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.


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

Hulu.com Launches Private Beta, Makes Very Good First Impressions

October 29, 2007

News Corp. and NBC Universal are certainly banking on it.

After seven months of preparations, delays and wisecracks about its quirky name, the two companies are finally lifting the veil Monday on their new Internet video service, Hulu.

Hulu programming will begin appearing Monday at the Web sites of its distribution partners, such as News Corp.’s MySpace, Yahoo!, Time Warner portal AOL, Microsoft site MSN and Comcast.

And Hulu.com, which will have additional features that won’t be available at the partner sites, is launching a private beta test Monday. The beta will start with a few thousand users who register their e-mail addresses at the site and will gradually expand its reach in the coming months.

It’s the latest and most ambitious effort by the television industry to reach viewers online. But in some respects, it’s also the most perplexing.

In addition to distributing content at leading portal sites, Hulu is also establishing a brand-new destination site at Hulu.com – not a simple task in an increasingly crowded online video market. Moreover, it will be competing for traffic with its owners’ other Internet properties, such as Fox.com and NBC.com.

Finally, Hulu will be run as a joint venture between two hard-nosed competitors, raising inevitable questions about whether or how News Corp. and NBC Universal, which is owned by General Electric, will play nice with each other.

But such concerns don’t appear to bother private-equity firm Providence Equity Partners, which has just invested $100 million in Hulu. And Hulu Chief Executive Jason Kilar, a former senior executive at Amazon.com, downplayed potential worries about the JV dynamic.

“This could not happen without their commitment,” Kilar said. “I feel very proud to say how they’ve come together.”

Hulu provides a vivid illustration of how much TV network attitudes have changed – and not changed – since YouTube crash-landed on the entertainment landscape two years ago.

While the networks were initially hesitant about making their programming available online, Fox, NBC, CBS, Disney’s ABC and Viacom all do so today to varying degrees. Hulu represents the latest step in these efforts.

Hulu and its distribution partners will feature streaming video of full-length prime-time programming and clips from Fox and NBC, as well as content from sibling networks such as Bravo, Sci Fi, FX and Fuel TV and USA Network. CNET, E! Entertainment Television and Sundance Channel will also provide programming.

All Hulu content, including movies, will be viewable free of charge and supported by advertising. Full-length TV shows and movies will open with a “brought to you by” title card that will appear for several seconds. Once the programming gets under way, a banner ad will rest at the top of the screen unless a viewer chooses the full-screen video option. In addition, about two minutes of video advertising will be inserted every 22 minutes or so.Clips and other short-form video will also feature a banner ad at the top of the screen, as well as overlay ads that will periodically appear at the bottom of the screen but won’t interrupt the flow of the programming. The overlay ads can be clicked for more information about the sponsor.

Hulu.com will have extra features not initially available at its distribution partners’ sites, including the ability to e-mail links to full episodes and whatever portion of an episode a viewer chooses to share.

Hulu.com visitors will also be able to embed full episodes and clips on their own Web sites and blogs. Embedded programming will retain all advertising. It’s a somewhat daring move, given the potential squeamishness that advertisers may feel about where their marketing messages will end up appearing.

All of these features illustrate how eager News Corp. and NBC are to reach viewers online. But in other ways, Hulu also demonstrates the degree to which the companies want to retain control over how consumers view and make use of their content.

For instance, contrary to what News Corp. and NBC indicated when they first announced their plans in March, Hulu won’t enable viewers to create mashups of its programming. Nor will it accept uploads of user-generated videos. Instead, Hulu has assigned part of its team to create clips and video “montages” for users.

Why impose such restrictions? “We’re very focused on premium content,” Hulu’s Kilar said.”We’re not seeking to have a user-generated content service. There are many other services out there. …We want to [break] new ground, as opposed to ground already being served by other companies.”

But shifting more power to consumers has been part of the core appeal of YouTube and other video sites. Differentiation from the competition is fine, but when the competition is eating your lunch in terms of traffic, taking a page from their playbook probably wouldn’t hurt either.


Hulu is still a joint venture exclusively between NBC Universal and News Corporation. It exists as a website through which users can stream a collection of TV shows, movies, and short clips on-demand for free without any limits on how many times you can view each video. Hulu also exists as a distribution network of premium content for several partner websites – AOL, MSN, MySpace, Comcast, and Yahoo – that will display Hulu’s videos for free but in their own branded players. In addition to these partnerships, users themselves form a viral distribution network of sorts since Hulu allows its videos to be embedded in any website and shared via email. Hulu makes money in all cases from advertising, which it displays in and around the videos it serves.

