Scénario catastrophe : Facebook va-t-il disparaitre en 2017 ?

http://www.01net.com/editorial/612558/scenario-catastrophe-facebook-va-t-il-disparaitre-en-2017/

Why is WhatsApp worth up to $19bn to Facebook?

The WhatsApp figures are startling: $4bn of cash, $12bn in Facebook shares and a further $3bn in stock that will vest over the next few years. Photograph: Justin Sullivan/Getty Images

People will bring their prejudices to the table when judging whether Facebook agreeing to pay up to $19bn for messaging app WhatsApp is a smart deal or not.

Some will see it as the latest evidence of a froth-fuelled social networking and apps bubble, which won’t end well. Others will hail it as the bold, decisive move of a visionary CEO.

WhatsApp may be labeled as the next Myspace or Bebo: bought for big bucks then withering as its users drain away. But it may also be seen as the next YouTube – bought for what seems like a ridiculously high sum, only to thrive so well that price looks like a bargain a few years down the line.

As with any big technology story, people will fit Facebook’s WhatsApp acquisition neatly into whatever their existing narrative is for what’s happening around smartphones, social networking and big tech more generally.

Nevertheless, here are some facts and expert views to help you draw your own conclusions about the impact of the deal.

Multiple Facebook apps in your home screen

When the deal closes, Facebook will own four of the world’s most popular smartphone apps: Facebook itself, Instagram, WhatsApp and Facebook Messenger – the social network says it’s committed to maintaining the latter, although we’ll see if that holds true in the long term.

Facebook wants to be on your smartphone in multiple ways, taking up several slots on your homescreen rather than just one. This strategy had already been outlined before yesterday’s news, though.

“Our vision for Facebook is to create a set of products that help you share any kind of content you want within the audience you want. We’re not just focused on improving the experience of sharing with all of your friends at once,” CEO Mark Zuckerberg told analysts during Facebook’s last earnings call.

“One of the things that we want to try to do over the next few years is build a handful of great new experiences that are separate from what you think of as Facebook today.”

If the average person’s smartphone usage tilts towards using a group of apps that mostly do one thing well – messaging, photos, games, whatever – then Facebook wants to be providing as many of them as possible. And if it can’t build successful enough standalone apps, it will buy them.

Look beyond the dollar amount

The figures are startling: $4bn of cash, $12bn in Facebook shares and a further $3bn in stock that will vest over the next few years. Cue the obvious “How many X is WhatsApp worth?” calculations – 19 Instagrams, 76 Washington Posts, or 96bn extra moves in Candy Crush Saga – which might even be enough to get you past level 147.

It’s important to look beyond the pure dollar amount, though. The former mobile analyst Benedict Evans, who now works for venture capital firm Andreessen Horowitz, thinks it’s more useful to think about the impact on Facebook using other metrics.

“It paid first 1% of its market value for Instagram and now close to 10% for WhatsApp, taking not dominance but at the least two of the commanding heights of mobile social,” he wrote in a blog post after the news was announced.

“That’s the right way to think about value, I think - not ‘OMG $16bn!’, but ‘is this worth 10% of Facebook?’ The deal values WhatsApp users at $35 each (very close to what Google paid for YouTube, incidentally), but the current market cap of Facebook values its MAUs at $140 or so.”

The entrepreneur and investor Martin Varsavsky also addressed the valuation of WhatsApp in his own blog post.

“The WhatsApp acquisition price sounds high, sky high, crazy high. But it’s not if you put yourself in Zuckerberg’s shoes and think about it in these terms: Facebook bought a network that is growing much faster than itself (growth drives valuations) and has almost half as many members already, for 10% of its value,” he wrote.

“So from this perspective it is reasonable to pay that price. If you call WhatsApp a better SMS system, on size alone, it is as big as half of all the texting that goes on in the world. SMS as Facebook said in its investor conference after the acquisition is a $100bn industry although imploding fast to the tiny cost of WhatsApp, $1 a year.”

Forrester’s Julie Ask suggested that the deal is an example of pragmatism on both sides. “There are a dwindling number of privately held companies with audience numbers in the hundreds of millions. Tencent (WeChat) is public. Line belongs to Naver Corporation. Rakuten bought Viber last week,” she wrote. “Kudos to the founders for not snubbing a few billion dollars.”

No ads, maybe, but…

Facebook bought Instagram, waited, then introduced advertising. WhatsApp will go the same way, right? Actually, wrong, according to its CEO Jan Koum. “Here’s what will change for you, our users: nothing. WhatsApp will remain autonomous and operate independently,” he wrote yesterday.

“You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. And you can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product.”

WhatsApp’s no ads policy has been consistent throughout its rapid growth to 450 million active users: its business model settled down as a $1 annual subscription after a year of free usage. Can that stance really survive once WhatsApp is part of Facebook?

Two points. First: WhatsApp has huge reach but it doesn’t really have enough data to be really interesting for advertisers in its current form. By design; it doesn’t collect names, ages, genders or addresses, and it doesn’t store users’ messages on its servers. Not a great ad-targeting platform compared to the way Facebook’s advertising business works.

Second, though: what WhatsApp does collect is people’s phone numbers. An alternative way of looking at the deal is as Facebook agreeing to pay up to $19bn for 450 million people’s phone numbers – more, if you consider registered users rather than active ones.

