Content Matters

In a direct response to the Facebook applications platform, Google will announce the OpenSocial platform on Thursday.

OpenSocial is a consortium of key players in the social networking and on-demand application space.  In addition to Google’s Orkut, the initial launch partners will include LinkedIn, Salesforce.com, Ning, Hi5, Friendster, Viadeo and Oracle.

OpenSocial will consist of a set of common APIs which will be used across all of the above platforms.  The three common APIs will cover the following areas:

• Profile information (user information)
• Friends information (the social graph)
• Activities (similar to Facebook news and mini feeds)

Developers can build applications using javascript, html and flash; there is no proprietary markup language like Facebook’s FBML.  Also, unlike Facebook, where the Facebook platform is the only container, any social network can be an open container for these apps.  Marc Andreesen, Ning founder, has more on why he feels this is the next big leap forward.

This is a big step for the social networking space.  Facebook was a big first step, but most (all?) of the apps built for Facebook to-date have been entertainment focused.  While some of the partners here are consumer (Hi5, Orkut, Friendster), this opens up some critical business platforms like LinkedIn and Salesforce for the development of b2b apps.

The following links are due to go live on Thursday:
http://code.google.com/apis/opensocial (technical docs)
http://sandbox.orkut.com/ (sandbox to test apps)

For more on OpenSocial, check out Techmeme, O’Reilly Radar, TechCrunch and the New York Times.

Meanwhile, Dave Winer takes a contrarian position.  As he points out:

Standards devised by one tech company whose main purpose is to undermine another tech company, usually don't work.

The SIIA is accepting submissions to present at the Previews day at the SIIA Information Industry Summit.

Previews, held the day before the general conference, provides an opportunity for startups to present to a mix of VCs, content companies and technology providers. 

Last year, Previews featured three groups of companies:

• Content Creators, featuring Generate, Near-Time, Eurekster and Decision Tree Media
• Content Delivery Companies including Pando Networks, Inform Technologies and Dragonfly
• Content Protectors, with Attributor, iCopyright and Cranium Networks

There was also a panel on deal trends and a keynote by Union Square Ventures' Fred Wilson.

The Previews day tends to showcase the more innovative and interesting emerging companies in the content and technology space.  For more information or to submit your company for consideration, visit the SIIA Previews page.

The final terms of the Facebook deal - it's a $240 million investment by Microsoft for a 1.6% stake in the company.

So, who are the biggest winners and losers in the Facebook deal?

Winners
Well, Microsoft is clearly a winner.  The ultimate investment of $240 million is modest from a cash standpoint and allows Microsoft to sell Facebook's European traffic (which today is largely UK) in addition to the current U.S. traffic.  It also helps them retain their relevancy in the Internet advertising market and keeps Google from displacing them from their advertising partnership.

Facebook, of course, is the big winner.  The company, who turned down a rumored $1.5 billion deal for the entire company now gets a valuation of $15 billion placed on them.  Meanwhile, the $240 million investment should be more than adequate to cover their growth until an anticipated 2009 IPO.

Accel Partners is a big winner as their initial $12.7 million investment now goes on their books with a $1.65 billion valuation.

Mark Zuckerberg, of course, sees his 20% share of the Company now worth about $3 billion.  That's about $300,000 for each day that the 23-year old founder has been alive.

Losers
Google should be considered a loser, though only slightly.  I don't think that this is a significant loss for them, but it's rare to see them lose out on a deal.  It will be interesting to see their strategy for the social networking market in the coming year. 

Yahoo may be the biggest loser of all.  They had pursued Facebook long before the others got involved and had made what at the time, seemed a significant offer.  Social networks like Facebook pose the greatest threat to the traffic of portals like Yahoo, so this has to be considered a huge loss to them.

According to CNET, Microsoft has won it's battle with Google for the chance to invest in Facebook.  The site indicates that the deal would include a direct investment in the company and an expansion of their current advertising partnership.

Meanwhile, the WSJ reports that the investment is for $250 million, a fraction of the $750 million to $1.5 billion range floated by the Post this morning.

