nuance intelligence

Note: We’re back from holiday, digging out of email and catching up with news. 

Really good data on growth in social network traffic in the first half of 2008.  Inside Facebook carries results of recent comscore rankings. In short, Facebook and Hi5 are the fastest growing networks, while MySpace is less hot in terms of growth, although still a goliath.

What’s the nuance? 

During the first half of 2008, the market became increasingly concentrated amongst the 6 market leaders. Although uniques to the leading 6 social networking sites increased by 88 million, uniques to the other 276 social networking sites in the category actually fell by 24 million from December to June. Despite all the new social networks being launched, it’s proving to be really hard to gain traction at this point.

It’s a never-ending sport.  With some drastic implications.

There’s ample evidence that the social networks are nothing more that the dot.com bubble revisited.  At the same time, big time players are putting heavy bets down that there’s a pot of gold out there somewhere.  So what are social networks really worth?

MIT’s Technology Review, in my opinion, the ‘Economist’ of tech media, i.e, the ones who have the best writers, do the best research and present it most professionally, has a series of articles this month as part of their Web 2.0 bubble cover feature.  The more relevant article investigates the valuations and advertising assumption, reviewing major financial disappointments at MySpace and Facebook, highlighting ad CPMs in the pennies, and raising the question of whether advertising has any chance of producing meaningful revenue for social networks.  (as I’ve written before, the answer is NO.)

TechCrunch, one of the influential blogs in the web 2.0 / mashup / social media space did a decent job of analyzing social network valuations based on a detailed assessment of advertising revenue, and the value of recent investments (LinkedIn, Facebook) and purchases of large social networks (Bebo, by AOL).

Silicon Alley Insider analyzes the Tech Crunch analysis, adding their own enhancements to the model. Separately, they’ve also got running values of the top 25 private companies — including many social networks — in their SAI 25.

What’s the nuance?

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I’m just back from Google’s I/O developer conference. Look for deeper thoughts in coming days and weeks, as the REM cycles process all the new info. In the meanwhile, here are some top-of-mind impressions:

1. I’m always on the lookout for corporations (like Google) to fall from grace. As near as I can tell, it’s just not happening. All the people I met have been focused, authentic and intent on their goal of opening up the web as a collaborative environment. At this event, that translates to enabling developers to build more interesting and integrated apps. The Googlers are all smart, authentic and interesting. There is a pretty high weirdo factor (which is to say Googlers are not dronish), and the T-shirt-to-khaki ratio was about 25-to-1.

2. Google leadership is doing a good job of pairing mature leaders with young engineers in technical presentations. This demonstrates a lot of trust in their teams, and provides these (relative) youngsters with great experience in working with their peers in the developer community.

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People who are leading a business, non-profit or other organization instinctively know that “online social networking” will, can, and should have a big impact. But during the busy business day, week, or month, it’s hard to find the time to translate this notion into practical strategy and performance metrics.

Although the development of functional tools have trailed transformative vision during the early stages of this important evolution, an important change has happened in social networking technology in the past six months. At the end of 2007, Google announced a standard for the exchange of information between and among social networks. OpenSocial was announced late in 2007, in partnership with the other major social networks, save Facebook, who released their own competing standard several months prior.

Last week, Google annoucned their own framework and mini-applications for integrating OpenSocial tools on almost any website, called FriendConnect.  These simple widgets are installed on any site to “socialize” it (and release your inner Stalin).

What’s the nuance?

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Note to entrepreneurs, especially those whose plans I’m currently reviewing for the upcoming Colorado Capital Conference: if you still think that you can support any type of social media on ads, think again.

You can’t scan the RSS feed of a latte-fueled digerati without tripping over tales of low low low advertising CPMs for social networks. If you don’t believe this, see what the industry heavyweights at AlwaysOn’s recent Venture Summit East have to say; it’s not pretty.

