Facebook recently displaced Orkut as the top social network in India. This is no mean feat. Social Networking is one of the few spaces where a first-mover advantage can mean a lot. The network efficiencies and advantages built up by the first mover are not only difficult to replicate, there is also rarely any reason for users to migrate from an existing network to another. This point was clearly lost on the hundreds of random social networks that mushroomed in India in the 2005-07 period. Social networking is usually a winner-takes-all market and for Facebook to come in, well after Orkut was well-established, and to wrest the advantage away from it is a huge deal. Orkut was the first real product that brought social networking to India and very soon, it meant for social networking what Google meant for search. “Orkutting” caught on as a term. One must note that this rarely happens in the internet industry. With such a large clutter of sites to choose from, a particular site rarely defines its category in a way that Orkut did in India. When a site starts defining a category, it is extremely difficult for another site to, not just overtake it in terms of usage but also start definiig the category. In fact, more people I know spend their time Facebooking that Orkutting these days. How did this happen? What worked for Facebook? How did it manage to pull something like this off? I’ve often asked people around me why they made the transition. And here’s what I gather from my conversations with other users: Bringing Privacy into the market: The Indian male stalker psyche definitely helped people move towards Facebook. The fact that everything about you was so public with no privacy settings whatsoever on Orkut was highly unnerving for a lot of users, especially girls who received random friend requests from unknown wierdos. Facebook’s privacy feature was the first real antidote to that and prompted many to move to Facebook. Sure Orkut did that too soon after but that was the start of Orkut getting into a “Copy-that-Facebook-feature” spiral which didn’t win them a lot of respect with the users. Everything under one roof: Facebook in its current form, had it not been so successful, could probably have been used as an example of clutter in user experience design workshops. Strangely, the fact that users could do everything from managing their pictures to playing games in one place really helped. Features were rolled out in a phased manner. For users who were already addicted to the site and comfortable with the interface, it probably wasn’t feature overload as much as it was some added utility. Social RSS: That’s how I would like to refer to the concept of Facebook feeds. While the Orkut design centers around the user and gives him a view of the network with himself at the centre, Facebook gives a more non-centric view of the network featuring feeds from all his friends at various points of time. I have a feeling this could just have clicked for the Indian psyche where everyone loves to know everything happening in everyone else’s life. I won’t have any data to support this but I will have a hard time believing that the average Facebooker in India doesn’t like this feature. Social Gaming: Social gaming is the most time-consuming activity on Facebook and many game developers continue to side with Facebook ignoring Orkut. While this may not have been the main drawer in bandwidth-starved India (or so we would believe), it definitely had a major impact in appealing to the next generation of net users, especially the ones who became active netizens towards the middle of this decade. Many believe that this was waiting to happen given a similar trend in Asia where Facebook displaced Friendster, the #1 social network in most SE Asian countries a couple of years back. The reasons for Facebook’s success in S.E. Asia were much more different though, riding largely on a very well-designed mobile app. S.E. Asia continues to thrive on mobile access to the internet and Facebook’s success here was less about the product and more about the added convenience of mobile access. Facebook is an interesting and rare example of a late entrant taking the market by storm, redefining the rules (Facebook Connect, Open Like) and eventually dominating the market. Google did it a decade ago in a space which no one was too interested to enter in. Facebook succeeded in doing it in a space that everyone was too keen about and some were already dominating. And like Google back then, Facebook with its virtual currency platform may just lead the way to ,monetizing it as well.
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Amazon Weds Facebook and you get that feeling of “Finally!!!” when you see a two obviously compatible people hanging out at the same pub but not hooking up for some unknown reason for ages. Ever since websites started showing us what our Facebook friends liked (sometimes in irritatingly irrelevant contexts), I was just waiting for Amazon to do the same. After all, wasn’t it most obvious that the company which tapped into community intelligence before the whole social media hoopla kicked in (“Users who liked this also liked that…”) should be the one cashing in on a user’s actual network to mine similarities and give gift suggestions?