“Lot of info in a phone number. Tie it all back to everything else. Ick,” as one industry source told the Guardian. Will all those phone numbers help Facebook’s advertising business outside WhatsApp? That’s a question to ponder in the months ahead.

Facebook bought the simplest messaging app

A Tumblr post by WhatsApp investor Jim Goetz, of VC firm Sequoia, includes a photograph of the note stored on Koum’s desk – a three-line statement of WhatsApp’s guiding principles written by his co-founder Brian Acton:

The ethos behind WhatsApp. Photograph: Jim Goetz

Most of WhatsApp’s rivals – from Line, Kakao and WeChat in Asia to Kik and BBM in the west – have been turning themselves into platforms for everything from gaming and music through to shopping and brand marketing. In a sense, they’re all trying to replace Facebook, in a sprawling, multipurpose sense.

WhatsApp is for messaging. No games, and no gimmicks. And it’s the app that a) got to 450 million active users, and is still adding 1 million a day in 2014, and b) got bought by Facebook for up to $19bn. Its single-minded simplicity is what made it worth so much in Facebook’s eyes.

Expect frenetic speculation about which messaging apps will get bought up next, by which tech giants for what purpose. Naturally, some of these companies will be eagerly fuelling the speculation.

“It’s $16bn clearer that we’re now in the age of the mobile messenger,”Kik’s CEO Ted Livingston told TechCrunch last night (referring to the initial cash-and-stock price Facebook is paying). “Having a popular mobile messenger is simply going to become table stakes for competing in the mobile era.”

There will be consolidation – of course there will – but it’s less about “company X is now worth Y because WhatsApp was worth Z” and more about what specific messaging apps are worth to specific buyers. Simplicity sealed the deal for Facebook, but will the mini-Facebook platform strategy tempt others?

“From an industry perspective, it is likely that further consolidation will occur, though it’s unlikely that subsequent acquisitions will provide as high a return as that achieved by WhatsApp,” said the Informa Telecoms & Media analyst Pamela Clark-Dickson today.

Meanwhile, Forrester analyst Nate Elliott has warned against seeing the deal as Facebook chasing teenage users who may have drifted away from the social network. “It’ll be tempting to read this as a sign Facebook is scared of losing teens. And yes, the company does have to work hard to keep young users engaged,” said Elliott.

“But the reality is, Facebook always works hard to keep all its users engaged, no matter their age. Facebook is tireless in its efforts to keep users coming back. That’s why their 1.2 billion monthly users keep visiting the site more and more frequently, rather than drifting away.”

Hello operators

Zuckerberg’s next public appearance is a keynote speech at the Mobile World Congress conference in Barcelona later this month: an event still dominated by the global mobile operators.

Imagine if Zuckerberg had saved the WhatsApp news for a one-more-thing moment towards the end of his speech. “Facebook is a strong partner for carriers, not their enemy. We complement their business, not cannibalise it. Oh, by the way, we’re buying WhatsApp …”

It’s difficult to avoid viewing the acquisition through the prism of what it means for the wider telecoms industry, at a time when WhatsApp and its rivals have already done a good job of surpassing the volume of SMS text messaging. It’s not so long since the prospect of a “Facebook Phone” was seen as a threat to operators. Now think about Facebook owning phone messaging.

“Mobile operators are in an interesting position: Facebook, one of their key content partners, now owns an application that has been a major catalyst in the decline of SMS revenues and, for some, SMS traffic,” said Clark-Dickson.

Varsavsky thinks the social network has more ambitious plans than that. “Where are Facebook/WhatsApp headed? In my view to do with telephone minutes what WhatsApp already did with SMS,” he wrote.

“It is surprising that Facebook which wants to connect everyone on the planet still does not have a platform to people to have actual conversations a la Viber or Skype. I can’t imagine that things will stay this way. And owning world’s texting and world’s conversations may very well be worth $19bn.”

Evans takes a different view, highlighting the stats comparing mobile messaging apps’ growth to SMS texting volumes, while suggesting that the potential of something like WhatsApp lies beyond pure communication.

“Mobile social apps are not, really, about free SMS. Mobile discovery and acquisition is a mess – it’s in a ‘pre-pagerank’ phase where we lack the right tools and paths to find and discover content and services efficiently,” he wrote.

“Social apps may well be a major part of this, as I discussed in detailhere. These apps have the opportunity to be a third channel in parallel to Google and Facebook.”

By Stuart Dredge.
Source: theguardian.com

The Three Reasons Twitter Didn’t Sell To Facebook

Facebook’s Mark Zuckerberg tried to acquire Twitter not once but twice, through official channels and via co-founder Jack Dorsey. The details of the efforts are revealed in Nick Bilton’s new book Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal.
I’ll have a full review of the book soon, but I found one passage in particular worth noting. It was late October of 2008, shortly after Dorsey had been ousted as CEO and consigned to a silent role as Chairman, with no voting stock or operational control. Fellow Twitter co-founders Ev Williams and Biz Stone had been invited to visit Facebook for a sit-down with CEO Mark Zuckerberg. The purpose? An acquisition of Twitter.

Zuckerberg, Bilton explains, had been working Dorsey for months to try to arrange a buyout. But his plans were thrown into disarray when Dorsey was yanked from the CEO slot. An email at one point to Jack had given a point-by-point reasoning on why Facebook+Twitter made sense. Among those reasons was the customary threat that Facebook could choose to ‘build products that moved further in [Twitter's] direction’, a tactic that we’ve personally heard many accounts of Zuckerberg employing. The implicit threat: sell to us or we’ll clone your product.

