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Venture fund to help social-networking startups

Posted in Board Of Intellectual Capital, Community, Economy, FaceBook, Gerbsman Partners, Intellectual capital, internet, Investments, Market research, Mobile, Social Networks, Strategy, Uncategorized, Venture Capital, Web 2.0 on October 22, 2010| Leave a Comment »

Article from SF Gate.

A partnership backed by Facebook, Amazon.com, Comcast and other major technology firms on Thursday established a $250 million fund to invest in startups that hope to capitalize on the growing reach of social networking.

The “S Fund” will be led by powerhouse Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, an early investor in Internet companies such as Amazon, AOL and Google.

The fund’s backers are betting that the success of Facebook, which has more than 500 million members worldwide, is only the start of the next wave of “incredible and disruptive innovation,” Kleiner Perkins partner John Doerr said.

So the investors want “to find and fund and accelerate the success of these new kinds of social entrepreneurs,” Doerr said during a news conference hosted by Facebook.

The six initial investors are Facebook; e-commerce giant Amazon; cable TV and broadband service provider Comcast Corp.; social games leader Zynga Games Network Inc.; communications and entertainment giant Liberty Media Corp.; and investment bank Allen & Co. LLC.

Joining Doerr on stage at the event were Facebook chief executive Mark Zuckerberg, Amazon chief executive Jeff Bezos, Zynga chief executive Mark Pincus and Bing Gordon, former chief creative officer of video game publisher Electronic Arts. Gordon, now a partner at Kleiner Perkins, will lead the fund.

“Social is going to be a breeding ground for great CEOs,” Bezos said.

Bezos also said he wants to find startups that will use his company’s platform of cloud computing services, called Amazon Web Services.

“These social apps do tend to be very viral, and when they hit, they hit fast and they can grow violently,” Bezos said. “That really does play to the strengths of Amazon Web Services.”

Zuckerberg said the fund will help entrepreneurs who are trying to build social applications and services “from the ground up.”

“The opportunity is there in the next five years or so to pick any industry and reimagine it in the social Web,” he said.

The fund’s first $5 million investment went to CafeBots Inc., a Palo Alto startup that is working on a “friend relationship management” platform to help consumers make better use of their social network.

The startup, the brainchild of three Stanford University graduates, hasn’t released its product and is still in stealth mode.

CafeBots co-founder Michael Munie, 28, said that in addition to the money, inclusion in the fund gives his startup access to the entrepreneurial expertise of Kleiner Perkins, Facebook and the other investing companies.

As examples of the kind of “social Web” firms that could be funded, Kleiner Perkins trotted out representatives of several companies it previously invested in, including Flipboard Inc., which earlier this year launched a popular iPad app that creates a personalized magazine-style display of Facebook, Twitter and other news media feeds.

Debunking the Myths About Facebook’s Stock Split

Posted in Board Of Intellectual Capital, Economy, FaceBook, Investments, Market research, Social Networks, Strategy, Technology, Venture Capital, Web 2.0, tagged boic, FaceBook, facebook ipo, Gerbsman Partners, ipo gossip, IPO news, SEC filing from Facebook?, Social Networks on October 3, 2010| Leave a Comment »

Article from GigaOm.

“What is it about a stock split that sets off speculation? It is one of the most mundane and technical developments in the stock market, with little or no impact on a company’s fundamental performance, and yet news of a split can set a stock’s valuation soaring.

It’s a common enough phenomenon in the public markets and, as Facebook shows, it can happen to privately held companies too. On Friday, Facebook said each of its shares would split into five shares, worth one-fifth of its former value. It was a mere formality intended to help bring Facebook’s share price back down into the range of its peers, a move helpful in granting stock units to newer employees.

Hint: More shares don’t make a higher value

This is pretty boring stuff. And yet much of the coverage of the split made it sound like it was magically pumping up Facebook’s valuation. Some sites, which only a week ago estimated the company to be worth $25 billion, now said it was worth $32 billion. That would mark a 28 percent surge in one week, with little news besides the stock split (and David Fincher’s unflattering movie, which certainly couldn’t have helped).

Adding to the speculation about Facebook’s value was Peter Thiel, a board member who said the company was worth $30 billion. Even the Financial Times pegged the startup’s value at $34 billion, based on the prices paid on Sharespost, an online secondary-market for stocks of privately held companies.

I defer to Thiel’s knowledge of Facebook’s financial details. But I also respect common sense, which tells me that a company making $1 billion in revenue this year can in no rational way be valued at $30 billion right now. And besides, valuing a private company is more art than science, a process of building consensus among insiders, outside investors and supposedly independent appraisers. Consider that Google’s underwriters initially valued its 2004 IPO as high as $37 billion. Google debuted a few months later worth $23 billion.

