amit klein » Articles

Slides from Social Media Training Sessions

amit — Wed, 08 Jul 2009 10:59:46 +0000

Last week I gave a few training sessions to new joinees in our company covering Social Media, Online Advertising and Analytics. From talks I’ve had with new joinees, I’ve found this information isn’t covered in college/graduate coursework. I’m planning on turning this into a longer course and teaching at one of the business schools here.

Part 1: Introduction to Social Media

View more presentations from amitklein.

Part 2: Twitter, Facebook and Social Data Portability

Advertising Is Not a Sustainable Business Model for the Web (unless you are a Search Engine)

amit — Sun, 31 May 2009 09:35:09 +0000

The long-held myth that web companies can achieve profitability through free products, services and content solely based on advertising is fading. The diminishing rates of online ads, and the slowdown of venture capital and IPOs, has led to a realization that a sustainable business model for web companies must have multiple, diverse, revenue streams.

Over the last few months I’ve seen a growing number of companies offering alternative strategies to generating revenue.

Subscription Services / Premium Content (Blizzard, New York Times, GigaOM, Forrester)

The most straightforward revenue source is paid subscriptions. Blizzard, makers of World of Warcraft, absolutely crush it.

“if [their] 10 million subscribers were to pay the regular $14.99 month-to-month fee, then Blizzard would fill its pockets with almost $150 million every single month… that means a revenue-target of more than $1.7 billion for FY 2008.”

While many media companies have experimented with paid subscription models, very few have been able to do it successfully. The exception is research focused companies like Forrester which banks on corporates with deep pockets shelling out $700 for a 12 page report. GigaOM and TechCrunch have also recently launched similar premium research and analysis services.

The New York Times recently released it’s TimesReader 2.0 Adobe Air client. While the client offers an improved user experience, I can’t ever imagine shelling out $3.45 a week for content I can get for free. Though I would pay for their $3 iPhone app.

It’s possible that with the success of the Kindle, these paid content services will flourish in the future.

Freemium (Wetpaint, Pandora, Google Apps)

A variation on premium content services is the freemium model. Give away 80% of your service for free, and charge for heavy users who want more functionality or a better experience. Pandora, a music discovery product, recently launched a premium services which, for $36 a year, removes ads, provides higher quality streaming music and offers a desktop app. A compelling offering for their top tier of users.

Wetpaint is another company that has found success through the freemium model:

“When Ben Elowitz formed Wetpaint in 2005, it was intended to let anyone create a Web site free… Wetpaint typically offers advertisers space on a few Web sites with a few hundred thousand visitors. But last fall, many of their advertisers raised their sights to publishers with more than five million readers, Mr. Elowitz said. Rates for leftover ad space fell to 25 cents per thousand views from $1… Now, Wetpaint charges its big company customers, like HBO and Fox, a fee in exchange for providing extra services like site promotion and moderating reader forums… Smaller customers can pay to keep their sites free of ads. Wetpaint plans to add more paid services, including additional storage for big files and personalized domain names. It is also considering selling virtual goods on its sites. “

Finally Google Apps is another nice example of successfully upselling premium services. The communication and collaboration platform is free for up to 50 users, but for $50 per user per year you get access to a whole range of services including: additional storage space, email security and archiving, video sharing, phone support and access to API’s.

App Stores (Apple, Nokia, Blackberry, Google Android)

It’s tough to argue against the game-changing success of the Apple App Store. Rival companies like Google, Nokia and Blackberry have launched their own stores (the Android Market, Ovi store and Blackberry App World respectively). A cursory glance on the Blackberry store only showed about 20 apps, and none of them were paid. While they won’t be competitive with Apple (at least for some time), it’s at least showing that this model is profitable and worth pursuing. I’m sure this is now central to how mobile handset makers and software developers plan on monetizing phones.

Interestingly this model is now being extended beyond just phones (and why not!). According to the Sun CEO, Jonathan Schwartz:

“Vector is a network service to connect companies of all sizes and types to the roughly one billion Java users all over the world. Vector (which we’ll likely rename the Java Store), has the potential to deliver the world’s largest audience to developers and businesses leveraging Java and JavaFX.

Our runtimes reach more consumers than just about any other company on earth. That ubiquity has obvious value to search companies, but it’s also quite valuable to banks looking to sign up new accounts, sports franchises looking for new viewers, media companies and news organizations looking for new subscribers – basically, any Java developer looking to escape the browser to reach a billion or so consumers.

How will it work? Candidate applications will be submitted via a simple web site, evaluated by Sun for safety and content, then presented under free or fee terms to the broad Java audience via our update mechanism. Over time, developers will bid for position on our storefront, and the relationships won’t be exclusive (as they have been for search). As with other app stores, Sun will charge for distribution – but unlike other app stores, whose audiences are tiny, measured in the millions or tens of millions, ours will have what we estimate to be approximately a billion users. That’s clearly a lot of traffic, and will position the Java App Store as having just about the world’s largest audience. “

I believe that a paid app store is also a viable business model for social sites like Facebook, LinkedIn and Twitter.

