MySpace Joins Google Alliance to Counter Facebook

November 1, 2007

By MIGUEL HELFT and BRAD STONE

MySpace and Bebo, two of the world’s largest social networking sites, today joined a Google-led alliance that is promoting a common set of standards for software developers to write programs for social networks.

The alliance now presents a powerful counterweight to Facebook, which, after opening up its site to developers last spring, has persuaded thousands of them to create programs for its users. The addition of MySpace, the world’s largest social network, and Bebo, the No.1 site in Britain, could also put pressure on Facebook to drop its own standard and join the alliance, called OpenSocial.

“OpenSocial is going to become the de facto standard for developers rights out of the gate,” said Chris DeWolfe, chief executive and co-founder of MySpace. Mr. DeWolfe said that developers using OpenSocial would be able to instantly reach 200 million users across various sites.

Google and others said they had invited other social networks, including Facebook, to participate in the alliance, whose existence was first reported Tuesday.

“The most important principle about openness is that everyone is invited to join,” said Eric E. Schmidt, Google’s chief executive.

Other members of the alliance include Friendster, Hi5, LinkedIn, Plaxo and Ning, as well as the business software makers Oracle and Salesforce.com. The creators of several of the most popular programs on Facebook, including Slide, RockYou, iLike and Flixter, have announced their intention to write programs conforming to the OpenSocial standards.

The alliance is not likely to erode the popularity of Facebook or immediately alter the dynamics of the social networking market. But it could help revitalize the sites of some of its members, which have seen their social networks eclipsed by the popularity of MySpace and Facebook. Orkut, Google’s social network, for instance, is popular in Brazil and a few other countries, but has failed to gain traction in the United States.

Google may benefit in other ways. As other social networks draw more users, it could sell more advertising on those sites. TheInternet search giant already has a $900 million advertising partnership with MySpace, and sells advertising on various other social networks. Its ads often appear inside the applications created by third-party developers. Google and MySpace have been in discussions about developing a common set of programming standards for about a year, the companies said.

At a news conference today at Google’s headquarters in Mountain View, Calif., Joe Greenstein, the chief executive of Flixter, whose applications allow users to share movie recommendations, demonstrated his program running inside MySpace.

“We are excited about OpenSocial,” Mr. Greenstein said. But he added that Flixter was not planning to pressure Facebook, where millions of members use the company’s program, to adopt OpenSocial. Mr. Greenstein said that customizing his company’s application that runs on Facebook to run on OpenSocial had been a painless task.Facebook declined to comment.

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Does a Microsoft-Facebook Tie Portend the Next Net Bubble?

November 1, 2007

By Clint Boulton

Though just a rumor at this point, the idea that Microsoft took a 1.6-percent stake in popular social networking site Facebook has some industry experts anticipating the next Internet bubble.

Ovum Research analyst David Bradshaw said the stake could open the floodgates for social-networking vendors going public with high valuations.

“Indeed, it is such a large amount that it makes me suspect that we’re in the run-up to another bubble in Internet company values,” Bradshaw told eWEEK. “A lot of other people will seek to go public,” he said, noting that the public is ripe for a new Internet bubble.

That’s right. Another Internet bubble. Another half-decade of sky-high valuations, lavish spending and high-tech incubators.

Fueling the high-cost frenzy for such properties as LinkedIn, Twitter, Bebo, Friendster and Digg, will be the desire to implement technologies from these companies into products for the enterprise, Bradshaw said.

Should some sort of Microsoft-Facebook union come to fruition, expect some of Facebook’s social-computing tools to be incorporated in Microsoft’s SharePoint collaboration software, said IDC analyst Mark Levitt.

“My take is that Microsoft is active enough in the consumer Web space that an investment in Facebook may not result in any crossing over into the enterprise for the foreseeable future,” Levitt told eWEEK. “But down the road, you are right that the Facebook’s experience and technology could find its way into Microsoft’s SharePoint solutions for enabling business social networking.”

However, Bradshaw said the stovepiped architecture of enterprise applications present some significant obstacles for vendors to address.

He said while social networks such as Facebook, of Palo Alto, Calif., and LinkedIn have made some strides on the recruitment ground, no one has cracked the selling of tools that enterprises themselves could adopt.

Aside from the challenges of negotiating social networking into enterprise systems, Bradshaw said that some problems with Facebook could preclude the company from rising as fast as some think and thwart his theory.

Those issues include privacy concerns associated with protecting minors from sexual predators and the ongoing legal action between Facebook CEO Mark Zuckerberg and his former roommates over the alleged theft of intellectual property.

Gilbane Group analyst Geoff Bock agreed that Facebook’s privacy issues could scare off prospective companies. On Sept. 24, the New York State Attorney General’s office subpoenaed Facebook for documents that demonstrate the company is not protecting underage users from potential predators.

Moreover, Bock downplayed the Internet bubble theory and has his own theory on the interest in Facebook.