Trading volume is too low to make an accurate valuation

While I also think sites like Sharespost offer a potentially valuable service by facilitating trading of privately held stock, there is a big risk in using their data to value a company. Most of the recent trades of Facebook shares that have been completed have been between $70 and $76 a share, a range that implies a value for the company between $31 billion and $34 billion a share.

But look closely, and you’ll see there have only been ten trades in Facebook’s stock so far this year. Companies can be hard to value in illiquid markets, and one trade a month is more than illiquid — it’s a drought. In such a market, two Facebook shareholders could sell 500 shares back and forth to each other and invent whatever valuation they desired. And nobody would be the wiser.

A legal loophole could create pent-up demand for an IPO

In fact, Facebook shares have been so scarce on the secondary market that there must be a substantial premium to pay simply for the right to own them. This is by design. Back in 2004, Google was pressured to go public against its wishes, in part because of a securities law that required companies with more than 500 shareholders to disclose financial data. Today, Facebook has 1,700 employees. Most of them must hold some equity in the company. But Facebook doesn’t plan to go public for another two years.

Why? Facebook created a loophole in the securities law. It handed out restricted stock units to employees that could never be sold to another person until Facebook was acquired or until six months after an IPO. Then it won the SEC’s permission to delay an IPO as long as those stock restrictions remained in place. Presumably, the few shares you could buy on a secondary market like Sharespost were issued before the restrictions went into place.

This was a cunning move, allowing Facebook to keep private and disclose only the information it wishes to. But one day it could come back to haunt the company. Eventually, employees will demand an IPO so they can cash in on their long-held shares. Then six months after the IPO, when insiders can freely sell shares on the public market, the pent-up demand will be unleashed, driving down the stock price with the sudden supply.

And if that happens, Facebook’s market value could be worth considerably less than $30 billion.”

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Android phones look to expand app offerings

Posted in Board Of Intellectual Capital, mobile 2.0, Strategy, Technology, Web 2.0, tagged Android, appstore, boic, Droid X, Ebay, Gerbsman Partners, google, Google Checkout, htc, iphone, itunes, Microsoft, Ngmoco, Norwest Venture Partners, PayPal, Pinger, POP, PopCap, RIM, Smaato Inc, target corp, Zecter INc., ZumoDriva, ZumoDrive on September 2, 2010| Leave a Comment »

Article from SF Gate.

“Pinger Inc., a San Jose developer of mobile applications, can get twice as much in sales from programs for Apple devices than for phones powered by Android software. That’s not stopping it from creating its first Android app.

“Even if the revenue generation might be less, we think it’s still going to be significant,” said Joe Sipher, chief product and marketing officer at Pinger, which makes text-messaging and other programs. “Our users are saying, ‘Gosh, I switched to an Android phone. Can you put your Textfree app on Android?’ ”

Pinger and other programmers don’t want to miss out on the $40 billion that Booz & Co. estimates will come from sales of apps by 2014, much of it from Google Inc.‘s Android platform. Android unseated Research In Motion Ltd.‘s mobile operating system as the top U.S. smart phone software last quarter, making developers more willing to put up with its drawbacks, including higher app-creation costs and an online marketplace some users consider harder to navigate than Apple’s App Store.

PopCap Games Inc., maker of the Bejeweled and Plants vs. Zombies games, doesn’t have any titles in the Android Market. But by mid-2011, the Seattle company expects to release games simultaneously for iPhone and Android handsets.

“Even though we are not making any money on Android right now, we have pretty high hopes for it,” said Andrew Stein, PopCap’s director of mobile business development. “There’s really no reason why users shouldn’t consume and buy content to the same extent on an Android phone as they are on an iPhone.”

Android phones like Motorola Inc.’s Droid X and HTC Corp.’s Droid Incredible are gaining devotees. Stein expects the revenue generated from Android games to approach that of PopCap’s iPhone versions by the end of 2011.

Apple way ahead

A wide variety of apps – as well as the availability of the most popular ones for games, location, texting and content – is critical to luring phone buyers. Android lags behind Apple by that measure. Apple has more than 250,000 apps available, compared with about 70,000 for Android.

Like Apple, Google takes a 30 percent cut of revenue from apps sold in its marketplace.

“We want to reduce friction and remove the barriers that make it difficult for developers to make great apps available to users – across as many devices, geographies and carriers as possible,” said Randall Sarafa, a Google spokesman.

Google may be taking steps to remedy some of the problems that make Android apps less lucrative to developers.

Apple iTunes users can do one-click shopping because iTunes saves their information. While Android buyers can do the same if they sign up for Google Checkout, that service doesn’t have as many users.