Microtransaction (Tencent, Zygna, Facebook)

Tencent, the largest Chinese social network, focuses on microtransactions as their primary revenue source. Users pay for subscriptions, virtual clothes for your avatar, new weapons, cute pets, etc… From their ’09 first quarter results:

Internet services (digital goods, game subscriptions, micro-transactions) – $279.9 mil (76% of total revenues)
Mobile Subscriptions – $64.5 (17.6% of total revenue)
Online Advertising – $21 mil (5.9% of total revenues)

Online advertising only 5.9% of their total $350mil revenues? Impressive.

Another company successfully generating revenues from social gaming microtransactions is Zygna. According to TechCrunch:

“Zynga, the online gaming publisher, is making a ton of money… [close] to $100 million. And clearly, it’s accelerating… There looks to be a bright future in the online gaming sphere and specifically around micro-transactions. That’s how Zynga makes most of its money. With some of its leading games on MySpace and Facebook, it charges users for playing time or for things like chips in poker. These small purchases which usually amount to only a few dollars at a time, start to add up quick. And that’s only with a small percentage of overall players opting to buy them.”

Facebook finally launched it’s much anticipated payment platform for testing. Facebook hopes to be the OS for the social web. They are banking on companies like Zygna figuring out what it the masses want and developing social applications on top of their platform. App developers will be able to charge for subscriptions and create opportunities for in-app transactions. Facebook will get a cut of each transaction. Cha-ching!

Another interesting company in this space is Tipjoy, which facilitates small payments on Twitter. I haven’t seen this used effectively yet, but I imagine a micropayment based Craigslist Twitter app could be successful.

Trend Analysis (Twitter, Zensify)

It’s undeniable that Twitter has achieved massive popularity, but that doesn’t always translate to profits (see YouTube). I believe Twitter’s most effective strategy for monetization will be mining and performing trend analysis on the millions of thought bubbles created by users daily. Both companies and individuals would pay big money to answer the following questions:

What are people saying about me/my product right now?
How has the perception of my brand changed recently and in what direction is it trending?
Geographically where is my biggest, rapidly emerging and diminishing audiences?
Who are my biggest evangelists, in what demographic do they fall in, where are they located?
Who are my biggest naysayers, how can I change their perception?
What is the perception of my product vs. my competitors?
What are the trending (in both directions) topics in my industry?

On a smaller scale the new iPhone app Zensify:

“Shows the user trends within your social graph in the form of a tag cloud of key words. In other words it brings a lot more intelligence to your social graph. Suddenly, you can see a big trending topic amongst people you follow… “Wouldn’t it be cool if “trending topics” were localized to the people who are followed by the people you follow.” Well Zensify does this… And it doesn’t just do it across Twitter. It does it also does it across updates from Facebook, YouTube, Flickr, Digg, Delicious, Photobucket and 12seconds.”

I believe that providing a set of tools to monitor trends amongst your social graph (and public timelines), will be a huge revenue opportunity for companies looking to monetize on social and real-time.

Conclusion

When the internet was originally created the “page metaphor” mimicked the existing print industry. It followed that the way to monetize was through advertisements. As we move from pages to activity streams we’re starting to see entirely new, innovative ways to profit. We are still in the infancy of this new stream based revolution and while companies like Twitter and Facebook have achieved huge valuations no one (especially the Newspaper and Music industries) has yet figured out Monetization 2.0. Put on your thinking hats…

The Transition to Real-Time, Social Search

amit — Thu, 18 Dec 2008 07:32:49 +0000

John Batelle recently wrote a great post about the shift from static to real-time search. To paraphrase he says that Google is/was awesome because for the first time, you could quickly and accurately get static information about any search term. Though this strength is also a flaw. By nature, newer content will have a lower page rank and thus appear farther down in search results. The emerging “liveweb” will be able to answer the question “What are people saying about X right now?” The current best example of this is Twitter Search. But this isn’t enough. The question I really want to ask (and the real moneymaker) is “What are people I trust saying about X right now?”

A few examples where static search is insufficient:

Breaking news/current events (we’ve seen many examples where Twitter breaks news stories first – i.e. San Diego Fires, Mumbai Terrorist Attacks, etc..,) Many times Twitter is able to provide (arguably) more accurate real-time reports that the news that traditional news outlets later pick up on. While Google is incorporating News Results at the top of it’s list:

It’s still not enough if I want to get a grasp on the current situation/perspective/events occurring now (though interestingly enough the NYTimes ad on the right is incorporating real-time content).