During the meeting, Williams and Stone threw out a valuation: $500 million. Zuckerberg was not shocked, as Dorsey had already informed him that this was the range that would be sought.
But the sale didn’t happen, and the reasoning behind the rejection was outlined in an email by Williams to the board, which is partially quoted in Bilton’s book.

It seems to me, there are three reasons to sell a company, Ev wrote in an e-mail to the board outlining why they should decline Facebook’s offer. 1. The price is good enough of or a value that the company will be in the future. (“We’ve often said that Twitter is a billion dollar company. I think it’s many, many times that,” Ev wrote.) 2. There’s an imminent and very real threat from a competitor. (Nothing is going to “pose a credible threat of taking Twitter to zero.” 3. You have a choice to go and work for someone great. (“I don’t use [Facebook]. And I have many concerns about their people and how they do business.”)

There are a few interesting points in this passage, which we’ve emphasized. First among those is that the board saw Twitter as a billion-dollar company in 2008, and Williams saw it as many times that. In 2008, Twitter had fewer than 11 million users, and had yet to see the exponential gains that would come in early 2009 as a result of publicity like Ashton Kutcher’s public race against CNN to be the first million-follower account. Twitter’s current IPO filing places a roughly $11.9 billion value on the company. Even with a crappy infrastructure still wobbling under the weight of the users it did have, Twitter’s leadership had faith.

That faith extended to the fact that there was no competitor, including Facebook, who could pose a ‘credible threat of taking Twitter to zero’. The concept of Twitter, and its execution, was so unique that even a company with Facebook’s resources was ill-equipped to mimic its behavior and success. This is reinforced by another anecdote in the book about a possible $12 million Yahoo acquisition, which was politely declined very early on in Twitter’s life. The number, even with only 250k active users of what was still an Odeo side project, seemed so low to Biz, Williams and Dorsey that it became a running joke.

And lastly, Williams was also uncomfortable about a culture mis-match. The book as a whole drills down deeply into some very flawed, very human characters. But a strain that runs throughout is that the core creators of Twitter were all looking for ways to democratize human connections. That started with Odeo and continued through to the Twitter experiment. Williams felt that Twitter could be negatively impacted by intermingling with Facebook’s company culture, and was willing to bet hundreds of millions of dollars that it would be better without that influence.

We seem to talk more and more about the mercenary nature of Silicon Valley — and the popularity of ‘acquisition as business plan’ — daily. But, it turns out, there are still people making decisions based on something other than the seven deadly sins.

And one can’t discount the impact that lightly veiled threats have on negotiations. They can often lead to a sour taste, and we’ve heard about more than one negotiation with Facebook that has been spoiled by this kind of hint-dropping. Facebook took roughly three years to clone Twitter’s core ‘follow’ feature, launching Subscribe in 2011. It was later re-named ‘Follow’.

Dorsey, for his part, was ambivalent about a Facebook acquisition, saying that “If the numbers are right, there’s a success story in either path.” At the time, he was fresh off of his removal as CEO, with little hope of getting any real power in the company back. That turned out to be wrong, thanks to friendly investor Peter Fenton, but it’s not too surprising that he saw the money as a fair trade.
But the board agreed with Williams’ reasoning and declined the offer. Zuckerberg would then go on to court Dorsey heavily, but refuse to give him a head of product position. Dorsey never went to Facebook, and when Twitter IPOs, he’ll get his voting shares back.
An interesting note: Williams actually blogged about the offer, and the three reasons, earlier this year but never disclosed that it was Facebook. An interesting quote from the piece:

At the time, the offer we had on the table for Twitter—though a heck of a lot of money and a huge win for investors and anyone else involved—didn’t seem like it captured the upside. Even though we weren’t huge, and there were still a lot of doubters, I believed our potential was unbounded.
…
In the Twitter case, we had no desire to sell. I had actually just become CEO and was raring to go—as was the team. Additionally, the company we were having the discussion with didn’t seem like one in which we’d fit particularly well or the team would be stoked about.

The passage presents us with an intriguing alternate reality where Facebook acquired Twitter, establishing an essential monopoly on the world’s largest and most recognizable social networks. And an example of how it’s still possible to mesh the concepts of business acumen and moral code.
[Photo: (CC) Flickr/Randy Stewart, blog.stewtopia.com]

Source : Techcrunch

Here's The Evidence That The Tech Sector Is In A Massive Bubble

The stock market is at an all-time high. Tech startups with no revenue have billion-dollar valuations. And engineers are demanding Tesla sports cars just to show up at work.
Here's the evidence that we're in a new tech bubble, heading for a crash, just like the dot com bust of 1999.

Interest rates are effectively at 0%.

(Fred / Think Progress)

Before we get into specific evidence that the tech sector is inflated, it's worth restating the macro-economic context: Interest rates are basically at zero and have been for some time. When borrowers are paying close to zero interest on loans, that makes money cheap to get. This chart shows the Fed's target rate for interest since 1970.
People with money generally have a choice: save it in interest-paying, risk-free bank accounts or invest it in riskier assets that may pay more money over time. When interest is at zero, virtually any other kind of investment is likely to pay more because the risk-free alternative is so lousy. So investment asset bubbles get created. Stocks tend to go up.

The stock market is at a peak, which is exactly what you'd expect in a zero-interest environment.

