Category Archives: Business

Solving the Social Intent Problem, or Why Facebook Will Succeed

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This is one of the biggest issue needing to be solved for the current and future crop of social media companies. As I had ran down in the previous post on user intent, Social Intent is lacking a direct monetization system. I believe that it can be solved and will be; this is my run-down of the issues and a few points of focus that maximize potential. Throughout the post, I’ll try to keep the points mostly agnostic, but still make specific points in the case of Facebook.

As is well known by now, Facebook recently had it’s financial potential put into question. The question came in two rather bold points, the faltering of the IPO and GM’s decision to pull it’s ads from Facebook. In my mind, both are wrong-headed if you look at it from a long-term perspective, believing Facebook can solve the Social Intent problem.

The first step in fixing the model is understanding what type of associations and products lend themselves to socializing in the real world where the money is. One area sticks out instantly here, communications and mobile, which I’ll come back to momentarily. The other areas to focus on are where we’re already doing in-person socialization and real sharing: sharing food(at restaurants), sharing music(albums and concerts), watching movies(at home or in the theater), other forms of in-person entertainment, and even things like sharing tools at work.

I have just listed a few different areas where advertising still makes sense on the platform, and enhances it. The next step is figuring out where and how to do the advertising. A few things that I think will work in the environment is promoting deals to groups of friends, using a focused approach to kick-off a word of mouth campaign, or promoting tools that extend or even compete with the platform.

Promoting deals to groups of friends is focused on experiences, and sharing them. Offering small group-buy discounts on services that bring people together would be a good sell. Also things that people would want to share with their friends after buying. The biggest thing though is where this should be, it needs to be mobile. Mobile means you can promote live deals on location data, this will be key for Facebook.

Facebook provides one of the most detailed systems for focusing on specific user for promotion. Using this to promote to a specific market that will love and share it with others will be gold. If you can find a product that is shareable enough, and can get some enthusiasts hyped about it, it makes sense to try this approach to reach a broad base cheaply. Not all products have a broad capacity though. Take GM for instance, vehicles aren’t one of the products that individually have broad capacity. GM’s ads weren’t fit for the market and eyeballs still don’t mean much ever after a decade.

This one is a bit questionable, considering I mention helping to promote competition. Of course, if they’re paying you, you get to see some metrics on how they’re doing, and you the sub-graphs may still be maintained or tightened by them. Promoting extension and competition make sense for a platform as it keeps the network tight, while allowing a form of escapism. In many ways, Facebook has huge advantages over most other companies in that they have both a large network that has hit critical mass and have a successful platform for extension.

This is a market or two and it’s currently anyone’s game to solve. I don’t know who’s going to get to the fruit first, but it’s there and I see it. Time to figure out if and how to sneak past the giant and grab it.

Ok, now mostly FB. There have been rumors and talk about Facebook phones or advanced cameras to compliment their service and photo-based extension of that service. I think, as I pointed out reason above, this is a no-brainer. You want to maximize the sharing on the site, but also promote real world interaction for the substance to share. If you can provide the tools to make this seamless in setting up and sharing experiences, from beginning to end, you’re in control. I’m not saying they need their own device, but it would make it more simple to do.

Facebook as it stands is profitable. They have the time and resources to solve this problem, and most of the secondary and sub-problems that I have missed and would surely arise during the process. If they figure this out they won’t have to worry about the doubt. It’s also why I feel long on Facebook, though I still believe it will come down further.

User Intent

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What is the intent of users on the web? I’ve been engrossed by this idea for a few weeks. It’s obviously not a simple question with one answer, as it has many; the value of the question is when used to answer specific cases. Let’s break down the concept into a few quick areas.

Primary Intent:

  •   Looking for something to do (Entertainment)
  •   Looking to buy something (Purchase)
  •   Looking for information (Research)
  •   Creating, Sharing, and in-taking information from others(Socialization)

Those four primary intents, and their combinations, define why users are on the web. Each provides an adequate monetization strategy, though that strategy isn’t always straightforward. Let’s look at a few examples of how I classify things.

Entertainment:

Purchase:

  •   Big Online Stores: Amazon, Newegg, Zappos
  •   Services(categories): Hosting, Web Design, Niche stores

Research:

Socialization:

That is just a quick run down, and I could easily move some of those freely between more than one category, e.g. Reddit could also be placed in Research/Socialization, Zynga in Socialization, and Google Search in Purchase.

Purchase intent is likely the easiest to monetize. There are two primary goals that need to be met, capture that interest and then maximize profit in an optimal fashion. Amazon wins by capturing interest with selection and pricing, then maximizes by setting bars such as Free Super Saver Shipping. Newegg, Zappos, and other smaller niche stores capture by catering to a specific buyer.

Entertainment and Research both have positives and negatives as far as monetization goes. They can both come with a purchase intent, though it isn’t necessarily a given. Both have similar monetization strategies, direct and ad-driven, yet each has inherently different ways of handling them.

Entertainment services are often closer to a direct monetization. The reason for direct monetization is partially due to higher costs, either via licensing, bandwidth and storage, or to protect from cannibalization of physical services. The ad-driven approach works okay at larger scale, but with it comes issues of possible mismatch among intent, interest, and the ad. If the user isn’t interested or has no intent in what the ad is providing, that ad is wasted, this is in general.

Research services however are more commonly using an ad-driven approach and it fits. The reason it fits, particularly in the case of search, is because the user may be looking for a solution and have a secondary intent willing to purchase that solution. If you don’t have the solution, but you and someone offering a solution can come to a mutually beneficial arrangement. There are also services that offer primarily direct monetization, like academic journals.