Finding the amount of times people are searching/mentioning a term – Google Trends allows you to verify the pretty obvious fact that searches for Santa tend to spike at the end of the year, but did you know Canadians were the most actively searching for Santa and that progressively each year less people are asking Google about him?

The equivalent of this is Facebook Lexicon (interestingly no label on the y-axis, not useful for an actual research tool) and Twitter Twist (been down for quite a while). This is huge for PR and Product companies who want to be able to monitor how much buzz a person/event/product are receiving.

Product Reviews / Social Shopping – When most people want to buy a product online, they head to Google. This is why advertising on search is a big moneymaker (as opposed to advertising on social networks which is seriously struggling – people go to Facebook to waste time, flirt, look at pictures of their friends drunk and write each other stupid messages, not buy products). There have been a bunch of entrants into this market but none so far has provided a compelling product and achieved critical mass. Hopefully now with Facebook Connect/Google Friend Connect, someone will make this possible. If I’m looking for a camera, I want to know which camera my friends use and love, then find the cheapest place to buy it. The first person who makes this easy to do (using my Facebook social data) is going to make a killing.

Google dominates static search, Twitter knows what you are doing, Facebook controls your social graph and Apple knows where you are. The company able to blend all of these services (static, real-time, social, and location), while maintaining the strictest privacy controls, which will dominate the next era of the web

The Razorfish Consumer Experience Report

amit — Sat, 29 Nov 2008 09:17:50 +0000

Every year Ave A/Razorfish puts out a yearly report highlighting research and trends in digital marketing. The focus this year is on the expanding role of social apps and how people use them. Not only is the report extremely insightful and provides a glimpse of where the internet and it’s users are headed, it also is beautifully put together.

There are 13 articles including, Designing Experiences for the Facebook Generation, How Micro-Interactions are Changing the Way We Communicate Online, How Tiny Applications are Remaking the Future of the Web, A Look at Games as Tools Not Toys, and Data Visualization for the Online Era. Below are some key takeaways – this is not meant to be a complete summary, just an excerpt to give you an idea of the contents.

Meet the Connected Consumer

All signs point to the continuing disintegration of “one-stop” digital destinations… We’ve found that [consumers] don’t want a one-size-fits-all solution for their needs. Consumers prefer using multiple destinations, and then aggregating media and services, via simple tools like RSS, into a highly personalized view of their digital world.
We were most surprised to see widespread acceptance and frequent consumer usage of Web site widgets… This development reinforces our belief that distribution of content and services will trump destinations, as both consumers and Internet technologies continue to evolve. Additionally, it will provide significant challenges for publishers (primarily media and entertainment companies) who currently have no clear path towards monetizing content distribution across the Web.
Digital Behavior Defies Age: We found today’s connected consumers equally distributed across all age ranges, with a slight skew to older segments. No longer are we seeing Internet technology adoption rates limited to only certain segments. Our study found widespread acceptance of these new service offering and finds older consumers much more likely to spend money online.

Designing Experiences for the Facebook Generation

What is happening is that the concept of social networking is evolving and morphing. It’s now about making the entire Web social instead of just creating a ghetto of destination sites where people have to go to socialize (a la Facebook Connect).
People want to feel special and tend to reach out to the things that make them feel that way. So, it’s no surprise that people flock to social networks in droves; they make users feel like the star of their own lives.
The most recent rapid expansion on the Facebook and MySpace sites came when they opened up their systems and allowed developers to make applications for their sites
Design for multiple levels of participation
- Low-level: rating, poking, tagging, commenting, subscribing
- Mid-level: writing statuses, twittering, playing games, adding widgets, uploading photos
- High-level: making videos, writing blog posts and reviews
- Expert-level: moderating groups and message boards, creating applications, running feeder businesses on the social network’s “economy”

Putting Jakob Back on the Shelf

Stop launching your design activity around pages as the medium… We need to build frameworks that power both storytelling and answer-seeking to occur.
Design the new customer experience as a map of interactions. The new experience might be a conversation; it might be a series of decisions made by the user; it might be an interactive storytelling session. Understand what the customer needs, and just design that.
Let’s not limit our vision to effective Web editorial styles, properly ordered Cancel and Save buttons, and left aligned lists of mixed capitalization blue links. Let’s design customer experiences that start and end with, well, the customers’ goals and needs—and let’s start with a blank slate. Use storytelling and interaction building blocks—not the building blocks of desktop publishing.

How Micro-Interactions Are Changing the Way We Communicate Online

At the heart of micro-interactions is the belief that immediacy, simplicity, voyeurism and constant communications matter. The success of the tools lend credence to the notion that quick, possibly frivolous, short bursts of communication are just as useful as more measured, reflective communications.
Web experiences will need to support communication dynamics that allow users to engage in something and report back to their communities in a Twitter-like fashion. Because they have the portability of a social graph, these micro-interactions will take place anywhere on the Web as people interact with their friends in more locations.