(Yahoo Finance / Jim Edwards)

We've had five years of solid growth in stocks. People who have invested in stocks in the last five years now feel very, very rich. What could possibly go wrong?

The market moves up and down, in cycles, as this chart of the S&P 500 stocks shows.
We're due for a downturn.
(BlackRock CEO Laurence D. Fink, whose company manages $4.1 trillion in assets, agrees that the Federal Reserve is creating “bubble-like markets.”)

In the tech sector specifically, there has been a recent run-up in deal prices.

(Thomson Reuters / PricewaterhouseCoopers)

This chart was published by PriceWaterhouseCoopers, which tracks merger and acquisition activity in the tech sector.
It notes that "software deal volume tripled that of the second quarter."
The driving force?
High stock prices and corporate giants who are rich with cash and need to invest it, PwC says.

It's not just tech asset prices that are high. Salaries are high, too.

While unemployment generally may be high, in the tech sector it is very low.

(REUTERS/Edgar Su)

Tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent has gotten too scarce and too expensive. It's driving up wages bills like crazy. Matt Allen, a tech recruiter at Vertical Move, told me recently:

We're experiencing first hand greater insanity than the dot-com days when Interwoven Software was pulling out BMW Z3's for engineers who joined. Instead, we're seeing sign-on bonuses for individuals five-years out of school in the $60,000 range. Candidates queuing-up six, eight or more offers and haggling over a few thousand-dollar differences among the offers. Engineers accepting offers and then fifteen minutes before they're supposed to start on a Monday, emailing (not calling) to explain they found something better elsewhere.

That suggests that wages in tech are in a bubble.
Want an example?

Twitter svp/technology Chris Fry got a $10 million pay packet. He only joined the company last year.

(Twitter)

Twitter's Chris Fry comes with a high price.

Fry is paid more in annual compensation that Jack Dorsey, the chairman of Twitter's board and the founder of the company. That's how much the price of wages has risen in the tech world. Fry is not a one-off event. Facebook's vp/engineering, Mike Schroepfer, got $24.4 million in 2011, Reuters noted:

One start-up offered a coveted engineer a year's lease on a Tesla sedan, which costs in the neighborhood of $1,000 a month, said venture capitalist Venky Ganesan. He declined to identify the company, which his firm has invested in.

It's not just wages that are expensive. Company valuations are rising too. 

Supercell, the game company, just raised $1.5 billion in new funding at a valuation of $3 billion. Supercell has real revenue — $178 million in Q1 alone. But you've got to question the logic of the people doing the deal: Investor Masayoshi Son, the founder of Softbank, believes he has a "300-year vision" of the future.
Even the CEO of Supercell thought he was joking when he first heard about it.

Companies with broken business models are highly valued.

(Jason / Goldberg / Facebook) 

Fab CEO Jason Goldberg

Fab.com, the design retailer, recently raised $165 million in new investment this year, for a total of $336 million in all venture funding. It did so despite laying off 440 employees after deciding that the flash sales model — in which customers are asked to suddenly purchase a daily deal — doesn't work. It was Fab's second business model "pivot" — the company started life as a gay community site. We're not saying Fab is going out of business. We're saying that Fab's backers have been fabulously generous.

Companies without meaningful revenue are highly valued.

(Natasha Foote / Pinterest)

Pinterest just raised $225 million in new investment funding, a stake that values the company at $3.8 billion. That valuation is fictional, of course. It's based on the notion that the company could be sold or go public at that price. That price is 10 times what investors have actually plowed into the company. To be clear, Pinterest is showing every sign of turning into a great company. It has already solidified a role for itself as a key referrer of online retail and e-commerce traffic.
But still, this is a company that currently is rumored to make only between $9 million and $45 million in revenue.

Companies with no revenue at all are highly valued.

(Snapchat / Apple iTunes)

Snapchat is rumored to be raising a new round of funding that values the company at $3.6 billion on paper. This company has zero revenues.
Zero.
And it's not easy to see how it might make money: It's defining product deletes itself after just a few seconds.
The last time we saw companies with no revenue receiving high valuations from investors was right before the 1999/2000 dot com crash.

Yahoo is again paying top dollar for companies with no meaningful revenue, just like it did in 1999.

(Wikimedia, CC)

Tumblr's David Karp and Yahoo's Marissa Mayer

Yahoo recently paid $1.1 billion to acquire Tumblr, the social blog network. Tumblr's revenues are so small Yahoo isn't required to mention them in its financial statements — they just don't move the needle. Again, to be clear, Tumblr is actually an excellent product with 50 million users. But for Yahoo to make money on this deal Tumblr will have to generate profits after sales of greater than $1.1 billion.
My sources tell me that with the right adtech, Tumblr could generate several hundred million in ad sales revenue over the years. But they don't believe Yahoo will ever get its money back on the deal.
This is significant because Yahoo does not have a good track record when it comes to buying in a bubble. In 1999, right before the last tech crash, it bought Broadcast.com for $5.9 billion in stock and GeoCities for $3.57 billion. Neither business had meaningful revenue and both have since been shuttered.

Companies are making dumb decisions: This startup chose beef jerky over a 401 (k) plan.