“The reason for the valuation is that it is a platform, and it appears to be a platform for the Net natives, people who group up and live on the Internet all of their lives,” Bock told eWEEK. “What we’ve seen time and again on the Internet is that places, locations, platforms and environments that get a lot of eyeballs and start doing useful things can get pretty decent valuations in the public marketplace.”

Bock also took a dimmer view of social computing in the enterprise, at least in the near term. The analyst said that while Facebook and Google allowing mashups make them enormously popular, that doesn’t mean these companies will help social-networking tools transition into the enterprise.

Bock said that enterprise content-management platforms from IBM, EMC and Microsoft SharePoint don’t support social networking, noting that it’s not clear how social computing works inside the enterprise.

He said businesses would have to build relationships with customers to link the information, supply chain and value chain flows together.

“We don’t have good software yet that manages those links,” Bock said. “Every major company is working on defining and managing the links and I don’t think the Googles, Facebooks and Amazons understand the enterprise enough to do that.”

If any company comes close to socializing the enterprise platform, Bock said, it’s IBM with its Lotus Connections software.

Differences of opinion on the evolution of social-networking tools in the enterprise abound. IDC analyst Rachel Happe said she is moderately bullish on the notion of social networking moving into the enterprise, noting that “social networking provides a filter to information, and information is exploding online.”

In fact, Happe called eWEEK Sept. 26 from the Emerging Technologies Conference at MIT, in Cambridge, Mass., where she said research engineers from Cisco Systems and Intel talked about how they are looking to use social networking to “evolve search to information discovery and filtering.

“They see social networking as an underlying platform for a lot of applications,” Happe said, noting that her research showed that device companies are looking at social-networking applications and P2P (peer-to-peer) media distribution as something to bundle with their devices to better control information flow.

Meanwhile, Bradshaw concluded that with the evolution of this Web 2.0 world of social networking and collaboration, “Facebook is no more than a step along the way and that there’s something further to come.”

“Longer term, we believe that social networking sites have to evolve further,” he said. “Maybe we need bubble 2.0 to burst before we can get to that, but let’s hope not.”

Burton Group analyst Mike Gotta said while the industry is still trying to understand what people want from a social-networking platform, the opportunity is compelling in terms of how social networking can alter product- and service-delivery models and also influence customer and community relationships.

But is there a bubble coming?

“We are so early in this phase that it’s difficult to position this as a bubble per se,” Gotta said. “Instead, I view it as one aspect of broader societal, market and economic trends that are transforming business and organizational models.”

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LendingClub Moves From Facebook to Alums

October 31, 2007

by Kristen Nicole

LendingClub, the peer-to-peer lending service that took off on Facebook and recently announced its plans to expand, is doing so with partnerships with 10 alumni associations across the country.

This is set up in a similar manner to how the Facebook app worked, enabling alumni to lend and borrow money from each other. In establishing these new lending tools, LendingClub has set up co-branded communities with several alumni associations including Georgia Tech, Kansas Sate and my own alma mater, University of Michigan.

This is a unique method of expansion for LendingClub, which announced a round of funding for $10.26 million in August. What it’s doing is offering custom communities for existing organizations, which automatically harbors a level of trust tat would otherwise be absent.

Just like visiting the classifieds site set up for your college, you know that you’re more likely to deal with people that are trustworthy than going to a third-party classifieds site. Dealing with these LendingClub communities isn’t exactly like the classifieds example, because after college we all have a tendency to disperse, so it’s not as if you can drive across campus to pick up the new futon you bought from a Senior. But you get the point.

This route for expansion plays nicely with its initial tactic on Facebook. Growth in the peer- and micro-lending spaces has continued even in the past week, with eBay’s MicroPlace and Zopa’s new Listings section.

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Social networking sites are called ‘better than print’ for recruiting IT staff

October 30, 2007

By Leo King

Facebook, LinkedIn and other social networking sites have become the top tool for hiring IT staff, a new survey among recruitment companies reveals.

According to 58 percent of IT recruitment firms polled by the Association of Technology Staffing Companies, an industry body, such sites are more useful in finding staff than traditional print advertisements. And 49 percent said they were now more effective than internet banner advertising.

But seven in 10 recruiters said job boards provided a better quality of candidates, and two in 10 preferred cold calling. Only 9 percent saw social networking as providing the most appropriate candidates.

Atsco said that the headhunters were favoring special interest groups on the sites to find candidates with the right background and knowledge, over the “scatter gun” approach of finding the right people through print advertising. It admitted, however, that print and online recruitment advertising would remain an important way for employers and recruiters to build brand value and target senior level appointments.

Ann Swain, chief executive at Atsco, said the success of social networking sites as a recruitment tool was a result of their being interactive, as opposed to the one-way communication of print advertisements. She said they offered “a dynamic, two-way dialogue between recruiter and candidate” rather than “another passive form of advertising.”

“Social networking sites make it very easy for recruiters to become trusted advisers to candidates and genuinely get to know them,” she added. “Candidates often reveal far more about themselves on these sites than they would do on the phone or in interview.”