At that price, Microsoft appears to be the clear winner, shooting down the hypothesis floated by Henry Blodget earlier today.  At $250 million, this deal should make Microsoft a clear winner.  Under their existing partnership, Microsoft has the right to sell banner ads on Facebook's U.S. site through 2011.  This deal should expand that partnership to international sites, and prove that Microsoft remains a key player in the Internet advertising market.  It will be interesting to hear Facebook's rationale for the decision; at that price, it's clear that Microsoft didn't outbid Google; the Facebook team must have decided that they prefer Microsoft as their long-term partner.

Like a cheerleader trying to decide whether to go to the prom with the quarterback or starting point guard, Facebook is expected to decide this week whether to take a significant investment from either Microsoft or Google.

While Yahoo began its courtship of Facebook more than a year ago with an acquisition offer rumored to be in the $1.5 billion range, the NY Post reports that the latest offers are for a 5-10% stake in the company for between $750 million and $1.5 billion.  In other words, the valuation has gone up 10x in about a year, to $15 billion.

A month ago, it seemed pretty likely that Microsoft would take a 5% stake for a then-rumored $500 million.  However, Google appears to have gotten involved and raised the stakes.  As MLB agent Scott Boras has shown, even the appearance of a second suitor can significantly increase the deal terms.  According to the Post article, Google has looked to raise the price in an effort to scare off Microsoft, but that the Redmond-based giant has stayed in the game for now.

According to Henry Blodget, either way, Google has won the war.  Microsoft needs the Facebook relationship much more than Google does.  While social nets have yet to really monetize their traffic, Facebook is today the 7th most visited site and is those visits are taking away from display ad traffic on traditional portals.  Assuming the bids are truly comparable, it would seem that Google would be the more attractive partner for Facebook.  If nothing else, it will minimize the likelihood of Google deciding to compete against them.  Meanwhile, if Microsoft does win, they will have overpaid and probably made other concessions to win the deal:

Because Microsoft will overpay, too--wildly--and won't get much for its money.  Facebook will no doubt extract other concessions (great pricing on ad sales, full control, etc.), and then will probably take Microsoft's money and turn its back.  So Microsoft will lose that way, too.  And Google will do just fine without Facebook.

Declan McCullagh has an interesting piece on the new journalist shield bill which Congress will vote on this week.  McCullagh and others have argued that the legislation has been watered down in that it no longer includes personal bloggers, but only professional journalists.

The original draft of the bill included a broad definition of journalist: "a person engaged in journalism and includes a supervisor, employer, parent, subsidiary, or affiliate of such covered person."

The technical definition in the bill is now someone "who regularly gathers, prepares, collects, photographs, records, writes, edits, reports, or publishes news or information that concerns local, national, or international events or other matters of public interest for dissemination to the public for a substantial portion of the person's livelihood or for substantial financial gain and includes a supervisor, employer, parent, subsidiary, or affiliate of such covered person."

As McCullagh points out, under this new definition, a blogger who is a serious blogger and breaks news, but who doesn't get compensated (through Google Ads or otherwise) for their writing would not be covered.   CNET's Don Reisinger furthers McCullagh's argument, suggesting that when he began his career, by volunteering, that he met many other credible journalists who were not being paid for their efforts.

I disagree with McCullagh and Reisinger in this case.  I write this blog.  I also twitter my thoughts from time to time.  I also post commentary to Congoo.  But I'm an industry participant, not a journalist.  And, while I may have "inside information" from time to time, that's not the same as having someone share information with a journalist.  I believe that it's critical for us to provide real protection for true journalists to not have to reveal a source in most instances.  Yet with the many forms of online communication today, it's a slippery slope to suggest that anyone who posts any content online should have the same protections as a journalist.  That loose definition could result in a backlash, where those protections are taken away from those who truly need them.

Morgan Stanley technology analyst Mary Meeker was among the notable speakers at the Web 2.0 Summit.

In her rapid-fire 15-minute presentation, Meeker noted that consumers, not the enterprise, were now driving technology. 

While enterprises have driven demand for technology for most of history, consumers were now the #1 users of semiconductors, surpassing IT and government.

