a more valuable platform. He described 3 things that platforms needed to have:

* wide distribution
* application developers making money
* good tools

Let’s test those three axioms against the preeminent platform play of our time, Google:

* Wide distribution? YES
* Application developers making money? YES (if you count all the adsense publishers)
* Good tools? YES (all the adwords and adsense self-service goodness)

Now let’s test these axioms against Facebook:

* Wide distribution? YES
* Application developers making money? NO (at least not yet, I will comment on 3rd party Facebook developers such as Slide, Rockyou, and AttentionSoft)
* Good tools? YES

Marc is right that app developers can keep 100% of the revenue that they make, but today that revenue isn’t much. As I’ve commented before, we need a standard for social network advertising, and until that standard emerges, ad revenue growth will be slower. But this will come in time, and so we can expect the Facebook platform to grow as well.

Unsurprisingly, the other big social networks (not just Myspace) have been rocked by the success of the platform and are all racing to build competitive responses.

On 3., where Marc seems to primarily base his conclusion on iLike’s experience, I side with James Hong who says:

I disagree with this. iLike’s application may have been particularly heavy, but it is not inconceivable (in fact I think it is more likely than not) that people will come up with massively popular apps that are not as machine intensive as ilike’s particular application might have been. Combine that with the fact that facebook allows advertising, and the fact that managed hosting companies exist, and i think it is quite feasible for 2 guys and an idea to scale.

Two of the companies I’m invovled in, Flixster and Rockyou, combined have four of the top twelve apps on Facebook. They have certainly worked hard to keep up with load issues, but none of them have struggled as much as iLike, partly because iLike has so many users, partly because they were already scaling outside of Facebook, and partly because their apps are lighter weight.

On 4. I think Marc overemphasizes the importance of being in the application directory. While we techcrunch readers obsess over the directory (I reload it at least once an hour when I’m at my PC!), the data I’ve seen suggests that the key drivers of virality are (i) profile virality (ii) invite virality and (iii) feed virality, with very little growth coming from the application directory at all.

However, to me, the most important part of the Facebook platform is that it commoditizes the social map. A lot of social media companies have built their value in creating a social map. For many broad based social networks, where communication and self expression are the key activities, the social map largely IS the value. When I was at AOL a few years ago and social networking was just beginning, we considered opening up the AIM friends list as an API to commoditize the social map and allow others to build on top of it (we didn’t do it in the end… sigh…). These companies are most threatened by a world of commoditized social maps.

What this forces social media companies to do is to build value on TOP of the social map. Yelp does a great job of this – the byproducts of their members communication are rated merchant reviews, information that has lasting value. For Flixster it’s movie reviews and ratings. For Rockyou, its photos. For iLike, music preferences and affinities.

Not all facebook apps build value on top of the map, and despite their virality, they are the ones that may be the most business model challenged on a standalone basis. Examples here include Slide’s Fortune Cookie, Rockyou’s “x me” and Graffiti. While these may have value for distribution or user acquisition, they don’t add much value on top of the social map, despite their popularity.

I’d be interested in hearing from readers examples of other apps that both DO and DO NOT add value on top of the social map.

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One of the hallmarks of the last few years on the internet has been the growing length of the “long tail”. Compete released some data last year showing that its panel was visiting 77% more websites than it did five years ago:

Long tail getting longer

Interestingly enough, Compete also released data showing that the “head” of the internet was growing in size:

Top Sites account for a larger percentage of pageviews

Together, this suggests that there are now many new sites getting only moderate traffic. While these sites may never grow big enough to become public companies, they are very likely getting to a scale where they can break even. I spoke on this topic at the web 2.0 expo where my presentation analyzed how big sites needed to get to hit both of these goals.

Many of the smaller ad supported sites turn to ad networks for monetization. This trend is being matched by advertisers embracing the channel. A recent report by Collective Media found that:

* 66% of advertisers plan to increase their usage of ad networks in 2007

* 88% of respondents planning to use online ad networks in 2007 (up from 77% in 2006).

* 57% of respondents believed how an ad network targets audiences was the #1 differentiating factor between networks

* Reach (at 52%) and Efficiency (at 66%) were still the key drivers for why agencies/advertisers include ad networks on the buy

I believe that among the biggest beneficiaries of these trends have been the content specific ad networks. With more advertising buying on networks, and with audience targeting being the #1 differentiator, networks that can offer extremely targeted audiences focused where an advertiser is endemic are hard to beat. As I’ve posted about in the past, having endemic advertisers makes for higher RPMs, and hence a smaller level of overall traffic scale to get to high revenues. At AOL, the channels with endemic advertisers always got the highest CPMs and sell through rates, and content specific ad networks are essentially creating synthetic channels.

Many ad networks do contextual targeting in their efforts to get endemic advertisers next to content (with Google and Yahoo being the most prominent). Others use behavioral targeting. Both of these approaches have been effective in lifting RPMs, but both require a leap of faith from the advertiser that the “black box” truly works. To mitigate this risk, contextual networks usually have CPC or CPA based pricing models. However, these models don’t capture all the value of a branding campaign, which can only be fully priced by a CPM model. This leaves some value on the table. Many endemic advertisers are not looking just for “in market” buyers who are looking to make a purchase decision imminently. They are also looking to build brand awareness to influence future purchase decisions.

