Facebook’s S-1 filing to IPO gives a little insight into their business model, plans for growth, and the quandary that both Facebook and Google face.
The business model has, on the surface, seemed fairly simple. As discussed in this FastCompany article ‘What is Facebooks Business?’, the main strategy is to create a place where people want to hangout, upload content, update their status, and exchange messages. Targeted ads placed next to that content accounted for $3.2 billion of the $3.7 billion that Google generated last year. Third party apps (mostly Zynga) brought in the other $500 million.
The plans for growth are really limited to three options. To approach the $100 Billion valuation of the IPO they will have to bring in more people, serve more ads, or raise the price of those ads. In all likelihood they will attempt to do all three of those things. With 845 million users and China off limits, increasing the number of users is not a sustainable long term strategy, since there are only 7 billion people on the planet. So they will need to focus on improving the service to increase the time users spend on Facebook, so that they are able to push more ads, while at the same time collecting as much information from you to better target the ads, thus creating a better conversion rate, and the ability to charge more for those ads. Luring users in with features they enjoy, while at the same time enticing them to give up more personal information is really the strategy they must employ. The recent Timeline feature is a perfect example of this strategy. A tool that essentially attempts to extract as much information from you about your life history is packaged as a ‘feature’ that allows you to tell your life story. Will users buy this? And for how long?
The quandary that both Facebook and Google face is a delicate balancing act between keeping users and advertisers happy. They both seem to be in a race to extract as much information from their users, so that the profiles they can build for their advertisers assure better targeting, and ultimately better conversion rates for the advertising. The real trick is to keep both groups happy simultaneously.
What does this mean for the small business owner who has an online presence to worry about? The advice for any of my Indianapolis SEO and Online Presence Management clients would be that there are amazing opportunities for search engine internet marketing. Google Adwords allows you to purchase ad placement in front of people who are already looking for you. Although not as effective as organic SEO for conversion, it is the quickest route in the short term to Google front page placement for your business. For long term success, organic SEO can achieve first page rankings that will have higher conversion rates than Pay-Per-Click. In the even longer term, it is important to keep abreast of trends such as the current privacy issues that users seem to be having more frequently. As Google and Facebook both continue the delicate balancing act between keeping users and advertisers happy, you need to know whose stock is rising and falling with users, and manage your online presence accordingly.
Today is a day of protest against two bills currently before congress, the Stop Online Piracy Act (SOPA), and it’s slightly less offensive little brother, the Protect IP Act (PIPA). You’ve probably heard about these acts, and you may or may not know why defeating them is so important for the future of the internet. If you’ve heard about this but don’t know the details, today is the day to get up to speed on what’s going on. Get the basic facts about the bills, read about it here in Wikipedia (Even today, when Wikipedia is ‘blacked out’, you can still access this direct link). Read this brilliant analysis of why this bill is so dangerous on mashable.com.
To mark today as a day of protest, and to raise awareness of SOPA and its dangers, some major and many minor websites have taken some major steps. Wikipedia has ‘gone dark’ for 24 hours, replacing the front page of the English version of the website with the following:
Reddit has also gone dark, but only for 12 hours:
Google has placed an ominous black box over there logo, and added this link to a page which advises people on what they can do to help defeat SOPA:
Craigslist added a black SOPA page, also with links to try and get more people involved in the fight against SOPA:
WordPress added a black front page, also with SOPA warnings and links to a call to action:
Hopefully this unprecedented action by these major websites will be a wake up call to enough people that we will have reached a tipping point in the battle against SOPA. Even before today’s actions, there are signs that the groundswell of noise from the tech community may have been heard in Washington. Last Saturday, the White House came out publicly against SOPA. A few hours later congress announced that the Bill had been shelved. SOPA is not dead, but perhaps it is mortally wounded.