A couple of things that Hulu is not: a repository of user generated content like YouTube or a download service like iTunes Store. All of the video on Hulu is premium content and users don’t have access to any uploading capabilities. TV shows and movies can only be streamed through Hulu or one of its partners’ Flash players, not downloaded to your desktop or portable media player. While it’s understandable that NBC and News Corp. want to focus exclusively on premium content, it’s a shame that we can’t (yet) download videos from Hulu (either in an ad-supported format or for a fee). Perhaps this is something to look for in the future, although company representatives were mum on whether they had plans for it.

As for the content on Hulu, TV shows will come from Fox and NBC, and over fifteen cable channels including Bravo, E!, FX, SciFi, Sundance, and USA. Movies will come from Fox and Universal, and following a deal signed just this Friday, from Sony and MGM as well. Hulu says many of its short clips will come from independent content providers, and it’s also signing licensing deals with others such as Smithsonian and the WWE. Overall, Hulu’s collection is impressive and we can anticipate seeing it grow even more in the coming months. Representatives say that they will listen to consumer demand to determine which shows and movies to add next. Click here to view a full list of the videos currently in Hulu’s collection.

In terms of availability, Hulu as a website will not be available to the public for another few months. Its collection, however, will be rolled out on its partners’ websites over this coming week so we can expect to see most, if not all, of Hulu’s content on AOL, MSN, MySpace, Comcast, and Yahoo very soon. Just when particular videos will be available through Hulu – and how long we can expect them to stay on Hulu – will vary from video to video. However, as a general rule TV shows will be available on Hulu by midnight Hawaii time after they debut on normal television. As another general rule, Hulu will keep distributing TV shows until five weeks of newer episodes have passed, at which point older shows will presumably just disappear from the site.

This is Hulu’s greatest weakness. Try as it might, it has not yet escaped the programming mentality of broadcast television. Hulu still imposes a schedule of sorts on Web viewers, even if that schedule comes with a five-week window of flexibility. But on the Web, five weeks may not be enough. Appointment TV just doesn’t make sense in a medium where time slots are thrown out the window and the available inventory of videos is counted in the millions. Hulu may be limiting its appeal by not keeping all of its videos up indefinitely (who knows when a particular video clip could take off as the next viral hit?). It also will be interesting to see how this limit affects embedded TV shows, which may just stop functioning after too much time. Similarly, movies and short clips will be added and removed from the site in an undisclosed (or uncertain) manner, although Hulu reps say they will try to add movies that are in demand. Hulu will not only have new releases but older movies as well, and only ten movies will be available to start.

Now for the design and features of Hulu.com itself. First of all, the experience is entirely browser-based so there is no software to install beyond Flash player, which you probably already have. Hulu has done a good job keeping the user interface simple and highlighting the actual content of the site. The homepage highlights a given video and lists the most popular episodes, the most popular clips, and recently added videos. You can also search Hulu’s entire collection from the homepage. Other sections of the site list the available episodes for particular shows and let you browse videos by network/studio, alphabetical order, or popularity. On your user profile page, you can create a video playlist and check your viewing history. Both your viewing history and playlist can be shared via RSS which, in addition to user reviews that you can leave at the bottom of video pages, form pretty much the extent to which Hulu.com incorporates social features.

The videos themselves are streamed at either 480kbps or 700kbps depending on your bandwidth, and Hulu is working with Adobe to provide even higher resolutions through Flash Player 9.2 by the end of the year. Hulu’s video player sports all the basic features we see in embeddable players these days: sharing via email, embedding via HTML, video details, full screen, seeking, and volume. It also has buttons with which users can submit feedback directly to Hulu, pop the video out into its own window, darken the rest of the page for better viewing, and vote the video up or down. Perhaps the coolest feature of the player is the ability to select just a segment of the video to share with friends or embed on your website. Embedded videos have fewer features, but users can still share and embed videos that have already been embedded, which should really help to spread Hulu’s videos virally (and make it less popular to embed low-quality versions hosted on YouTube). But, again, if the embedded video expires or is replaced with new content that the embedder did not choose, that could end up backfiring on Hulu.