Synthetic channels, like the channels on the big portals, have an advantage in this respect. By guaranteeing that all sites in their network are about a single topic, they can aggregate a critical mass in traffic while still enjoying endemic site RPMs. This is, in a sense, a “hack” to true contextual targeting, but it has the advantage of being simple to understand and hence simple to sell to advertisers.

One example is Jumpstart, a synthetic channel reaching 5m UU/month and focused on the auto industry. It was bought by Hachette Filipacche (publisher of Car & Driver and Road & Track) in April of this year for up to $110m.

Another example is Glam, which started life as an site focused on fashion, but quickly morphed itself into a synthetic channel focused on “Women: Fashion and Lifestyle” and reaching over 12m UU/month. It claims to be the “fastest growing web property in 2007“.

A third example is the Health Central Network, a synthetic channel focused on medical information and tools. Many of Health Central Network’s sites are actually owned and operated by the company as it rolled up small health content sites during the internet bust.

I think we’ll see more synthetic channels emerge, focused on the high ad spend categories:

ad spending by category

Note that automotive, retail and medicine, the content targets of the three examples above, are the three of the top four advertiser categories. I’m sure this is not an accident! Are readers aware of other synthetic channels?

Update: Conincidentally, Techcrunch just posted about Active Athlete Media, another synthetic channel.

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Marc Andressen’s latest post on how to hire the best people you’ve ever worked with is long but useful reading for all entrepreneurs. It reminded me to post a hiring process that I recommended to some entrepreneurs recently; I figured I’d paste it from the email as it may be of broader interest:

1. Get resumes prescreened against a profile from a recruiter (or from some referral source you trust like me or friends in the industry or whatever)

2. For resumes you like, do a phone interview of no more than 30 minutes – you’re looking for reasons to say “no” at this point

3. For people that you like on the phone, have one person do an initial interview in person for one hour. Ideal is to aim for end of day, say 4pm or later.If it IS working out, make sure that others are available to meet afterwards if the first interviewer likes them so that you don’t have to bring them back. But If its not working out, be frank about it, and don’t be afraid to cut the interview short rather than wasting your time and theirs. You can just say “thanks, bye” and not waste anyones time.

Make sure that you have a standard set of questions that you ask people interviewing for the same job. I personally prefer “behavioral interviewing”. e.g. focus on behaviors and not just skills. Skills you can test quickly and from resume. But behaviors are things like “Can you tell me about a time when you had to launch a new product – a release 1.0, rather than an upgrade of an existing product”; “We work on short deadlines here – can you tell me about a time when you had a project to do on what you thought was an unrealistically short timeframe”. etc. You frame up a specific behavior that you need and ask them about a time when they faced that same behavior. They often tell you what they WOULD do – make sure you keep them focused on a REAL SITUATION and what they DID do. Then look for behaviors in their answer that would either fit or not fit.

4. If you like ‘em, make an offer almost right away. Its a hot labor market right now, so know what “market comp” is beforehand (we can help with this; so can a contingent recruiting firm”) and the best folks are not on the market for long.

5. Reference check yourself (ie don’t rely on the recruiter), and do it obsessively. Not just the people that they supply you with – look deeper, call people you know at those companies, ask the references for other people that they worked with etc. This is a massive time suck, and you will hate doing it, but it is the single most important thing that you can do.

6. Once you find people you like, sell them hard and from every angle. [Your investors] can help with this, so can partners, other employees etc.

7. Its not likely for top calibre talent that you can bring them on as a contractor first, then transition to full time. Some employees (a small minority) prefer this becasue they are test driving you as much as you’re test driving them, but don’t count on it.

8. If its not working out, don’t let it fester – move quickly to terminate. You’re too small to be able to afford people who are a bad fit and you can’t carry dead weight. And people rarely come around – your first instincts are usually right.

If you forget everything else, make sure you remember #5. Reference check obsessively. People don’t do it anywhere near enough.

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I just spent the last two days at the Internet Retailer conference, and emerged convinced more than ever that we’ve just scratching the tip of the iceberg with ecommerce opportunities. There are still many more $500m+ revenue ecommerce companies

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I’ve posted in the past about the three ways to build an online media company to $50m in revenues. One of the three ways is to focus on a topic with endemic advertisers – because RPMs are higher, you …

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I’ve been obsessing over the Facebook platform since it launched last week. As has been extensively covered, its an incredible distribution platform for other companies. The most popular apps in the platform early on were existing companies like iLike

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For those who liked my previous post on how casual immersive worlds are hitting the mainstream in the US, there was a good article in Sunday’s San Francisco Chronicle, found via Ypulse.

My favorite comments was about webkinz

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Allison Randal put up an interesting contrarian post on the O’Reilly Radar blog yesterday where she says:

The trend of moving traditional desktop applications to massively networked, Web 2.0 online applications like Google Docs is well-known. The problem is, a

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As I’ve said in the past, I think that distribution is the most important success factor in the early stages of any new consumer technology. Distribution used to mean getting a carriage deal done with a big portal. These …

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Online video is hot and everyone is scrambling to figure out how to best monetize it. Google just launched their “adsense for video” product, Advertising.com has Instream, and there are a host of startups attacking the problem as

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