(waitscm | Flickr)

The New Yorker recently wrote:

Hunter Walk, an entrepreneur who recently co-founded an early-phase venture firm called Homebrew, told me about a startup where he’d previously worked. The company had needed to figure out whether to spend its limited budget on beef jerky to keep around the office or 401k plans for the staff. “We put it to a vote: ‘Do you want a 401k or jerky?’ ” he explained. “The vote was unanimously for jerky. The thought was that well-fed developers could create value better than the stock market.”

Correction: Walk now tells me that the beef jerky incident happened in 2001. The New Yorker presents the anecdote as if it were current. Nonetheless, there are plenty of companies making dumb decisions. For instance ...

Companies are making dumb decisions (part 2): There are more Facebook ad agencies than regular ad agencies.

Facebook has about 300 so-called Preferred Marketing Developers. They all do one of just four things: Place ads on Facebook, manage Facebook pages for companies, provide social media analytics, and create marketing apps for Facebook. They are basically ad agencies, in the sense that advertising clients hire them to promote their brands via Facebook.
But there are more Facebook PMDs than there are major ad agencies in the U.S., even though the non-Facebook ad business is many times the size of Facebook. Not all of these companies will survive, and a few have recently realized that there is not enough money to support them all. Even Facebook has moved to cull the herd.

Serious investors are beginning to suspect a tech bubble has formed, and that a crash is coming.

(UBS, Art Cashin)

Art Cashin, the the director of floor operations for UBS Financial Services, has been around the block. He recently worried that he he was seeing things that reminded him of 1999:

"I do worry a little bit that we're beginning to hear things that are reminiscent of the 1999-2000 period—the number of hits, the number of eyeballs," said Cashin, ...

"I think if we hold to the old tried-and-true—how many dollars are coming in—then we might be better served," Cashin said. " But people are extrapolating, in some way, in a manner similar to the way they did in 1999-2000." 

"For an old fogy like me," the trend of extrapolating future earnings based on users and viewers "gets the warning flags flying," Cashin said.

Andreessen Horowitz is pulling up the ladder.

(Flickr / coltera)

Andreessen Horowitz is is the sine qua non of Silicon Valley investor groups. It had stakes in Facebook, Twitter, Pinterest, Groupon and Zynga. Now it is saying it will no longer invest in early stage consumer-oriented startups. They're done.
Andreessen is interested more in later stage and business-to-business-oriented companies. Companies with actual prospects of real revenue, in other words.
This, arguably, is the kind of "flight to quality" you often see when asset prices and stocks start falling. What does Andreessen know that we don't?

One of the most legendary tech investors, Tim Draper, thinks we're at the end of the curve.

(youtube/2millionminutes, Tim Draper)

Timothy Draper is the founder of  Draper Fisher Jurvetson, a venture capital outfit that has invested in dozens of tech startups. He's been around since the days when Hotmail was the big new thing. He recently told The New Yorker that he believed tech venture capital may have reached the top of its cycle:

“I’ll draw you the cycle,” he said, taking my notepad and pen. He scrawled a large zigzag across the page. “This is a weird shark’s tooth that I kind of came up with. We’ll call it the Emotional Market of Venture Capital, or the Draper Wave.” He labeled all the valleys of the zigzag with the approximate years of low markets and recessions: 1957, 1968, 1974, 1983, and on. The lower teeth he labeled alternately “PE,” for private equity, and “VC,” for venture capital. Draper’s theory is that venture booms always follow private-equity crashes. “After a recession, people lose their jobs, and start thinking, Well, I can do better than they did. Why don’t I start a company? So then they start companies, and interesting things start happening, and then there’s a boom.” Eventually, though, venture capitalists get “sloppy”—they assume that anything they touch will turn to gold—and the venture market crashes. Then private-equity people streamline the system, and the cycle starts again. Right now, Draper suggested, we’re on a venture-market upswing. He circled the last zigzag on his diagram: the line rose and then abruptly ended.

"Abruptly ended"?
Let's hope he's wrong.

Source : Business Insider 

Facebook Is Growing Through Risky Business

Facebook COO Sheryl Sandberg. Photo: World Economic Forum/Flickr

It’s easy to get caught up in Facebook’s new earnings numbers; revenue and adjusted profits spiked impressively in the first quarter, and mobile business boomed. But if you listen closely to what Facebook executives say as they release those stats, it’s clear the social network has set down a risky path that banks on following users ever more closely and selling to advertisers ever more aggressively.

In first-quarter financials released yesterday, Facebook said revenue rose 38 percent to $1.46 billion and that mobile advertising climbed to 30 percent of ad revenue from 25 percent of ad revenue in the prior quarter; analysts had expected revenue growth of just 36 percent. Adjusted earnings, meanwhile, were 12 cents per share, flat compared to last year and below analysts’ estimates of 13 cents per share.

In a call reviewing those numbers, Facebook executives crowed about how more people are spending more time with Facebook on more platforms than ever before, how advertisers large and small are plowing money into the social network, and how Facebook is investing in innovative new products like Facebook Home and Graph Search.

Then they talked about change. Change is inevitable at Facebook; though the company made $5 billion in revenue last year, it did so largely by targeting people on desktop computers with relatively straightforward advertising that for the most part paid by the click. These days, Facebook’s users are shifting to mobile, and advertisers want ever-more sophisticated targeting options.

So Facebook is moving to meet both camps, and doing so with impressive speed. But it’s far from clear whether its new business model will work as well as the old one.