Finally, some important information about how Hulu plans to advertise. Advertising will be much less intrusive than on actual television. Ads will be served in a variety of ways: banners that display alongside videos, text blurbs that overlay the bottom of videos, and in-video clips that play before, within, and after videos. Shorter videos will tend to have overlays and banner ads, whereas longer videos will tend to play in-video commercials. Hulu says that for longer videos, the total playback time dedicated to advertisements will be drastically lowered, perhaps constituting only 25% of the time you’d spend watching ads on TV. Thus, for every 30 minutes of video, you may only see 2 minutes of ads, whereas on TV you would see 8 minutes. If this is true, then Hulu will certainly be more consumer-friendly than TV. However, that is still probably more commercials than people are used to when watching video on the Web.


Gartner Identifies the Top 10 Strategic Technologies for 2008

October 29, 2007

Gartner, Inc. analysts today highlighted the top 10 technologies and trends that will be strategic for most organizations.

See more at http://www.unitedBIT.com

Searching For The Better Ways of Finding Things on Net

October 29, 2007

By David H. Freedman

Tui Stark is searching for a vacation paradise and can’t find it. Googling “snorkeling beaches blue water” turns up listings for scuba diving, real-estate firms, rafting outfits. So Stark, a photography stylist in Needham, Massachusetts, turns to Quintura, one of many upstart search engines, which allows her to focus the results on snorkeling. “The Google results just had too much stuff I wasn’t looking for,” she says. “I wanted to zoom in on the best snorkeling beaches.” And within seconds, Quintura delivers.

That’s a bad result for Google, which is more vulnerable than you think. By virtue of dominating Web search—Google draws 60 percent of all searches worldwide, says market-research firm comScore, with Yahoo a distant second at 14 percent and mighty Microsoft limping along at 4 percent—Google has not only become the reigning heavyweight of the online world, but it has also transformed advertising, riled governments and sent tremors through Wall Street. As of last week its stock was valued at $200 billion, more than five times that of Yahoo’s, and nearly three quarters of Microsoft’s. Now it’s threatening to shake up the trillion-dollar corporate-computing and wireless-communications markets.

Despite spending billions trying to diversify beyond the straightforward search offered on its stripped-down, almost childlike home page, Google reaps about 60 percent of its outsize revenues and more than 80 percent of its profits from ads on that page, according to analysts’ estimates. That means the company’s success continues to hinge on the dominance of its simple search. There are no guarantees that its dominance will last. It is threatened by a massive worldwide effort to build a better search, involving giant high-tech rivals, governments in Europe and Asia, and hundreds of tiny start-ups founded by academic wunderkinders much like Sergey Brin and Larry Page, the Stanford graduate students who founded Google in 1998. And it’s also dependent on an online public that may make up the most fickle market in history, an audience whose interests are already showing signs of wandering outside the search box.

Google may well be able to continue its charmed life by holding onto its search lead and getting its non-search businesses to kick in more profit, and Wall Street is certainly betting that way. But the computer world has a way of bringing seemingly golden brands down to earth with surprising speed, as Lotus, Novell, AOL and other firms have discovered. It’s not farfetched that five years from now we may wonder why everyone thought Google was such a big deal. “Google has won the first stages of the Web-searching race,” says Trip Chowdhry, an analyst with Global Equities Research in San Francisco. “It won’t win the next one.”

History shows how quickly search leaders can lose their way. The race kicked off in 1995, when researchers at Digital Equipment Corp. (remember them?) figured out how to store the words on Web pages as an index that lent itself to lightning-fast searches. The resulting AltaVista search engine quickly became a favorite home page for early Web users, and seemed destined to rule search. But in 1998 word started getting around about a new search engine from a tiny company with a goofy name that sometimes returned more-useful results, and by 2000 Google was the search engine to beat. Yahoo, with a stunning lack of foresight, put Google’s search box on its home page that year, burnishing Google’s reputation with Yahoo’s tens of millions of users. Microsoft, caught napping, wouldn’t even enter the search-engine race in earnest for another three years. When Google tweaked its business model by linking ads to searches and charging advertisers only when searchers clicked on them—an approach it copied from rival online marketing firm Overture—it converted its search box into a money machine. Right now that machine is producing $15 billion a year, of which almost $4 billion is profit.

If Google has been able to crush its search competition, it’s not because it has perfected the art and science of Web searching. Far from it. Google is what the industry calls a “second-generation” search engine. First-generation engines like AltaVista found Web pages containing words that matched the user’s search words. Google’s innovation was to further rank a Web page by the other pages that link to it, on the somewhat shaky assumption that if a page is much-linked-to, it must be useful. Charles Knight, an analyst who runs the AltSearchEngines Web site, notes there’s a plethora of good ideas for what a third-generation engine might bring to the party, and no shortage of companies trying to prove those ideas. “Each has shown they can do some aspect of a search better than Google can,” says Knight.