Android Market also lacks features for in-app purchases, which some developers of Apple apps use to sell new game levels or virtual products, said Tim Chang, a venture capitalist at Norwest Venture Partners, whose investments includes Ngmoco of San Francisco, which makes games for the iPhone.

Google is in talks with eBay’s PayPal to add its payment service, three people familiar with the matter said last month. That may ease the process. Google may also offer tools that let developers sell subscriptions and virtual goods from within apps, Andy Rubin, Google’s vice president of engineering, said in June.

For now, producing programs for Android isn’t as lucrative. Loopt Inc., the maker of an app for locating your friends on a map, and Zecter Inc., which offers the ZumoDrive file storage service, said they make less from the sales of their Android apps than they do from their iPhone versions. Neither of the Mountain View companies would specify the difference.

Developers hesitant

“There’s no question Android has a lot more phones out than six months ago, but that’s very different from saying Android is a more appealing platform for developers,” said Sam Altman, chief executive officer at Loopt.

ZumoDrive makes money by getting people to download the free program and then upgrade to a paid version. Thirty percent more iPhone customers do that, said CEO David Zhao.

Besides generating fewer downloads of paid apps, fewer people click on ads in Android programs, according to data from Smaato Inc., a Redwood City mobile-ad firm. In July, the iPhone had a click-through score of 140 in the United States, compared with 103 for Android, Smaato said.

Plus, the market share Gartner Inc. measures for Android – 34 percent in the United States last quarter – doesn’t mean there are that many customers for apps, said Pinger’s Sipher. Some Android phones don’t have the ability to access Google’s app store and the proliferation of models means some programs won’t work on some phones.

App creators have to contend with various versions of Android and differences in screen resolution and keyboards. That makes it more expensive to test programs and can force developers to design for the lowest common denominator, said Bill Predmore, president of POP, which builds mobile applications and ads for such clients as Google, Microsoft Corp. and Target Corp.”

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Facebook’s Places raises more privacy debate

Posted in Board Of Intellectual Capital, FaceBook, Market research, Social Networks, Technology, Web 2.0, tagged aclu, bing maps, boic, FaceBook, facebook credits, facebook places, Foursquare, Gerbsman Partners, google maps, Yelp on August 23, 2010| Leave a Comment »

From SF Gate.

“Facebook‘s latest move to add “where” to the list of personal information members share with the world gives the social networking firm yet another tool in its march to become the Internet’s most dominant destination.

And yet predictably, the new Facebook Places check-in feature has ignited a new round of debate over whether the Palo Alto firm is doing enough to safeguard its members’ privacy.

Facebook Places began rolling out Wednesday night to the company’s members in the United States with an upgraded application for the iPhone and iPod Touch that includes an icon that resembles a Google Maps location pin.

Launching the app lets members share their current location, which is automatically plotted by their phone’s GPS technology. They can tag Facebook friends who might also be there and use a “Here Now” function to see who else might be in the area. On Facebook.com, the Here Now map is powered by Google-rival Microsoft’s Bing Maps.

Tapping into trend

Places taps into the same social sharing game of “check-in” that has caused technology pundits to declare startups like Foursquare and Gowalla as part of the latest hot tech trend. This year, microblogging service Twitter also launched a location-tagging feature to its tweets and online recommendation service Yelp enabled check-ins on its mobile application.

But Facebook vice president Chris Cox said Places represents more than just a game, because it uses virtual technology to connect people in the real world. Over time, locations can accumulate stories and memories that later generations can access, Cox said.

San Francisco’s Ocean Beach, for example, could be tagged as the place “where your parents had their first kiss,” Cox said. “What starts to happen is the physical reality we’re in comes alive with the human stories that we’ve told there.”

Facebook worked with other location-based services to integrate their apps with Places.

“This basically validates that we’re on to something, that this will be something much, much bigger going forward,” Holger Luedorf, vice president of mobile and partnerships for Foursquare, said during a Facebook news conference.

But analysts say Facebook’s entry into the location-based services could blow the others out of the water because the social network has such a broad reach with mainstream audiences. Worldwide, Facebook has more than 500 million active members who span all age and marketing demographics. Foursquare, by comparison, has at least 3 million members and is growing quickly.

Working with Facebook may give companies like Foursquare “a little advantage, but the advantage is minimal and it’s not going to last very long,” said Susan Etlinger, a consultant with the Altimeter Group of San Mateo. “My Aunt Sue might not be on Yelp, but I know she’s on Facebook.”

Places also completes the public picture of members, who are already encouraged to share who they are, what they are doing and when. Facebook has become one of the Internet’s top destinations for finding news, viewing photos and watching video. And according to Internet researcher eMarketer, Facebook is on track to bring in $1.28 billion in online advertising in 2010, up from $835 million this year. The company is also developing its own virtual payment system, Facebook Credits.