Take mobile advertising. Facebook has earned appreciative backslaps from Wall Street from going from zero to 30 percent mobile ad revenue in just three quarters after remaking its flagship app and rolling out a host of new mobile ad options. Trouble is, much of the money Facebook rakes in on mobile comes from app makers, who pay Facebook to push their apps at users most likely to be interested in them, based on data from their friends and phones. These are, generally speaking, speculative advertisers, often venture backed, hoping to get rich off their software – exactly the type of businesses that tend to disappear when there’s a cyclical downturn in the now-booming tech sector.

When probed by analysts yesterday, Facebook declined to hint at how much of its mobile advertising comes from these app makers. But Facebook brass bragged about the app install business early and often during yesterday’s call. “One of the developments that’s been interesting is seeing how big an opportunity mobile apps can be for Facebook,” Facebook CEO Mark Zuckerberg said just four minutes into the call. “It’s clear now we can create a lot of value for developers… and we’re starting to see real revenue through selling mobile app installs.” COO Sheryl Sandberg later added that mobile app installs “performed very well this quarter,” driving 25 million downloads and being used by 40 percent of the top 100 grossing apps across iOS and Android. “Recently the app install ad product… is showing some real traction,” Zuckerberg reiterated later in the call.

Facebook is walking another precarious road with how it sells to its large, longtime advertisers. Facebook was once content to target based on data it collects directly from users and to get paid mainly when users click ads. It is rapidly evolving into a nexus where information about things you do far from Facebook, both online and offline, comes together with advertising that is often bought and customized in the blink of an eye through instant-bidding platforms like Facebook Exchange. Facebook can now select an ad based on what you’ve bought in the grocery store, where else you’ve been on the web, and even what you’ve been searching for on other sites.

As its targeting grows more sophisticated, Facebook is also hinting that it would like to expand how it bills advertisers; it could follow its users after they merely glance at an ad, watching their online buying habits and real-world store visits and billing the advertisers if any transaction occurs.

Sandberg didn’t say if or when Facebook might introduce such a billing system, which would presumably be enabled by data-tracking technology called Atlas that Facebook acquired earlier this year. But when pressed by an analyst she acknowledged that Facebook is trying to grow its business selling ads that are merely viewed rather than clicked.

“Our focus with Atlas is on impression based ads,” Sandberg said. “As people have looked more holistically at all the ad spending they’re doing, what they find is that it’s not just the last click that matters but all the impressions leading up to that click. Importantly, we also drive sales offline, and offline people aren’t clicking through to purchase at all — they’re actually walking into a store.”

As it collects more and more data on users, Facebook argues its ads become more relevant and thus more palatable. And clearly, the company would like to extract more money from advertisers in exchange for such smartly-aimed spots. The question, as Facebook builds the all-knowing ad-based revenue engine of the future, is whether users and advertisers are willing to go along for the ride.

Source : Wired,  RYAN TATE05.02.13

Facebook explains why it used natural language to compete with Google search Read more at http://venturebeat.com/2013/04/29/facebook-graph-search-natural-language-engineering/#KwuAM1YGL6gDJSeE.99

Facebook’s Graph Search is the company’s big bid to compete against the likes of Google, Yelp, and LinkedIn with people-powered, connections-based search. And interestingly enough, even though its machines run on a deep understanding of nodes and edges that bind all of humanity and our habitats into an enormous web, its front end has to handle very human language.

Google has for the past decade or two been training us to search with keywords rather than natural phrases. For example, a Google web search might read “bookstore Alamogordo wifi coffee” rather than “What bookstores in Alamogordo have free Wi-Fi and serve coffee?”

But Facebook, as engineers Xiao Li and Maxime Boucher note today on the company blog, takes a different approach. [See full post embedded below.]

The Graph Search team iterated over possible query interfaces at the early stage of this project. There was consensus among the team that a keyword-based system would not be the best choice because ofthe fact that keywords, which usually consist of nouns or proper nouns, can be nebulous in their intent. For example, “friends Facebook” can mean “friends on Facebook,” “friends who work at Facebook Inc.,” or “friends who like Facebook the Page.” Keywords, in general, are good for matching objects in the graph but not for matching connections between the objects. A query built on keywords would fail in cases where a user needs to precisely express intent in terms of both nodes and edges in the graph.The team also toyed with the idea of form-filling augmented by drop-down filters. However, because of all the possible options you could search for in Facebook’s data, this would easily lead to an interface of hundreds of filters. In mid-2011, the team converged around the idea of building a natural language interface for Graph Search, which we believe to be the most natural and efficient way of querying the data in Facebook’s graph.

The post goes into further detail about parse trees, which basically conjugate a natural language query, separating it into usable data and a stack for when and where to search for which terms; the flexibility of natural language search via lexical analysis; entity detection; and semantic parsing.

It’s a hefty but satisfying read for those interested in the future and present realities of the technology behind all kinds of evolving search.

Read more at http://venturebeat.com/2013/04/29/facebook-graph-search-natural-language-engineering/#KwuAM1YGL6gDJSeE.99 

http://fr.scribd.com/doc/138527966/Facebook-Natural-Language-Engineering

Millions Of Teens Are Skipping Facebook And Using A New Breed Of Flirty Mobile Messaging Apps

Create personal profiles. Build networks of friends. Share photos, videos and music.

That might sound precisely like Facebook, but hundreds of millions of tech-savvy young people have instead turned to a wave of smartphone-based messaging apps that are now sweeping across North America, Asia and Europe.