Yahoo, for one, has been frantically working to leapfrog Google. One new feature of its engine provides search-term suggestions that pop up as soon as you start typing your query—a possible antidote to the frustrating process of having to keep repeating a search with different terms in order to find helpful results. (Google reminds you of searches you’ve previously typed in.) Another offers shortcuts to following up on certain types of popular searches. Typing in a movie title, for example, brings up a trailer and local showtimes; typing in “restaurants” and a city narrows down the choices by neighborhood, cuisine or popularity. More is coming, says Vish Makhijani, head of search for Yahoo. “We’ll know when you’re ready to make a reservation versus when you’re just doing research, and we’ll let you make the reservation right there on the search page,” he says.

Microsoft, too, is eager to provide new ways to merge its Windows Live Search with other online and PC-based tasks. So far the company hasn’t taken advantage of the dominance of Windows to drive search traffic its way, but that will change, says Microsoft’s search chief, Brad Goldberg. “We’ve just begun integrating search in a meaningful way with our assets,” he says. “We’re working on ways to capture what the user is doing and carry it into the search experience.” In theory, that could mean a Microsoft search on “Coke” would give an accountant financial information on the Coca-Cola Corp., while a student writing a term paper on health and diet might get the nutritional rundown on a can of soda.

In fact, the biggest competitive hurdle for Yahoo and Microsoft is not that their searches don’t work as well as Google’s, but that people just don’t try them as often. According to a recent Nielsen/NetRatings survey, the gap between Google, Yahoo and Microsoft narrows when you look at the percentage of users of each site who keep returning—79, 69 and 65, respectively. A University of Michigan study released in August shows that Yahoo passed Google in customer satisfaction in the past year.

Google has already been relegated to also-ran status in several key markets worldwide. It gets less than 2 percent of queries in Internet-happy South Korea, and 17 percent of the queries in China, the world’s most important emerging online market. The company has also been trounced by local competition in Russia. Google dominates searching in Western Europe—82 percent of queries come its way in Germany—but the German and French governments plan to put up $165 million and $122 million, respectively, for search-engine research. In Japan, not only is Google running behind Yahoo, but the government is reportedly pumping some $125 million into local search efforts. Meanwhile, notwithstanding rumors of a forthcoming phone, Google hasn’t yet established leadership in the mobile-phone search market, expected to be lucrative.

Yahoo, Microsoft and governments aren’t the only ones seeking a cure for Google envy. In 2005 and 2006, venture-capital firms injected $350 million into 79 search-related start-ups. Knight tracks no fewer than 1,000 search contenders, mostly U.S.-based, that have something to recommend them. Among the features that he and other experts believe might be hallmarks of a third-generation search engine:

Word smarts. Some search engines, like Hakia, the forthcoming Powerset and Sydney-based Lexxe, are trying to go beyond matching your exact query words—they seek to get a sense of what you’re looking for and pull up the best pages based on an understanding of their content. “In most cases the document you want won’t contain all your search terms,” notes Rohini Srihari, a University of Buffalo computer scientist and CEO of Janya, an Amherst, New York, company specializing in searching for counterterrorism leads. “And if you’re looking to discover who or what has suddenly become a hot topic, you won’t even know what search terms to use.” A smart search engine might know that when you plug in “Paris,” “Tokyo” “New York” and “hottest restaurants” that you’re looking for popular new restaurants around the world.

Editing. No matter how clever a computer program, it will never match a human brain for determining quality and relevance. Some new search engines, including Mahalo and ChaCha, rely in part on human editors or guides to pre-cull the most relevant pages for some searches. You’ll probably get more select results than on Google—but only if your search terms are among those the editors have explored.

Focus. Google searches everything—but you don’t want everything. You’ll actually get more relevant results with a search engine that indexes a much smaller number of pages, as long as the pages are on-topic. Trulia searches out homes for sale, Healthline lets you plug in symptoms to track down possible causes and treatment, Globalspec’s searches are aimed at industrial engineers, Like.com offers pictorial product searches, and Spock specializes in information about people.

Guided queries. It’s hard to guess which search terms will do the best job, but some search engines help by suggesting terms, as do Yahoo and a start-up engine called Accoona, or by grouping results into categories that focus on the desired topic, as do Ask.com and Clusty. Type “spears” into Ask.com, for example, and it will suggest you steer the topic in either the pointy or pop direction; Google just mixes them up. A number of cutting-edge engines, including France’s KartOO, KooltTorch and Quintura—founded in Moscow and now based in Virginia—display the categories in graphic maps that visually suggest which categories are likely to be the most useful.