The integration does solve for some basic social shopping scenarios at the moment. Gift recommendations and gifting alerts are probably the most basic way in which Amazon can use the Facebook network data. But the real value of this alliance can come through only if Amazon successfully understands relationships on Facebook based on common activity, location, likes and dislikes. If most of the people in my network listen to Coldplay, the chances are fairly good that I like the band too. However, if Amazon can really get to a point where it can segregate common interest friends from work/school connections and both the above from random friend requests one may have accepted, the product recommendations can get very relevant. The amount of positive recent activity with another friend should also be a good indicator of how much I would value that person’s interests as well as how likely I would be to buy something for them. What is good is that unlike a lot of other Facebook integrations, Amazon is not publishing data back to Facebook. Given the recent spate of controversies around Facebook’s privacy stance, this will definitely help spur the uptake of this opt-in feature. Great partnership that was waiting to happen! I hope this really works out well for the good of all of us who love shopping online. My earlier article on Saas applications was largely about Saas applications that focus on productivity. The benefit of those apps is to allow users to ‘outsource’ their IT needs using a hosted service, thereby resulting in a lower TCO. While Saas and hosted applications did set out to primarily create that benefit for users, it is unfortunate that most people who think of Saas limit the definition to just that.
In today’s world where the ‘community’ aspect of the internet is over-emphasized to a fault, it is only logical for productivity apps to incorporate that aspect. Business, after all, is about interactions with your network and productivity, largely depends on how best one can source and manage these interactions whether these interactions are with consumers, buyers, suppliers or with internal employees for a firm. Saas allows such interactions within the context of an application much better than desktop software ever could, owing to its very nature as a hosted service. There are two models in which the productivity and community aspects of Saas can be deployed: 1. Productivity apps on a Social Networking platform This is the more obvious (and widespread) model. A social network with an engaged user base is a great hook for developers to create apps. Most general-purpose social networks primarily serve as a place for entertainment and casual connections but there still are a few apps that solve use cases like: · CRM on a social network: Enables small businesses to engage with their clients and keep a tab of the latest updates at their client’s end with relevant analytics · Partner management apps: These work more on niche social networks that are targeted towards business networking. E.g. YouCanDo.Biz is one of the best examples of business apps enhancing the value of a social network 2. Productivity apps with social features: · Several CRM apps, in particular, plug into your existing social networks to update customer information on the app based on his live feeds. Hence, if your customer is also a friend on Facebook, all details relevant to him will be analysed and extracted from his feed and added to the app · Several HR management apps, especially those into recruitment management, are closely integrated with LinkedIn to manage a constant inflow of leads based on the HR exec’s requirements One would expect marketplace apps like Alibaba and Indiamart to go several steps beyond the basic client discovery nad lead generation service that they provide to include online client management apps. While sites like YouCanDo.biz are attempting something similar, Alibaba, with its already mammoth user base would be the ideal platform to deliver this and potentially open itself to new business models by bringing the entire transation and client management process online. Zoho is clearly a leader in the social Saas space but its customer base is largely non-Indian. The only Indian website providing a productivity app to businesses over a network (at least, the only on that comes to mind) is probably Burrp Small Business Solutions which helps small businesses connect with their customers, get interesting analytics around what customers are saying and run marketing campaigns among target customers. As more businesses come online, this will be an interesting space to look out for. AOL’s recent sale of Bebo was all over the news last week for all the wrong reasons. AOL has had an unenviable track record of killing acquisition value for quite some time. Bebo, bought for $850M a couple of years back, was sold last week for under $10M to Criterion Capital Partners. AOL may go around justifying this deal giving it a “meaningful tax deduction” but the ridiculousness of the value lost cannot be ignored.