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On December 19th, two US Senators, Herb Kohl and Mike Lee, the Chairman and ranking member of the Subcommittee on Antitrust, Competition Policy, and Consumer Rights, sent a letter to the Federal Trade Commission (FTC) calling for an investigation of Google’s trade practices. In the letter, which you can read here, they cite the testimony from Eric Schmidt, Google’s Chairman who testified before them in September. They specifically cite his admission that Google has a monopoly on search. They go on to cite the extent to which search now pervades commerce. Statistics they cite include 240 million Americans use the internet, eCommerce was $170 Billion last year, and 92% of Americans use search engines. They go on to state that Google started as a search engine who’s only goal was to redirect users to relevant sites. They state definitively that Google’s business model has changed dramatically in recent years. They say that Google has made numerous acquisitions, and question whether it is possible for Google to remain an unbiased search engine when they have holdings in so many vertical markets where they tend to favor their properties. They point out that Google has been known to penalize certain websites in their search rankings, and questions whether Google uses these penalties fairly, or to favor their properties or maintain their domination of search. They go on to state that they are not acting out of an interest to protect any specific competitor, but to maintain robust competition in search, especially the mobile search market.
Google’s main response has been a June blog post that they keep referring back to, that according to Google, states their 5 driving principles that will stand up to any non-competitive scrutiny. Those five principles are:
- Do what’s best for the user.
- Provide the most relevant answers as quickly as possible.
- Label advertisements clearly.
- Be transparent.
- Loyalty, not lock-in.
(Read more about these principles here.)
Besides citing these five guiding principles, there other main defense to anti-competitive charges seems to be the “competition is only a click away” argument. This kind of arrogance, in light of their own admission of nearly complete dominance of the search space, is just the kind of hubris that will make me root for the FTC in the coming battle.
On September 28th Jeff Bezos announced the Kindle Fire, Amazon’s full color entry into the tablet computing market. After a month and a half of speculation and hype the new Kindles shipped yesterday, a day ahead of schedule. The hype included stories that reported the Kindle Fire had pre-launch demand numbers higher than the pre-launch demand numbers for the iPad, and analysts estimates that Amazon was losing $50 on every Kindle Fire sold. The reports by October 5th were that Pre-orders for the Kindle Fire had reached 50,000 per day.
This week, reviewers finally got their hands on the Kindle Fire, and the reviews seemed to be mixed, but mostly positive. Most of the reviews that were negative seemed to be when they compared the Kindle fire to the iPad, which hardly seems fair when the iPad still has a $499 price, while the Kindle Fire has a $199 price. Here’s a good summary of the reviews of the Kindle Fire from Engadget, Gizmodo, Wired, and Mashable.
To step back from the hype that is trying to position the Kindle Fire as an “iPad Killer”, you need to think about what Amazon is trying to accomplish with the Kindle Fire. Are they trying to challenge the iPad? If they were, wouldn’t they have made a larger device, raised their price point a little and tried to compete head on? Apples core business is hardware sales. Amazons core business is content. Their goal was to develop a content delivery tablet for the masses, which will then give them a delivery medium for their core business, selling content. If the price point for the Kindle Fire allows them to put the device in millions of hands that will then begin purchasing content, do they even care how it stacks up against an iPad?
While everyone else gets caught up in the hype and the inevitable iPad comparisons, check out this interview in Wired Magazine, Jeff Bezos Owns the Web in More Ways Than You Think. It lays out Jeff Bezos’ post-PC vision of the web, and how it is different than Apples vision.
I just received my Own Kindle Fire and have been playing with it for a couple of hours. Initial impressions? It’s like a little slice of an iPad. If you were used to using an iPad, it may seem small. I’ve used an iPad, but I don’t own one, and so to me it seems big enough for what it does. Web sites looked good. I emailed a word document to my new kindle email address and was able to view it. It came pre-registered with my Amazon account and credit card info, so I had purchased a book within 15 minutes of unpacking it, which is< I believe, the whole idea. Also, I tried to load music, and found out that “free” storage in the cloud of all media really means free storage in the cloud of any media you purchase from Amazon. If I want to store my existing mp3 library of music, that would be an additional $20/year for 8 gig of space. I was able to hook the Kindle fire up to my computer and move my 1.5 gig of mp3’s directly onto the Fire, and I am able to play them, but if you have a lot of your own music or videos, don’t expect to move them all to the cloud and store them for free, and the 8 gig will be chewed up pretty quick if you have a large library of media content.
So how does the Kindle Fire stack up? As an “iPad Killer”? Maybe, maybe not, the jury is still out. As a content delivery portal to fulfill Amazon’s vision? A definite home run, no question.