Community. NosyJoe, Squidoo and Sproose allow other users to help determine which pages are most useful, cutting down on the often irrelevant and spam-ridden results that come up via Google’s link-counting approach. Wikia, which has ties to the online, everyone-can-chip-in encyclopedia Wikipedia, is working on a search engine based on user contributions, and the Web-page bookmarking service Del.icio.us, bought by Yahoo in 2005, allows searching through everyone else’s labeled bookmarks to find relevant pages.

Right now all these underdog search engines (except Ask.com, the No. 4 search site) have a combined share of less than 5 percent of all queries, according to Knight. But even if one or more of them starts to gain traction, does Google really have to worry about being bested by some obscure search engine, given its longstanding, widespread popularity? After all, Microsoft continues to dominate software, in spite of persistent claims that better alternatives like Apple and Linux are out there. Google’s dominance, however, is different from Microsoft’s. The costs of dumping Windows can be intimidating, between setting up new hardware or software, retraining and lost productivity. What’s to keep someone stuck on Google? “The moment someone proves themselves better than Google, people will switch in a heartbeat,” Srihari says. Just ask anyone who was at AltaVista in the late 1990s.

Google isn’t waiting around to be AltaVistaed. Its smaller challengers can’t hope to match the company’s massive investments in computing infrastructure, said to include more than 450,000 servers. So be prepared to wait an annoying three seconds or so for results on some of the wanna-be search sites, compared with Google’s blink-of-an-eye speed. And with $12 billion cash on hand, Google can buy hot companies that pose a threat, much as it plopped down $1.65 billion last year for YouTube, whose video search crushes Google’s popularity. “Google was buying tiny search companies at the rate of two per week at one point,” says Knight.

Even $12 billion and the billions more Google could borrow wouldn’t buy all the world’s search competition. The performance gap won’t be hard to narrow for a hot new company freshly fueled by investors. In the end, Google has to have a better search to stay on top. Thus its army of software engineers is looking at every wrinkle in search, insists Google’s research director, Peter Norvig. “I guess we’re paranoid,” he says. They’ve already injected several new technologies into its search—for example, results take into account results you’ve clicked on in the past, provided you’ve signed up to have your searches tracked. You can type in your query in plain English, get suggestions for search-term refinements, or do any of more than 40 specialized searches, including movies, government Web sites, patents, airline flights and human faces. Google just doesn’t advertise any of these features, or make them plain. Although it’s clear Google is capable of plenty of search innovation, there’s a reason the company sometimes acts as if its hands are tied when it comes to implementing next-generation techniques. “People don’t want radical change from us,” says Matt Cutts, head of search quality at Google. “Our biggest task is ensuring simplicity.”

It’s true, most mainstream searchers do tend to value the stripped-down, no-brainer elegance of a thin box that takes a few words and delivers straightforward results. Given that a growing number of queries are being funneled to alternative engines, there are clearly plenty of power searchers willing to accept a little complexity in return for better results. It wouldn’t take a smash-hit new search engine to steal Google’s thunder; the damage could take the form of a slow leak of searchers to a variety of engines that each have some special appeal. Another threat to Google may be online social networking sites such as MySpace and LinkedIn. “We’ll likely see dozens or hundreds of specialized search engines that collectively chip away at Google’s dominance,” says Brant Bukowsky, founder of Plus1 Marketing, a search consultancy.

Last quarter, Google raked in $925 million in profit, 28 percent more than the same quarter last year. The game is still Google’s to lose. Even Stark, who resorted to Quintura to find her snorkeling beach, still makes Google her first stop when she needs to track down a Web site. What, after all, would Google have to fear from a tiny company with a goofy name that sometimes returns more-useful results?


Fighting for members, MySpace tries to outcool Facebook

October 29, 2007

By Brian Braiker

Do you Facebook or MySpace? Increasingly, membership in one social network does not necessarily rule out the appeal of belonging to the other. Of course, each company wants you visit their site more often than the other (if not exclusively)—all the more reason to differentiate. To that end, MySpace, the 800-pound News Corp.—owned gorilla, made three major announcements this week—two of which served to underscore a deepening fundamental difference in philosophy from its closest rival, Facebook. “MySpace is Hollywood and Facebook is Silicon Valley,” says David Card, a senior analyst for Jupiter Research. Or you could put it this way: MySpace is glam; Facebook is geek. Not that there’s anything wrong with either.