For some reason, media companies have never done a great job of managing internet acquisitions in general and social networking sites in particular. Murdoch’s NewsCorp paid $580M for MySpace and ended up paying another $450M last year as impairment charges! Along similar lines, ITV (a British TV group) did an AOL when it sold off Friends Reunited for 25M pounds after acquiring it for 7 times that price. Acquisitions regularly destroy value across industries but one of the main reasons the success rate is that much lower with media companies acquiring internet companies is the inherent culture clash. Most internet startups, if bought early enough, are a group of T-shirt-and-shorts-sporting geeks-in-a-garage who iterate quickly, learn quickly and build quickly. Most media houses, on the other hand, are slow-moving, largely-family-owned with large stakes owned by which refuse to move without the customary bureaucracy and paperwork. The culture shock is immense, the bottleneck theory kicks in and the combined entity is only as fast as its slowest entity. One of the main reasons acquisitions in the social networking space, in particular, have killed value has been the lack of post-acquisition integration strategy. Social networking took the world by storm a few years back and every media and internet giant wanted to have it in their portfolio. No one was quite sure why! Some wanted to have a “social networking strategy”, others wanted to have a “Gen Y strategy” but no one was quite sure how they were going to integrate a social networking site with the rest of their products. A case in point is ebay’s acquisition of Skype. While Skype may not fall under the social networking umbrella, ebay ‘s acquisition of Skype wanted to fundamentally do what most social networks do… help its users connect and share information better, and of course, given Skype’s capabilities, add the voice channel. Though not an AOL-Bebo story in pure numerical terms, Skype left the ebay canvas without registering much change for ebay largely because ebay had no clue how to go about integrating its multiple online shopping platforms (many of them country-specific) with Skype. As for AOL, it remains to be seen how many value-destroyed acquisitions they have to spin off before they return to being a growth story! AOL’s recent sale of Bebo was all over the news last week for all the wrong reasons. AOL has had an unenviable track record of killing acquisition value for quite some time. Bebo, bought for $850M a couple of years back, was sold last week for under $10M to Criterion Capital Partners. AOL may go around justifying this deal giving it a “meaningful tax deduction” but the ridiculousness of the value lost cannot be ignored.
For some reason, media companies have never done a great job of managing internet acquisitions in general and social networking sites in particular. Murdoch’s NewsCorp paid $580M for MySpace and ended up paying another $450M last year as impairment charges! Along similar lines, ITV (a British TV group) did an AOL when it sold off Friends Reunited for 25M pounds after acquiring it for 7 times that price. Acquisitions regularly destroy value across industries but one of the main reasons the success rate is that much lower with media companies acquiring internet companies is the inherent culture clash. Most internet startups, if bought early enough, are a group of T-shirt-and-shorts-sporting geeks-in-a-garage who iterate quickly, learn quickly and build quickly. Most media houses, on the other hand, are slow-moving, largely-family-owned with large stakes owned by which refuse to move without the customary bureaucracy and paperwork. The culture shock is immense, the bottleneck theory kicks in and the combined entity is only as fast as its slowest entity. One of the main reasons acquisitions in the social networking space, in particular, have killed value has been the lack of post-acquisition integration strategy. Social networking took the world by storm a few years back and every media and internet giant wanted to have it in their portfolio. No one was quite sure why! Some wanted to have a “social networking strategy”, others wanted to have a “Gen Y strategy” but no one was quite sure how they were going to integrate a social networking site with the rest of their products. A case in point is ebay’s acquisition of Skype. While Skype may not fall under the social networking umbrella, ebay ‘s acquisition of Skype wanted to fundamentally do what most social networks do… help its users connect and share information better, and of course, given Skype’s capabilities, add the voice channel. Though not an AOL-Bebo story in pure numerical terms, Skype left the ebay canvas without registering much change for ebay largely because ebay had no clue how to go about integrating its multiple online shopping platforms (many of them country-specific) with Skype. As for AOL, it remains to be seen how many value-destroyed acquisitions they have to spin off before they return to being a growth story! Twitter, and indeed all social media, is often touted as THE place for creating buzz about your product while keeping your purse strings tight. While there are many ways to leverage Twitter (and many more ways to get all excited about it and end up having nothing but a pathetic account for your product with a handful of followers), hashtag campaigns are definitely one of the more effective means of using Twitter.
Hashtag campaigns are Twitter campaigns where users are encouraged to tweet with a certain hashtag, which, if sufficiently popular, can make it to one of the top btrending topics. I feel that there are three essential elements to running a campaign on Twitter well: 1. Employ hash tags well i.e. ensure people use the hashtag on every tweet, the hashtag is not too long and unwieldy and at the same time is representative of your product and/or positioning 2. Have a competitive angle for the tweeters 3. Create an exciting incentive structure for tweeters Hashtag campaigns with monetary incentive Launch a limited duration hashtag campaign to create buzz similar to what Squarespace and Moonfruit have successfully done. Squarespace launched a very successful twitter hashtag campaign where users were asked to send tweets with #squarespace and 30 random candidates would get 30 Iphones. Within days, #squarespace became the top trending topic on Twitter. Their rival moonfruit launched a similar campaign with equal success. Hashtags campaigns with non-monetary incentive USAToday recently launched a successful hashtag campaign where users were asked to send #AmericaWants tweets stating which charity should get a free full page ad in USA Today. The charity with the most tweets won while USA Today ot all the CSR-heavy buzz that it wanted. Hashtag campaigns for crowdsourcing Launch a campaign encouraging people to tweet about the content (e.g. local news) that you need to source and ask users to hashtag their tweets Unlike the earlier campaigns which would be time-bound, this would have to be an ongoing contest with a prize given out every week or so. Executed successfully, it could help source content while creating the necessary buzz. LinkedIn, widely known as the #1 professional networking website globally, has a large and rapidly growing base in India and is now establishing a local presence in the country as well. Alexa (a source I would at best consider indicative), ranks it in the top 15 websites in the country in terms of traffic and ~15% of the traffic on the website seems to be from India. What I really like about the company is a very enviable Revenue per employee ratio, something that definitely speaks of scale in the internet industry.