The hot apps include Kik and Whatsapp, both products of North American startups, as well as Kakao Inc's KakaoTalk, NHN Corp's LINE and Tencent Holdings Ltd's WeChat, which have blossomed in Asian markets.

Combining elements of text messaging and social networking, the apps provide a quick-fire way for smartphone users to trade everything from brief texts to flirtatious pictures to YouTube clips - bypassing both the SMS plans offered by wireless carriers and established social networks originally designed as websites.

Facebook Inc, with 1 billion users, remains by far the world's most popular website, and its stepped-up focus on mobile has made it the most-used smartphone app as well. Still, across Silicon Valley, investors and industry insiders say there is a possibility that the messaging apps could threaten Facebook's dominance over the next few years. The larger ones are even starting to emerge as full-blown "platforms" that can support third-party applications such as games.

To be sure, many of those who are using the new messaging apps remain on Facebook, indicating there is little immediate sign of the giant social media company losing its lock on the market. And at a press event this week, the company will unveil news relating to Android, the world's most popular smartphone operating system, which could include a new version of Android with deeper integration of Facebook messaging tools - or possibly even a Facebook-branded phone.

But the firms that can take over the messaging world should be able to make some big inroads, investors say.

"True interactions are conversational in nature," says Rich Miner, a partner at Google Ventures who invested in San Francisco-based MessageMe, a new entrant in the messaging market. "More people text and make phone calls than get on to social networks. If one company dominates the replacement of that traffic, then by definition that's very big."

Facebook spokespeople declined to comment for this article, citing this Thursday's planned announcement.

Facebook's big challenge is reeling back users like Jacob Robinson, a 15-year old high school student in Newcastle upon Tyne in the U.K., who said the Kik messaging app "blew up" among his friends about six months ago. It has remained the most-used app on his Android phone because it is the easiest way for him to send different kinds of multimedia for free, which he estimated he does about 200 times a day.

Robinson said he trades snapshots of his homework with friends while they stay up late studying for their exams - or not.

"We also stay up in bed with our phone all night, just on YouTube searching for funny videos, then you quickly share it with your friends," he added. "It's easy. You can flip in and out of Kik."

Facebook "has really started to lose its edge over here," said Robinson, who found his interactions on Facebook less interesting than his real-time chats.

Waterloo, Ontario-based Kik has racked up 40 million users since launching in 2010. Silicon Valley entrants in the race include Whatsapp, funded by Sequoia Capital, and MessageMe, launched earlier this month by a group of viral game makers. MessageMe has received seed-stage funding from True Ventures and First Round Capital, among others, and claimed 1 million downloads in its first week.

Meanwhile, Asian companies are producing some of the fastest-growing apps in history. Tencent's WeChat boasts 400 million users - far more than Twitter, by way of comparison - while LINE and KakaoTalk claim 120 million and 80 million users, respectively. Both have laid the groundwork to expand into the U.S. market.

MOBILE WAVE

The growth in the messaging apps reflect the dramatic shift in Internet usage in recent years, as Web visits via desktop computers have stagnated while smartphone ownership and app downloads have skyrocketed.

Chief Executive Mark Zuckerberg has publicly called Facebook a "mobile company" to emphasize the company's priorities. Last year, he splashed $1 billion for photo-sharing app Instagram, which has remained red hot, while Facebook also launched its own Messenger app, offering a suite of smartphone communication tools.

Still, Facebook has also been forced to play defense. Earlier this year, the company cut off its data integration with a young startup called Snapchat and then mimicked its feature with a new messaging tool called Poke, which sends messages that self-destruct. It has also shut off its integration with messaging apps like MessageMe and Voxer.

At the same time, Facebook has also hired graphic artists to draw emoticons and graphics for Messenger that emulate features of the wildly popular Asian apps like LINE, according to people with knowledge of the matter.

Dave Morin, an early Facebook employee who left to found the "private" social network Path in 2010, said he recognized last summer the critical role of messaging functions in smartphone apps, and quickly began working to incorporate them.

Since Path released a new version of its app earlier this month, the number of Path's daily users has risen 15 percent, which Morin attributed to the new messaging features.

"What's the number one reason why people have this thing?" said Morin, holding up his iPhone. "It's to call, to text, to communicate."

Messaging, Morin added, is "the basis for the mobile social network."

PLATFORM THREAT

While established social networks move to incorporate messaging features, the new-wave messaging apps are looking to grow into social networking platforms that support a variety of features and enable innovations from outside developers.

"The tried and true approach for a social network is first you build a network, then you build apps on your own, then you open it up to third party developers," said Charles Hudson, a partner at early stage venture capital firm SoftTech VC.

The moves mirror Facebook's younger days, when its user growth and revenues were boosted by game publishers like Zynga Inc, which made popular games like FarmVille for the Facebook platform.

In the South Korean market, for instance, eight of the top ten highest grossing Android apps are games built on top of KakaoTalk. Tencent announced in November that it would introduce a mobile wallet feature enabling payment for goods with WeChat. And Tencent also makes money in China by using the app's location data to displaying nearby merchants' deals to potential customers.

If the messaging apps reach a certain scale, they could form networks that rival Facebook's "social graph," the network of user connections and activities that enable highly targeted delivery of content and advertising.

"The folks on your address book are very different from your Facebook friends and your LinkedIn contacts, and that's a natural place for a very powerful graph to be created," said Jim Goetz, a partner at Sequoia Capital.