Facebook officials sidestepped questions about how the firm plans to generate revenue from Facebook Places.

But analyst Augie Ray of Forrester Research Inc. said Places enters Facebook into the emerging mobile advertising space.

“There is no question that knowing where people are and what places they visit will be valuable data for Facebook and its advertisers,” Ray said. “It will permit Facebook to better understand individual’s likes and dislikes, not simply based on what buttons they click, but on their actual real-world behavior. And knowing where an individual is at a given moment will permit Facebook to serve better and more relevant ads based on user location.”

ACLU raises questions

But the San Francisco office of the American Civil Liberties Union immediately questioned whether Places has again left Facebook members open to privacy problems.

“Facebook made some changes to its regular privacy practices to protect sensitive location-based information, such as limiting the default visibility of check-ins on your feed to ‘Friends Only,’ ” the ACLU’s Nicole Ozer wrote in a blog post. “But it has failed to build in some other important privacy safeguards.”

In a sharply worded rebuttal, Facebook spokesman Barry Schnitt said Places “sets a new standard for user control and privacy protection for location information. We’re disappointed that ACLU’s Northern California office ignores this and seems to generally misunderstand how the service works.””

Ning will make all users pay

Posted in Board Of Intellectual Capital, boic, Business models, Economy, FaceBook, Investments, LinkedIn, Market research, Social Networks, Strategy, Web 2.0, tagged boic, Charles Schwab Corp., FaceBook, Gerbsman, Gerbsman Partners, Intel Corp, Jive Inc, Jive Software Inc., Kleiner Perkins Caufield & Byers, LinkedIn corp., Marc andreessen, Nike Inc., ning inc, PayPal, twitter, Wedbush Securities Inc., yammer on August 12, 2010| Leave a Comment »

Here is an article from SF Gate.

“Ning Inc., the social-networking site co-founded by venture capitalist Marc Andreessen, did what many young Web companies only dream of: It got customers weaned on free services to start paying.

Since telling users in April that it would stop offering the means to build and operate social networks for free, Ning’s paid user base tripled to 45,000, with memberships starting at $2.95 a month. The privately held Palo Alto company is adding paying subscribers at the rate of 5,000 a month, three times what it was before.

“A very large percentage of economic activity is shifting online, and it makes sense that there are more services that are going to charge,” said Andreessen, the co-founder of Netscape Communications Corp., who serves as Ning’s chairman. “It also means there are going to be more people willing to pay.”

Few are charging

Ning is one of the few social-media sites charging users, following a path cut by media and entertainment providers, which have experimented with fee-based services. Founded in 2004, the same year as Facebook Inc., Ning failed to turn a profit with its original strategy: offering most services for free and charging a monthly fee for extra features. Co-founder and Chief Executive Officer Gina Bianchini resigned in March, and 42 percent of the staff was laid off in April.

Social-networking tools on the Web are widely available for free. Facebook, which has more than 500 million users, is expected to generate at least $1.4 billion this year, mostly from the sale of ads, two people familiar with the matter said last month. Twitter, with more than 100 million users, began running ads on its site this year.

With a large population of Web users relying on Facebook for basic social services, like keeping track of close friends, there’s an opportunity for other sites to charge for more unique services, said Lou Kerner, a social-media analyst at Wedbush Securities Inc. in New York.

“Facebook has won the free social media race,” said Kerner. “What you’re seeing in the marketplace is folks who are trying to find out business models that are more niche-oriented.”

For Jive Software Inc., that niche is business. The startup, also based in Palo Alto, sells social-networking and online collaboration tools to corporations, including Nike Inc., Intel Corp. and Charles Schwab Corp. Jive’s services start at $100 per user per year, and many customers pay for at least 10,000 users to start.

“The use of social software in the consumer world has no doubt fueled the interest level” among business users, said Tony Zingale, Jive’s CEO. The company, which received a $30 million investment last month led by Kleiner Perkins Caufield & Byers, expects bookings of as much as $25 million in the last three months of the year, he said.

Paying subscribers are an attractive asset to venture capitalists, who are often asked for money from Internet startups planning to cash in on advertising.

“Ad-driven is a lazy model,” said Dave McClure, a startup adviser and venture capitalist in Silicon Valley. “If there is value, then there probably is a paid relationship that works there at some point,” he said.

Business networking site LinkedIn Corp. generates some revenue by selling professional services, like tools for finding and recruiting job candidates. Meetup Inc., a service for coordinating social events, charges organizers a fee.

The “freemium” model of charging a portion of users is nothing new. One of the earliest examples is PayPal Inc., founded in 1998, which made its payment service free to buyers of products and services so that many people would use it.

“You need free users to enhance the overall value for the product,” said David Sacks, one of the founders of PayPal, who now runs enterprise social-media startup Yammer.”

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