Among other key trends Meeker indicated were driving the technology market:
* High demand for consumer Internet-enabled services is driving the demand for technology infrastructure by companies like Yahoo!, eBay, Amazon, Google, iTunes, PayPal, YouTube, Facebook and others.
* Wireless innovation is accelerating, with 3G handset adoption set to double by 2009
* Storage needs continue to ramp with consumers expecting to both connect and carry mobile devices
* Strong data center growth to support today’s technology products
* Enterprises are starting to emerge from their purchasing funk

Towards the close of her presentation, she singled out a group of compelling internet companies: YouTube, Wikipedia, Demand|Media, Slide, Digg, Joost and Facebook.  A few key metrics:

• YouTube had more than 206 million global uniques in August, up 185% from a year earlier
• Wikipedia has 211 million unique visitors and more than 8.3 million pages
• Facebook presentation widget Slide has had more than 45 million installs and has 5 million active users
• Video-on-demand provider Joost has had more than a million users sign up for its invite-only beta
• While Facebook's 69 million visitors is impressive, what's more astounding is that they are now seventh overall in terms of minutes spent on the site (more than 15 billion minutes last month)

Meeker notes that there remained risks to this rosy picture.  She suggested that a recession remained a potential challenge and that the spreading crisis of subprime woes should not be underestimated.

Her full presentation is available from the Morgan Stanley Global Technology site.

I am in New York this week, so am not at O’Reilly’s Web 2.0 Summit.  Luckily, it’s pretty easy to follow what’s going on there.
I’ve provided a quick round up below of the highlights.

Facebook’s Mark Zuckerberg speaks but says little (O’Reilly Radar) while John Battelle tries to get him to commit (Read/Write/Web)

MySpace to open its platform for developers to fend off Facebook (Reuters)

Sequoia Capital’s Mike Moritz disputes the NY Times article that this is just a repeat of the bubble  (via AlacraBlog)

Meanwhile, Josh Koppelman reminds us that we’ve talked about the bubble at every Web 2.0 conference for the past four years (Silicon Alley Insider)

CNET twittered the conference, saying wireless connectivity was too spotty for full blog posts

Rupert Murdoch and Chris DeWolfe jointly announce that the MySpace cofounders will be staying with Fox Interactive (Guardian Unlimited)

Tim O’Reilly says “don’t pitch me on your Web 2.0 strategy; we’re focused on the slice of the future that hasn’t yet become evenly distributed”

Last week, I posted about Donors Choose and the Donors Choose Challenge.
One of the things that makes Donors Choose so attractive is the ability to earmark your donation to a specific project for a specific school.  The project that I chose to fund was Bridging the Technology Gap in an Urban School.  This was to fund the purchase of a multimedia projector for a 5th grade school located in the South Bronx.

Just today, I received an email from Mrs. Carfiro, the teacher who had submitted the request:

Dear Mr. Graubart,

Thank you very much for funding our proposal. My students are going to be very excited about the new technology we will bring bringing into our lessons. This couldn't have come at a better time, as we are beginning to prepare for the NY State Social Studies Test. With this projector I can now make test preparation more fun and interactive. I can't wait to let my student know that they will have their own personal projector for us to use. On behalf of my students, I thank you. Sincerely, Ms. Carfiro  

So, in a matter of about two weeks, I was able to identify a project which I wanted to fund, make a donation targeted specifically to that project, and get confirmation from the teacher that their project had been fully funded.  When you compare that to the traditional model of donating to an organization and hoping your dollars make an impact, there's no comparison.

If you haven't yet reached out, go to Fred Wilson's Donors Choose Challenge page and make a donation.  You'll be glad that you did.

The new Fox Business Channel goes live today.
Ken Doctor has an interesting post - nine questions on the launch of Fox Business Network.

It will be interesting to see how Fox approaches this, particularly in advance of the WSJ deal closing.  Will Fox Business Channel be more like the news content of the Journal?  Or will it become more like their editorial page?

For the past decade, one way that companies have been able to increase productivity is by outsourcing much of their development to offshore locations.  Skilled developers, typically at one-fifth the cost of their U.S. counterparts, helped us get through Y2K and to offset the developer gold rush of the dot com days.  Initially much of that work was performed in India; as costs there began to increase, Russia, Bulgaria and other spots opened up as offshore development centers.