MySpace announced Tuesday that it has forged a splashy licensing agreement with Sony BMG—the world’s second largest label—for access to streaming videos, music and other content. The partnership calls for the social-networking giant and the music studio to share advertising revenue. And in a bid to conquer the social-networking world beyond U.S. borders, MySpace will soon be offering its 110 million active monthly users free voice chats via a new partnership with Skype (220 million strong, mostly outside of the States). In a new service called MySpace IM with Skype, the Internet phone company will enhance the MySpace instant messaging service with new free VoIP capabilities starting November. (The companies will split the revenue, but specifics of the arrangement were not disclosed.)

These moves stand in direct contrast to Facebook, which instead of teaming with major media players to build services for its network of 47 million active users, allows third-party developers to build applications. A staggering 6,000 applications have been built for Facebook just this year. “We are not a media company,” Mark Zuckerberg, the wunderkind brains behind Facebook, announced at the Web 2.0 Summit in San Francisco in October. Analysts are inclined to agree. “I think there’s a core philosophical difference, but [it’s] the same revenue engine at the end,” says Jupiter’s Card. That engine, of course, is advertising. But with its Skype and Sony BMG announcements, original programming and hosting concert tours, MySpace seems to be morphing into an entertainment portal where everyone is in your extended network (and a potential audience member).

Facebook, on the other hand, has tended to be more of a communications hub than its rival. Its platform infrastructure is built around connecting you to your actual friends—hence the viral appeal of applications like Scrabulous, Where I’ve Been and Top Friends. Oh, and it’s even already possible to make calls on Skype through some Facebook apps. And, to be fair, the private company is a chic geek. It’s a media darling despite having about half the active users of its chief rival. Its enviable flavor-of-the-month veneer is due in no small part to the cagey Zuckerberg, who has declined outlandish offers for his company in order to stay in control. He’s also maintained a vigorous reluctance to publicly adopt anything as mundane as a business model. Meanwhile, Microsoft, Google and other funds have reportedly been in talks with the site, considering investments that industry-watchers say would put the value of Facebook at a hard-to-fathom $10 billion (MySpace has been estimated at least $16 billion).

This is where MySpace’s third big announcement this week enters the picture. Perhaps in a bid to make inroads with the developer crowd that has become so loyal to Facebook, MySpace CEO Chris DeWolfe and News Corp. chairman Rupert Murdoch confirmed at the Web 2.0 Summit that the company is working on a developer platform of its own. Details were sketchy and the date of its launch likely farther off than “within a couple of months” as vaguely promised. Even Kyle Brinkman, vice president of product development of the social network, wavered slightly in his enthusiasm for third-party development. “I do think there’s a place for widgets and add-on applications,” he tells NEWSWEEK. “But where we see core propositions for our users, that’s where we want to build services ourselves.”

Which means MySpace is thinking like, well, an old media company. “They may be creating some big synergies for partnering and monetization, but I don’t think it’s really revolutionary thinking at all,” says Rodney Rumford, a consultant and publisher of FaceReviews, a blog that tracks and critiques the network’s applications. “Where Facebook has a great advantage in the long term is the ability not to serve me ads based on what page I happen to be on, but through my behavior. It knows what groups I’m in, it knows my behavior and it knows my friends.” How they end up doing that remains to be seen. But as far as users are concerned, it increasingly seems to make sense to belong to both: one for your music fix and the other to keep tabs on your friends.


Start-up: Social Services

October 29, 2007


Internet social networks, in the popular imagination, are refuges for geeks who seldom see the light of day and enjoy a purely theoretical romantic life. But iWiW, the remarkably popular Hungarian online network, is surprisingly rooted in what geeks call “offline” reality.

Tamas, a 28-year-old lawyer, explains how iWiW oils the wheels of his personal life: “It’s just like a database for your social life,” he says. “So, for example, I met this girl in a bar last year, and I remembered her name but didn’t get her number. Before iWiW I would have had a problem, but all I had to do was search for her name, select the account with her picture, and send a connection query. Now she’s my girlfriend!” iWiW (which stands for International Who is Who) supposedly disdains such opportunistic tactics, but the fact is that much of its success rests on just such uses. With 1.6 million members out of a population of 10 million, if you’re a young, social and computer-literate Hungarian, you’re almost certainly a member.