How Tiny Applications Are Remaking the Future of the Web

One could argue that we are seeing a third wave of software properties—propagated by RockYou—that is differentiated from previous waves based on customization, interactivity and viral distribution.
We believe that widgets provide the purest glimpse into the new, improved networked future. It’s an interconnected world where people will select, personalize, share and consume Web services wherever and whenever they choose. Effortlessly.

A Look at Games as Tools, Not Toys

Get to know the product by imagining it as a game… Use game-inspired techniques to create a better experience in non-game products.
People love instant feedback. It creates a sense of reward through a series of small, doable steps. In games, the steps to “winning” are visually represented and easily accessible. This may look like a coin-counting meter, a halo around your avatar or many other things. Mint.com’s dashboard provides instant feedback on your financial goals. It monitors how every swipe of your card affects your budget and net worth, and even how your spending compares to others in the same city.

Data Visualization for the Online Era

The next time you are tasked with providing users with consumption or performance information, or a way of comparing the past, present and future, think of the questions the users are trying to resolve. Then get creative and provide the answers visually. Consider how quickly they can use the information to decide to buy, change, stop or reconsider. Ensure the style of the visuals reinforces a brand personality. The result? Users who will feel empowered, engaged and appreciative that you have saved them precious time and allowed them to make a decision with confidence.

In case this report isn’t enough reading for you can download last year’ report: Desigining for Constant Change.

Why Twitter? and Problems with Microblogging

amit — Wed, 24 Sep 2008 04:19:16 +0000

I was asked recently to take a look at microblogging and suggest improvements to Twitter. First off…

Why Twitter?

It’s a difficult question to answer, even for those who do it regularly. You start off tepidly following your in-the-know co-worker and soon you are fanatically telling your 513 followers that you are:

Recently the NYTimes Magazine had a great article Brave New World of Digital Intimacy, which describes the growth, stigmas and motivations of microbloggers:

“Social scientists have a name for this sort of incessant online contact. They call it “ambient awareness.” It is, they say, very much like being physically near someone and picking up on his mood through the little things he does — body language, sighs, stray comments — out of the corner of your eye…

The growth of ambient intimacy can seem like modern narcissism taken to a new, supermetabolic extreme — the ultimate expression of a generation of celebrity-addled youths who believe their every utterance is fascinating and ought to be shared with the world…

This is the paradox of ambient awareness. Each little update — each individual bit of social information — is insignificant on its own, even supremely mundane. But taken together, over time, the little snippets coalesce into a surprisingly sophisticated portrait of your friends’ and family members’ lives, like thousands of dots making a pointillist painting.”

The article continues to describe how these short updates allow you strengthen your relationship with loose acquaintances. When that cute friend of a friend you once met at a party posts pictures of their trip to Buenos Aires, or that guy you met at a conference starts ripping apart the Mets bullpen, they are essentially reminding you they exist and offering you an opportunity to connect. Microblogging also provides an opportunity for following breaking news, a targeted audience for marketing your product, and (as opposed to blogging) requires little to no commitment.

Problems with Microblogging

Though Facebook still dominates (38.2 million unique visitors in August vs. 2.3 million for Twitter) Twitter is blowing up. I will never, ever, forget, the reason Twitter is so successful is because of it’s open API. Twitter’s popularity has grown because it has allowed 3rd party developers to build a whole world of enhancements to its core services. At first, finding ways to improve seemed like an impossible task. My initial thoughts about geographical, social and keyword visualization was already done. So was any enhancements to messaging attachments including, events, pictures and videos (a la Facebook Wall).

Rather then try to identify new features that Twitter could add, I took a step back and tried to identify the problems with their core service. When you first join Twitter, it’s not fun. You can follow the 5 people you actually know and search for the people you want to know (i.e. Henry Rollins, Kevin Rose), but you still aren’t involved/committed in the Twitterverse. Then there’s the reverse: Barack Obama is following 83k people. Given his busy schedule, how can he slice and dice all the updates he receives to, for example, reach out to all the Hillary supporters in NY who recently pledged allegience to Palin? Problem #1: How can you quickly find and engage in conversations around topics you are interested in?

Ok, I’ll be honest, some of my “virtual” friends I don’t really like. I’m not sure why I agreed to your Facebook friend request but I don’t want to receive any more emails inviting me to your poetry reading and I’m too lazy to defriend you. On the other hand, when my friend gets arrested I want a text message asap. Problem #2: How can you identify which notifications are important and send/receive them in the appropriate method and frequency?

Part 2 of this article will discuss the solutions to the problems above: special interest and contact groups.