For a time, it seemed that these regions had a seemingly limitless supply of IT talent, freshly minted from their technical institutes.  But as demand has increased, the supply has leveled off and offshoring no longer offers the deep discounts that it once did.  Coupled with a depreciating dollar, offshoring does not appear to be the bargain it once was.

So points out Assembla in their post Offshoring is Dead: How to Thrive in the New World Order.  In the post, they describe how one of their key suppliers, in St. Petersburg, has seen their labor rates increase 200% in the past two years.  Russia’s oil-led economic boom has driven increases there, while India now faces shortages of technical talent and China’s booming economy keeps their engineers focused inward.

So, what’s the solution? 

According to Assembla, the key is to look at your development team on a global basis.  Rather than identifying the less critical tasks and trying to match them to inexpensive outsourced functions, the key is to find the most productive developers wherever they may be located.  It has never been easier to work in a distributed team environment than it is today.  Meanwhile, agile development, web services and SaaS models reduce the development effort required to launch an application.  So, build small and talented teams and you can keep your costs manageable.

Andy Singleton, Assembla president, has long been a visionary in the technology field.  He was the first one to show me the Internet (in the early days of Mosaic) and among my first colleagues to seriously embrace outsourcing.  The full blog post, on the Assembla blog, is must reading for anyone involved in the development of technology products.

Anyone who has school-age children knows that getting enough resources in the classroom is a huge challenge.  Things that we should be able to take for granted (like having tissues, paper towels and toilet paper) are now items that teachers have to ask students to provide.  Funds for special projects, school trips and other things that help kids get excited about school, are simply nonexistent.

DonorsChoose is a web-based organization that allows teachers to submit projects for funding.  Then, individuals can select the specific project they wish to support and make a donation.  Funds are used to buy materials for the project, which are then sent directly to the classroom.  So, you know that your funds are going exactly where you'd like them to.

DonorsChoose has begun the Donors Choose Challenge, where they have challenged a blogs and websites to get their readers to contribute to these projects.  Rather than signing up myself, I've donated on Fred Wilson's A VC blog page and I encourage you to do the same.  To-date, Fred's blog has raised about $16k, roughly 2/3 of his $25k goal.

As an added bonus, the top 2 sites, in terms of total donors, will get to have lunch with Yahoo's Jerry Yang.  Fred has graciously agreed to give that lunch invite to someone who donates through his page.  Details are provided here.

I think it's criminal that in a society that gives hundreds of millions of dollars in tax breaks to energy companies, we still don't invest adequately in our children's education (or, to quote a recent statement by our President,  so that our "childrens do learn").  But this isn't the forum for that discussion (I'd gladly have it offline with anyone who'd like to).  Instead, this is an opportunity to make a direct impact on specific students.  Donations can be as small or as large as you'd like.  So, visit the Fred Wilson Challenge page, grab your credit card and make an impact.

As I’ve previously written, one of the obstacles to using Facebook for business purposes is that there’s only one class of friend.  If I wish to link to another Facebook user, I become their Friend.  There’s no way to differentiate between whether it’s a personal friend, a co-worker, a client or a partner.

With a network that has one primary purpose, such as LinkedIn, that’s not an issue.  In LinkedIn, I link to people who have some level of business relationship and I only expose business-related information to them.  My LinkedIn profile is strictly business, so there’s no issue.

My Facebook page includes much more varied information, including music and entertainment details.  Do I want to share those with my friends?  Sure.  With my clients?  Perhaps but maybe not.

According to Steve O’Hear, at ZDNet, Facebook is ready to launch a new feature which will allow users to organize friends into groups, with various levels of privacy for each.  In other words, I should soon be able to organize my Facebook page so that I can decide which apps should be accessible by which types of “friends”.  This will be a big improvement for Facebook and should move them closer to becoming relevant for the business world.

I’d like to see two steps follow:

First, in conjunction with these groups, Facebook should allow third parties to build apps that allow users to define the categories of friends.    This would allow the development of vertical market solutions on the Facebook platform.  For example, in the pharma industry, you might want to define a relationship between a pharmaceutical sales rep and a physician; in the government affairs market, a relationship between people at organizations who support the same issue; in software, a relationship between people who team on a business development opportunity, etc.  The nuances of those relationships are not supported by the current options in Facebook.