It was perhaps this opportunity to have almost universal access to the country’s most sought-after consumers that prompted T-Online, a part of Deutsche Telekom, to pay almost €4m for iWiW in April 2006. The deal made the founders, led by Zsolt Várady, pretty well-off overnight – although they must now be wondering if they could have held out for more, given the speed with which T-Online has increased the operation’s revenue from online advertising.

“We started the network in 2002. At that time it had no name; it was just an IP address where friends could connect. We had no cash, we used old computers and we worked from home,” says Márton Szabó, another founder, who is now managing director of iWiW. Rather than being a scheme aimed at making millions, iWiW owes its existence to a “sociometric survey” of people’s social habits, which revealed that the internet could improve social dynamics. As membership snowballed to 20,000 in the first six months, the founders brought in a local software firm.

iWiW remains different from giants like MySpace and Facebook. If you want to join, you need to be invited. As Szabó says: “iWiW is a social network, whereas MySpace is really a content network. Our network mirrors real social relationships; it’s much more intimate.” Here iWiW bears a resemblance to aSmallWorld.net, the network for the young, international and rich.

iWiW, then, could be among the first of a generation of online networks that connect people to those they are already connected to in some way, rather than exposing them further to the randomness of the net. Only now is this ethos starting to bear fruit on the bottom line.

In 2005 iWiW turned over just €20,000 and made no profit. Under T-Online it turned over nearly €900,000 revenue and made a profit, the vastly increased revenue stream owing everything to a strictly commercial approach to web advertising adopted by T-Online. How that potential business develops in the future is anyone’s guess, but it proves the old maxim that it’s not what you know, it’s who you know – as they say in Hungary.


Peer-to-peer lending: Crunchless credit

October 26, 2007

IF THE banks won’t lend you money, might a stranger? Probably not, to judge by recent data from Prosper, an American peer-to-peer lending marketplace (a place where people can lend their own money to other people).The website, which lets lenders bid against each other on the interest rates they are prepared to offer to specific borrowers, has seen an increase in demand from subprime borrowers as access to credit has tightened. But lenders have responded in turn. Chris Larsen, Prosper’s boss, reports a sharp drop in the number of subprime borrowers who are getting funded, from just under a quarter of borrowers in September 2006 to a mere 8% last month. Homeownership, which used to weigh positively on a borrower’s creditworthiness, no longer casts such a magic spell.

So far, so like the outside world. But the credit crunch is also reinforcing areas of difference between social-lending firms and the mainstream market. Without the costly paraphernalia of a normal bank (branches, staff and regulatory costs), social-lending marketplaces have always claimed to offer borrowers cheaper credit than they could get elsewhere. That price gap has widened recently as mainstream lenders have hiked their rates and social lenders have largely failed to follow suit. Asheesh Advani, founder of a social-lending business that relaunched under the Virgin Money brand this month, says that its loan volumes have grown rapidly over the past year largely because they are seen as more affordable as credit terms elsewhere have become tougher.

Why aren’t social lenders raising their rates? One reason is that, unlike banks, they are not facing higher funding costs caused by the seizure in money markets. Another clue lies in that word “social”. Mr Advani, whose business is designed to facilitate loans by family and friends, points out that parents tend not to foreclose on mortgages but to restructure them. Even when strangers are involved, lenders are usually not seeking solely to maximise returns. Let’s not get too misty-eyed, though. The relative immaturity of the market may also play its part, says Giles Andrews of Zopa, a British peer-to-peer lending site.

Most intriguing of all is the possibility that social-lending sites do a better job than their mainstream counterparts of assessing risk. Zopa, which takes a stringent approach to credit assessment and will let only prime borrowers onto the site, boasts a default rate of just 0.1%. Prosper, which is more laissez-faire and has a default rate of 3%, provides measures of “social capital”, such as endorsements by friends, that help lenders to judge the risk of a specific borrower.

That sounds promising. The volumes of loans being processed by peer-to-peer marketplaces remain tiny, however. And default rates will rise as portfolios age. But at least the credit crisis has given social lending a friendly pat on the back.


eBay’s in the ‘Hood

October 26, 2007

by Jack Schofield

Like Google, eBay has become a verb, and users say things like: “I ebayed a dozen books last week.”

This reflects the fact that it has been around for a long time – since 1995 – and is hugely popular. It now has 233 million users in 37 markets, including the US and the UK.

Along the way, eBay has acquired a lot of rival sites and a few complementary ones, such as PayPal, Skype and the social bookmarking site, StumbleUpon. eBay also owns Gumtree, a popular small ads network, and 25% of Craigslist.