Very logically, it is also pulling down the cost of its subscription packages, which so far, clearly mirrored a US-centered pricing strategy. This should definitely make it a lot more popular among the monetizable segments of its customers viz the recruiters. It will be interesting though to see how LinkedIn makes its way into the country. Why Orkut or Facebook are not the biggest threat! This Mint article, in my humble opinion, rather naively suggests Orkut and Facebook (with a professional networking app, of course) as principal competitors to LinkedIn. I disagree on the points made there on more than just a few counts. 1. One third-party app out of a million, focusing on professional networking, will not transform either of these products overnight into a professional social network 2. I have my doubts on the success of a professional networking app on Facebook/Orkut. Utilitarian apps exist on both these networks even now but the majority of the users continue to be obsessed with social gaming (think Xynga) and quizzes 3. Facebook has a better shot at monetization with a Cyworld-like virtual currency model and is already headed in that direction. I don’t see professional networking as being the #1 money spinner for them anytime in the near future. 4. The absolute lack of clutter is something that appeals to me as a serious professional networker, an aspect notably missing in Orkut or Facebook. While that may work for a general purpose social network, I want to keep my navigational challenges at a minimum while networking professionally. 5. Finally, there is that minor point about brand perception. No number of professional networking apps on Facebook is going to make me start perceiving Facebook as the place to network professionally. The real competition I don’t see Indian professional social networks (TooStep, PeerPower) as any competition for LinkedIn. I don’t even see them as candidates for alliances. I still can’t understand the need for launching so many carbon-copy social networks when the first mover advantage has clearly been taken by a player. LinkedIn is a social network all right but rather curiously, it doesn’t monetize the way most other social networks do. Ultimately, competition really kicks through when it comes to the monetization model and the segment whose monetization model is most similar to LinkedIn is the online jobs segment. I see Naukri and Monster as the real competition for LinkedIn. LinkedIn monetizes through recruiters in much the same way that these job portals do. Yes, the business models are very different; we have active job seekers on one site and at best, passive job seekers and non-seekers on the other; but at the end of the day, both will be competing for the same wallets with the same segment of end users (recruiters and HR professionals). Principally, LinkedIn is a social network with greater engagement than any jobs site and solving for a lot more use cases but purely on its current monetization model of charging recruiters for access to candidates, it is directly competing with Naukri. LinkedIn might do it with a P2P model but any online jobsite with a P2A (Peer to Application) on one side and an A2P on the other side is essentially solving for the same use case. How could the market change? This could signify a change in the online jobs market with referral based jobs increasing in number and background checks being engineered on LinkedIn itself. However, the basic market dynamic of the middleman will probably not change. The online jobs market (indeed, the entire online classifieds space as a whole) in India is interestingly different from its counterpart in many western countries in the fact that the middlemen (recruitment agency in case of jobs, real estate brokers in case of real estate and, ahem, family / well-meaning relatives in case of matrimonials ) continue to exist even on a platform that is supposed to aggregate the end users. The entry of LinkedIn doesn’t seem to visibly challenge that scenario and all the so-called value creation associated with disintermediation is unlikely to kick in. The Asian prospect It will be interesting to see LinkedIn’s progress in other emerging markets, especially South-East Asia, where the rules of social networking and social gaming are being redefined. There are 2 factors in particular that could really work for the company: 1. The mobile angle: Friendster, having failed in most geographies, was the #1 social network in many Asian countries, until Facebook launched its mobile version and took over many of these markets overnight. Indonesia, in particular, is a case study worth exploring. LinkedIn will have to have a relevant mobile strategy (and I don’t just mean a WAP site or an Iphone app) to cater to this market. 2. The online jobs scenario: A sizable number of S.E. Asian professionals, especially those in the information and/or services economy look for jobs across S.E. Asia. Their needs are underserved with there being not even a single online jobs marketplace that consolidates all S.E. Asian markets. JobsDB probably comes closest but is largely used in the principal markets of Philipines and Singapore. LinkedIn could be that one unifying professional networking and job-sourcing website that S.E. Asia currently lacks. It’s tricky for an American internet company to succeed in these markets. Outside search, portals and general purpose social networking, the only internet company that has succeeded notably in terms of traffic in these geographies is Ebay. However, Ebay grew entirely through acquisitions. It remains to be seen which of the internet majors entering these geographies can really succeed not just in generating traffic, but more importantly in monetizing them in a manner that justifies all the hoopla around the emerging markets. While monetizing a business network, community or marketplace, a successful company would be one which knows what the central proposition of the product is and would know how to monetize that particular proposition. It doesn’t take a genius to figure out that the central proposition for a marketplace is the transaction happening between two parties on it.