The second request is more trivial.  Let’s come up with a better word than “friend”.  I have professional relationships with many people in business, and the term friend just doesn’t seem to fit.  If we insist on referring to these relationships as “friends”, I think we’ll have to change the name of a business meeting to a “play date”.

In Facebook, all of the action happens in the feed and mini feed.  The mini feed shows a user their activity, while the feed provides a view of the activity of their friends.  However, not all online activity occurs within Facebook, so this view is, by definition, limiting.

A new entrant, FriendFeed, is making an effort to address this by delivering a comprehensive feed that encompasses multiple platforms.  With FriendFeed, your feed includes your Twitters, music you’ve  listened to on Last.fm, pictures you’ve posted to flickr, changes to your LinkedIn profile, videos  favorited on YouTube, updates to various Facebook apps and many more (23 services in all).

FriendFeed raises the question of whether there is a need for platforms like Facebook, or whether the  Internet itself is the platform.  In essence, it’s another part of the same argument in support of an open social graph and not for walled gardens.

FriendFeed, which is in early beta (by invitation only), is a startup from four Google alum, including Bret Taylor and Jim Norris, who built Google Maps.  This feed mashup is very compelling.  Of course, it’s only as useful as your network, so my friend feed is at http://friendfeed.com/graubart.  Feel free to friend me there or subscribe to my feed.

Creating and maintaining accurate reference data is not among the more glamorous aspects of the financial services industry; but it’s the backbone that drives numerous mission-critical applications.

From a CRM perspective, firms have long strived to have a 360-degree view of their customers.  Patriot Act, Bank Secrecy Act and FSA regulations have raised the bar in terms of “Know Your Customer” requirements.  New regulatory measures, such as MiFID and Basel II, designed to help regulators assess risk, require financial institutions to have a comprehensive picture of each of their client relationships.

In 2006, Alacra launched Alacra Concordance, as a means to help clients clean and maintain reference data from a wide range of internal and external sources.  In addition to the data cleansing process, Alacra Concordance appends various public and private identifiers and can also update credit ratings from ratings agencies like Fitch, S&P and Moody's. 

While we’ve heard numerous anecdotal examples from clients of cost savings and improved productivity,
it's been hard for us to quantify and communicate that effectively.  To better quantify those benefits, Alacra recently commissioned Forrester Consulting to perform an ROI analysis of the product, using Forrester’s TEI (Total Economic Impact) methodology.  Forrester conducted in-depth interviews with four Alacra customers and created a composite organization from the four. 

Forrester Consulting concluded that the composite company realized a 402 percent return on investment, and that the company paid for its use of Concordance within two months. The composite company realized $1,911,163 in cost savings by using the Alacra Concordance Solution.

The press release describing the TEI study is posted here.  To request a copy of the full TEI study, click here.

While the NY Times has killed its premium TimesSelect offering and the betting remains high that the Murdoch-led Wall Street Journal will remove its pay wall, the Financial Times has taken a few baby steps in that direction.

Beginning today, the FT will allow visitors to FT.com to access up to 30 articles per month for free.  For active users, an annual subscription to ft.com remains £98.99 per year.

Their stated goal is to encourage websites and blogs to link to FT content; today, many are hesitant to do so, as they don’t wish to link to a page their users cannot access.

I don’t see the rationale in this approach.  I understand the FT argument that their newspaper is really a b2b purchase, not a b2c one, yet this approach seems to guarantee their position as a niche financial offering.  Murdoch has touted international growth as a key driver for the Journal.  It seems clear that they will be going directly after the FT in this market.  So, what’s the FT’s response?  Allow only minimal usage for free, which should allow the Journal to stake out a dominant global position in the coming years.

The changes in the newspaper market are happening quickly and will continue to do so in the coming years.  A cautious approach by the FT is exactly the wrong approach and will ensure it remains a small, niche offering in the coming years.  Pearson had hoped to be a player in the Dow Jones acquisition, but its efforts to team with NBC and others faded.  Perhaps they will instead put the FT on the block, as this half-in, half-out model is doomed to fail.

PaidContent has a full interview with Ian Chen, publisher of FT.com.  Must-reading.