And although the basic service has not changed much over the past decade, eBay does try to innovate. Last week, for example, it introduced Neighborhoods, a new social networking service. It’s also beta testing a desktop program codenamed San Dimas, which allows users to do things while offline. This is pioneering software developed for AIR, the Adobe Integrated Runtime, which enables users to run Flash-based programs outside the confines of a web browser.

eBay recently introduced a Facebook widget that enables users to put listings on their Facebook page, and another dozen enhancements are in the works. In particular, it’s experimenting with a new search system called Finding 2.0. This is being used in “the Playground”, which is “a separate eBay site that lets you experiment with new features we’ve come up with, before we consider introducing them on the regular eBay site”. Note that all the auction items and bids are real: it’s not somewhere to play around. Finding 2.0 is a much-needed attempt to make search smarter. It would be nice if it was more reliable at finding things, too.

Social networking is obviously trendy, following the huge success of MySpace and Facebook. It also makes a lot of sense on eBay: it should help users with particular interests (eg Quad hi-fi not Quad Bikes) find one another and share information, and increase the level of confidence you feel when bidding. From eBay’s point of view, it could also encourage people to hang around on the site, and thus to sell or spend more.

However, eBay has a tendency to add whatever’s trendy without the new features ever making a significant difference. For example, how many people know that eBay already offers users their own blog, and how many people actually use them? eBay also has MyWorld, Groups, Reviews, Answers, chat rooms, a Wiki and the ludicrous MatchUps.

Maybe it’s just me, but all this stuff looks utterly pointless, and I won’t be surprised if Neighborhoods turns out to be a waste of time. The only things that make a real difference are the built-in mail and the discussion forums.

There are plenty of things eBay could do to improve its core service. These include better search, more detailed categorisation and tagging, more space for feedback (160 instead of 80 characters), quicker action against scammers, lower PayPal fees and a real help service. In comparison, adding Neighborhoods is trivial.

Will mashups ever be mass market?

October 26, 2007

By Jack Schofield


When Microsoft boss Steve Ballmer spoke at last week’s prestigious Web 2.0 conference in San Francisco, he announced a public beta test version of Popfly to try to impress the crowd. Because it’s based on Silverlight, Microsoft’s alternative to Adobe Flash, it can certainly do some nice visual tricks. Its practical value is, of course, another matter.

Popfly is an online system where anybody can create a graphical web page, a mashup or a Windows Vista Sidebar gadget by “drag and drop” programming.

The term “mashup” comes from the music business where it is used for mixes made from two or more different songs. In web 2.0 terms, it means combining data from two or more sources. One of the best known mashups takes government crime figures for Chicago and plots them on a Google map of Chicago.

When Yahoo! launched a beta test site for creating mashups in February, it had the idea of streams of data being changed and combined: the result was Yahoo! Pipes. Popfly uses a different kind of imagery that’s much more like object-oriented programming. Everything comes in a red box or block, and you create your mashup by linking red blocks together.

The Popfly toolbox already contains dozens of blocks. Look under Display, for example, and there are blocks such as Bar graph, Carousel, Chat bubbles, Page Turner, Photosphere and Slideshow.

Other blocks offer streams of data, including RSS feeds of news reports, Twitter and Upcoming. There are also blocks such as Combine, Filter, Sort and Timer so you can do things with data along the way. If you can’t find the sort of block you want, you can create one.

Each block contains lines of computer code, so when you link them together, you are actually writing a program. What’s cool is that it doesn’t feel like it.

Popfly has lots of nice visual effects, but I found some things didn’t do what I expected, and it wasn’t always easy to see why.

For example, I did an extremely simple mashup to fish 100 random Paris Hilton pictures from a search engine, and display them in a mini-album on my Facebook profile page. Actually it showed only 20 images, and it didn’t display them on Facebook: it just put a link to the album on Popfly. It was easier to post it to a blog: even I can manage a one-line copy-and-paste operation!

There are several sites doing the same sort of thing as Pipes and Popfly, and Intel has just unveiled MashMaker, promising “Mashups for the Masses”. Google also has the Google Mashup Editor, which is only suitable for programmers. No doubt there will be many more.

Microsoft’s mantra is “developers, developers, developers,” and naturally it wants to make programming accessible to people with no programming skills.

Given enough pre-created blocks, I can imagine lots of people connecting two blocks, or even a few, if it does something they really need. But a mass market? I don’t think so!