Ted Livingston, the 25-year old chief executive of Kik, said he developed the capability for his service to support external features in November, and he plans to open the platform to outside developers in the near future.

Livingston said Kik and Whatsapp were "in a race to see who's the first to build a platform."

Whatsapp, which has been the most widely downloaded communication app for both iOS and Android in recent months, according to analysis firm App Annie, has been profitable by selling subscriptions to its service for $1 a year. Although it has remained mum about its platform plans, the company has been rumored to be in talks with Asian game publishers about hosting games, according to news reports in South Korea.

Goetz declined to address the reports, saying only that because it relied on a subscription business model, Whatsapp did not need to sell games or ads to make money.

Still, he said, the Whatsapp team "spends a lot of time thinking about the developer community."

DEAL POTENTIAL

Established social networking giants could also swoop in for the upstarts - and Facebook has demonstrated its appetite for acquisitions.

Indeed, investors are eyeing a round of potentially lucrative buyouts resembling the series of deals involving group messaging applications in 2011.

Facebook acquired group messaging app Beluga in March of that year, enlisting its founders to help build its own stand alone app, Messenger, which launched six months later.

In late 2010, First Round Capital, an early stage venture capital firm, invested in GroupMe, a group messaging startup that was sold to Skype just fifteen months after it launched.

Kent Goldman, a First Round partner who has backed MessageMe, said it was unlikely that the market in the long term could support numerous independent messaging startups, which by their nature become more powerful as they grow larger.

"You don't want to be the smallest one when the music stops," he said.

Copyright (2013) Thomson Reuters.

Read more: http://www.businessinsider.com/teens-using-messaging-apps-in-threat-to-facebook-2013-4#ixzz2PZpfFtUI
Source : Business Insider, 1/4/13

Facebook and Apple: it’s complicated

Here’s what Mark Zuckerberg had to say about Apple, the iPhone and Facebook in two different one-on-one interviews that hit Thursday.

iOS is one of the most popular ways to use the Facebook app on mobile devices. Facebook sharing is also integrated into iOS and OS X. Apple and Facebook have a good thing going together. However, things may not be quite as cozy as they seem; the relationship could even be on the rocks if you read between the lines of what Mark Zuckerberg had to say on Thursday.

Thursday was Facebook’s big day: the rollout of Facebook Home, the first piece of the company’s attempt to be a primary interface for mobile devices. Notably, it’s a launcher for Android phones only. Still, Apple came up a fair amount during the discussion around the unveiling of Facebook’s latest mobile ambitions. Mark Zuckerberg didn’t say anything directly negative about Apple, the iPhone and their partnership, but the two seem to be drifting further apart philosophically.

Here’s what he said in two interviews published Thursday:

Zuckerberg may really want Facebook Home to be on the iPhone, but it’s likely never going to happen, and he knows it. Here’s how he avoided saying that in an interview with Fortune:

We’d love to offer this on iPhone, and we just can’t today, and we will work with Apple to do the best experience that we can within what they want, but I think that a lot of people who really like Facebook — and just judging from the numbers, people are spending a fifth of their time in phones on Facebook, that’s a lot of people. This could really tip things in that direction. We’ll have to see how it plays out.

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He admits that philosophically the team down in Cupertino is pretty different than the hackers in Palo Alto. As he told Wired:

There are a bunch of companies that try to make every release perfect, and Apple is the best at that. That’s wonderful, but there’s another way of doing things that’s potentially even better over the long term—allow yourself room to experiment and don’t try to make each individual release as polished as possible.

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While Google and Facebook are very much direct competitors, Facebook is actually far more similar to Google. From the same Wired interview:

We have a pretty good partnership with Apple, but they want to own the whole experience themselves. There aren’t a lot of bridges between us and Google, but we are aligned with their open philosophy.

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Facebook and Apple are friends now but they haven’t always been. It’s pretty easy to see that if Facebook does try to morph this Android launcher into a version of a Facebook mobile operating system some day, it may find itself on a similar trajectory as Apple frenemy-in-chief, Google: once integral iOS partner to just another appmaker on the App Store.

Source : Gigaom, Erica Ogg, 5/4/13

Mark Zuckerberg on Facebook Home, Money, and the Future of Communication

As caretaker of a service with a billion users, Mark Zuckerberg is used to sparking protest. Any time his company releases a new product, adjusts a privacy setting, or even tweaks the design, thousands of outraged Facebookers take to the Web to decry the change. So Zuckerberg can expect to hear sirens today, as he announces Home, Facebook’s most dramatic response to the pivot from desktop and web to phones and tablets. New paradigms like mobile can be the ill winds that blow down card-houses of tech dominance, and to maintain its status as the alpha social network, Facebook must get this right.

First, what it’s not: Home isn’t the long-rumored Facebook Phone. That was always a red herring. Instead, Home turns your phone into a Facebook device. Even with the lock screen on, a photo stream of your friends’ activities fills the screen. Updates appear on your home screen, too. What’s more, Home makes Facebook the primary means of communication on your device. The company’s messaging software merges with SMS, and you can continue using its “chat heads” to text while inside another app. Zuckerberg believes that the social network plays too big a role in its users lives to be drowned out by a vast sea of apps. “Apps aren’t the center of the world,” he says. “People are.”

More on that : http://www.wired.com/magazine/2013/04/facebookqa/

Source : Wired, April 4, 2013