But the survey also revealed that recruitment firms were risking their valuable databases online. Only a quarter of staffing companies currently write restrictive clauses into consultants’ contracts, asserting ownership of databases and contact lists constructed by staff on social networking sites.

As “the lifeblood of the recruitment industry,” these databases needed much more security, Atsco said.

“This is currently an area where contract law is lagging behind social trends and an area of risk that the recruitment industry needs to pick up on,” Swain said.

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Big money in Enterprise 2.0

October 29, 2007

Radicati Group, a leading analyst firm that tracks the messaging and collaboration industry, recently released some suprising data on the size and growth of the business social software market. According to Radicati, the market is expected to be $920 million this year and blossom to over $3.3 billion by 2011. These revenue numbers are staggering and indicate the significant investment that has started in Enterprise 2.0 technologies by business customers. Radicati’s numbers are indeed bullish compared to other analysts like Gartner which published back in July that the social software market would grow from $226 million in 2007 to more than $707 million by 2011.

Regardless of which numbers are accurate, what’s clearly driving this market is the shift of consumer-oriented Web 2.0 tools to the domain of ‘enterprise social computing’ and addressing real business problems. Gartner highlights this trend in a recent study entitled ‘Facebook and the Emerging Social Platform Wars’ and points out “the usefulness of social networking in the enterprise is becoming more visible to large (BEA Systems, Sun, IBM, Microsoft and Oracle) and small (Leverage Software, Spoke, Userplane, Corespeed, Unisfair, Tacit Software, Socialtext) vendors.” Clearly Enterprise 2.0 is more that just hype and the value of social software is shaping up to create a billion (or multi-billion) dollar market opportunity.

Source: Socialtext’s blog


Microsoft to Pay $240 Million for 1.6% Stake in Facebook

October 24, 2007

SAN FRANCISCO, Oct. 24 — Microsoft has won a high-profile technology industry battle with Google and Yahoo to invest in the social networking upstart Facebook.

The two companies said on Wednesday that Microsoft would invest $240 million for a 1.6 percent stake in Facebook. The investment values the three-year-old Facebook, which will bring in about $150 million in revenue this year, at $15 billion.

The deal ends two months of jockeying between three major Internet players for the right to invest in and forge close ties with Facebook.

As part of the deal, Microsoft will sell the banner ads appearing on Facebook outside of the United States, splitting the revenue with it. Last year, Microsoft struck a deal with Facebook to run banner ads on the site in the United States through 2011.

The astronomical valuation for Facebook is evidence that Microsoft executives believed they could not afford to lose out on the deal. Google appears to be building a dominant position in the race to serve advertisements online. Fearing it might lose control over the next generation of computer users, Microsoft has been trying to match and in some cases block Google’s plans, even if that effort is costly.

“We are now stepping outside what is typically a business decision,” said Rob Enderle, the founder of the strategy concern Enderle Group. “This was almost personal. I wouldn’t want to be the executive that’s on the losing side at either firm.”

A Google spokesman said the company had no comment. Facebook is planning to comment on the deal later today.

Representatives of Facebook say the investment will allow it to add employees, expand overseas and aggressively develop its own advertising system that will tailor ads to the personal preferences users make public on their Facebook pages. Facebook is expected to introduce such an ad network at an event in New York next month.

The Microsoft investment throws the value of the holdings of Facebook investors into the stratosphere. Mark Zuckerberg, the 23-year-old Facebook founder who dropped out of Harvard to build the company, owns a 20 percent share which is now valued at $3 billion. Accel Partners, the venture capital firm that invested $12.7 million in May 2005 and owns 11 percent of Facebook, now holds stock worth $1.65 billion.

The high valuation also represents a belief that Facebook is creating an important new operating system — one that exists on the Web instead of on personal computers. In May, it opened its platform, inviting other companies and third party developers to create tools for the site and share in the advertising revenues.

The move unleashed a flurry of activity around the social network. More than 4,000 applications, like games and music-sharing tools, have since been created for the site, which in turn has accelerated Facebook’s membership growth. The company says it now has more than 42 million members and will exceed 60 million members by the end of the year.

“Once a social operating system takes over a country it’s like it becomes the native language of that country,” said Lee Lorenzen, a venture capitalist who is bullish on Facebook and notes that Google’s Orkut dominates Brazil, Friendster dominates the Philippines and Facebook is becoming the dominant forum in the United States, Canada and Western Europe.

Facebook boosters say that social networking represents the future of online activity.. Advertisers are attracted to these properties because they offer an opportunity to aim ads to particular users interested in their product or service.

Mr. Lorenzen and other Silicon Valley investors are often dismissive of MySpace, Facebook’s larger rival, which has more than 110 million active users and is owned by the News Corporation. “MySpace is not based on authentic identities. Facebook is based on who you really are and who your friends really are. That is who marketers really want to reach, not the fantasy you that lives on MySpace and uses a photo of a model,” he said.

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