What’s the nuance? From the perspective of a business whose primary revenue is not from developing online social media, a few things should be clear: Continue reading

With the whole silicon valley echo chamber trying to figure out how to make money from social networks, I had very low expectations about our tiny little blog’s performance on Google search results.

When researching CPM and other detailed info on that very subject, our own blog hit the front page of google, specifically for the search “vertical social network monetization,” not exactly an obscure search given the scale of these business opportunities.

Proof, with apologies to George Jefferson, that we “finally got a piece of the pie”:

OK.  Back to work.

Ning, the largest provider of customizable social network software, just raised $60 million, on a pre-money valuation of $500 million, so says Venture Beat. This on top of $44 million on a $170 million valuation back in July, 2007. In a generally depressed venture environment, according to the Industry Standard, this is a pretty important indicator.

This editorial in AlwaysOn runs counter to the skepticism around social networking bubble hype, and points to the very legitimate upside of Ning and social networking in general.

What’s the nuance? Ning’s success rides on the trend of people moving away from massive centralized networks like MySpace and Facebook, and toward smaller, focused, vertical networks that connect people with more affinity and coherence. More and more people are approaching us with queries on how to integrate social networks into a meaningful business model, which is the next major hurdle once you grok the idea of vertical social networks.

But the scariest nuance is the quote from Marc Andressen in his note to VentureBeat:

We raised the money to enable us to keep scaling given our accelerating growth (over 230,000 networks on Ning now, growing at over 1,000 per day) and to make sure we have plenty of firepower to survive the oncoming nuclear winter. At current growth rates, we don’t need it to get to cash flow positive, but having lived through the last crunch, it’s good to be conservative with these things.

Here are some interesting stories I saw this week, and why…

• Industry Standard: 10 ‘Net Services that Will Succeed and 10 That Probably Won’t.  A new set of choices for the new new new new new thing, most of which I hadn’t heard about yet, and some harsh knocks on buzz darlings Second Life, Zillow, Twitter and Joost.
• Compete Blog: Analysis of Traffic Patters Among Users of Facebook, MySpace and Twitter.  Good insight into how these brands differ, based on data about the most popular sites visited by account holders in these three meganets.
• NYT: Feature on Boulder in the Travel Section.  For a piece in the Old Gray Lady, it’s not too bad.  What did they miss?  The 300-person-per-month TechMeetup at the core of the biggest tech entrepreneur scene between New York and San Francisco, five new CleanTech venture funds being started, how close excellent backcountry skiing really is and the wide variety of global leaders who make their living somewhere else, but make Boulder their home.
• Worldchanging: Emerging Green Jobs Market.  Joel Makower has a good piece on the gap between the hype and reality around the growth in ‘green jobs’.  Made me think about the solar panel installer I met at “Green Drinks” last week who said, “for the first time in my life, I’ve got job security, and I’m not worried at all about a recession.”

Enjoy your weekend.

It has taken me the better part of a decade, but I finally think the Economist might understand a thing or two about the business of digital media. Throughout the 90′s and into this century, it seemed they were late to the table, with obvious observations that hit the newsstands six months after they hit the digital zeitgeist.  Living outside the echo chamber, they provide good triangulation and outsiders’ detachment, as demonstrated by this week’s piece on the business of social networks.

As fits their milieu, they cover the battle of the titans with some accuracy, but miss the nuance of how social networks create value in a more distributed way.

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Today, I went to check an old online workspace at Omidyar.net for Targeted Currencies, a project I co-founded back in 2004. And I found out that the Omidyar network had closed down.

The Omidyar Network (O/Net) was an early phase community collaboration site for progressive global activists, founded when Pierre Omidyar (founder of eBay and leading social venture financier) led the pack and switched his charitable giving from a .org to a .net (and for-profit) to allow the fund to invest in for-profits as well as non-profits, which was a major turning point in the evolution of social entrepreneurism. And I felt at the time that the network had an equally serious role. Continue reading