Borrowing a parallel from computer science and graph theory, the assets in a network or community may be understood in the following way:
Revenue models in order of how close or far they are from the central theme of the site would be:
Social networking is at a point where a lot of us are almost bored to death with the daily launch of new networks. Strangely enough, not many of these social networks, boasting enviable usage and engagement metrics, can really claim to be running on a revenue model which really monetizes off the user engagement on the product. Many have taken the advertising path and it’s clearly not been the best. In the middle of all this, Cyworld from South Korea stands out as an important example of how one can make money off a social network.
South Korea boasts the highest household penetration of broadband internet in the world and online shopping is a huge fad out there with nearly 80% of internet users having shopped online. Cyworld seems to have united the best of both trends by combining social networking with online shopping and emerging as a highly profitable business in a field where Facebook, as the leader, is struggling to break even. More than 90% of South Koreans in their 20s and more than one-third of the entire population of South Korea are registered users of Cyworld with more than 25 Mn unique users per month. Great stats but not out of the world as far as social networks are concerned. What absolutely bowls one over, though, is the degree to which they’ve monetized this user base. Cyworld is a lot richer on features than many social networks. Somehow feature-rich seems to have worked for them. Interestingly, Google doesn’t have any significant market share in South Korea and it’s possible that users actually prefer feature-rich and heavy websites, what with the top notch broadband infrastructure that all Koreans have. On Cyworld, every member has a homepage, referred to as a mini-hompy in the Korean Internet world. Basic services on the site are free (as with most social networks) but the site generates close to $250 Mn in annual revenues following a very unique revenue model and makes nearly $10 per user per year (MySpace makes $2-3 per user per year, largely from advertising). Most of these revenues come from the sale of Cyworld’s virtual currency (dotori) which then users use to buy virtual objects to decorate their homepage and accessorize their avatars. Since these digital goods are micro-priced, there are a lot of transactions happening on the site, and given the huge user base, a lot of revenues flowing in. The craze for virtual goods has resulted in a lot of online vendors setting shop on Cyworld to sell virtual goods. Given the richness of content that the mini-hompy service offers, Cyworld also has a sister service called Cyworld Town where SOHO (Small Office Home Office) owners display their offline goods through videos and graphics on their mini-hompy resulting in online order and offline conversions. Given low online shopping outside the travel category and low connectivity (thus ruling out feature-rich sites), the model might not necessarily be directly relevant to the Indian scene. There are, however, pertinent points that one can note form Cyworld’s success: 1. A revenue model that monetizes actual actions that user must do to interact with the community can provide a more steady stream of revenues than one where the user has to perform a non-central action (like clicking on an advertisement) for the site to make money 2. Value added services like accessorizing one’s page etc. can be used to good effect on social networks. There is an inherent tendency to go one-up on friends on a social network, especially in showing off popularity, and if a value added service can help users do that, it could prove catchy | AuthorA curious cat, online at odd hours, trying to figure out why some companies don't suck and how to be one of them! ArchivesOctober 2010 CategoriesAll |
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