Socialization is the hardest intent to monetize, because it has the least correlation to a intent to purchase. Ads aren’t going to work as well as when the intent was on research or entertainment because the ads are often highly irrelevant to the reason the user is there. Promoting word of mouth will likely be more efficient than ads. And since the services often require users to get and retain other users the up-front direct monetization strategy is limited.

TL;DR: When a user decides to use a service they are doing so with specific intent in mind. There are four primary categories that web-services fit into: seeking entertainment, seeking to purchase something, looking for some information, or interacting with others actively or passively. Of the four, the intent to purchase stands out above the rest as far as monetization goes; entertainment and research have similar models but different usage for them; socialization sticks out due to it’s weaker capacity for monetization using the current models shared by the other areas.

Usage Caps: Hidden and Invisible

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I’ve been thinking about it, usage caps make sense, but the implementations that providers are offering don’t, with these arbitrary usage caps, that are mostly hidden. There is already a theoretical cap, that for all current intents and purposes seems invisible. That theoretical cap exists do to the maximum bandwidth that the provider supplies you with.

Let us look at some of those numbers. I’ll start with a simple example for a 1Mb/s connection and assume that this contains both up/down streams.

1Mb/s connection = 1/8th of a MB/s ;

MB/30 day month = 60s*60m*(24h/8)*30d = 324000 MB/month = ~325GB/month.

That’s the invisible bound on a 1Mb/s connection for 30 days, you can’t achieve greater than ~325GB/month. Then you have to factor in decay caused by latency and dropped packets on the line and assume maybe 90% capacity is possible, which brings you further down to ~290GB, realistically.

Taking that information, I think I would start people off with a percentage based amount of their bandwidth. I’d start off with a provision of a 40% utilization(~130GB/month), and allow it to be increased/decreased. It’s entirely possible that this is too high of a utilization offering to start with; for example,  when you get to 5Mb/s lines that same 40% is ~650GB/month. On the other hand, some companies want to cap it at 250GB/month which is less than 20% utilization of a 5Mb/s connection. It is my belief that they need to scale their utilization cap with their speed offering; to me, it doesn’t make any sense, otherwise.

If I can do this math, I’m sure they can and have done it as well. They already know what they are theoretically being asked to provide at peak times, and also what they’re capable of handling. How hard would it be for them to optimize this, and increase their efficiency?

Maybe offer a 10% utilization at 1Mb/s(~32GB) as a baseline, for those like RMS who don’t use the web with the exception of email? Then they can automatically roll you into the next 10% for the month, if you go over that limit. You automatically get rolled up 5 or 10%, at some percentage of cost. Once you have the roll over and initial utilization provisions determined, you can go about extrapolating and targeting different areas of what you provide.

Lets assume that you start with a base fee of maybe $10 + taxes and then a rate for bandwidth/speed similar to this:

For a 1Mb/s  plan: 32GB(10%) @ $10, 64GB(20%) @ $12, 96GB(30%) @ $14, and 128GB(40%) @ $16.

For a 2Mb/s plan: 64GB(10%) @ $15, 128GB(20%) @ $18, 192GB(30%) @ $21, and 256GB(40%) @ $24.

For a 4Mb/s plan: 128GB(10%) @ $25, 256GB(20%) @ $30, 372GB(30%) @ $35, and 512GB(40%) @ $40.

You can extrapolate further.

Maybe my scaling is a little off, a little too linear, as I’m not really accounting too much for trying to limit peak loads. Also I’m starting each tier at roughly the cost of the tier below at 35% utilization. There are lots of inefficiency in my model, but that’s because I don’t have the actual data required to see if this is feasible. I think it is still better than their blind caps that they try to hide.

If you have any thoughts or suggestions on how this could be done, or if it’s feasible, leave a comment.

If You Want News, Focus On The Product

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Over the past year I’ve taken various roles in and around various products. I’ve seen, advised on, and been part of the main issue. Companies want news, but they don’t do anything newsworthy. Why the hell does anyone want to write about what you did 6 months ago? 3 months ago? Even last month?

The fact of the matter, in my experience, and my observation is unless you do something on the product side, good or bad, or have some clout you aren’t going to get news. There is a factor of your scale as well, as some sources tend to focus on the larger stable companies and products, which is partly due to the advantage of inertia and size. I’m going to mostly ignore that though and point out product problems I’ve encountered.

I know that there are products that can get by successfully only doing data processing, primarily when offered as a business service. Unfortunately, it’s common to see stagnation or failure in the consumer area because it has pretty low barriers to entry, and often times lower consumer value. I’ve got no problems if this is how you want to start and test a market. As you grow you’ll need to either be so awesome the user wants to keep using it or have another reason for the user to interact with the site.

If you only handle data from one service, that’s great, but why aren’t you handling data from more? Only Twitter or Facebook, why don’t you add the other one to your sources, even better try and get in and add Google +, while it’s still early and/or hot. You are self-limiting and become susceptible to your source’s actions. Free yourself from the dependence, through wider integration plans. Even better, add your own system that can be used without the external dependence, giving yourself more control on the data you want, a protection from external forces, and a possible pivot point.This doesn’t mean you need your system to be the primary, but having it is a good thing.

I’ve had several minor rows with people over this in the past. Often times they aren’t in a position to change it. Once, I was in the only actual position to change it, but it wasn’t what was planned or wanted; I should have done it, anyways. You’ve got to just do it.

Another issue, I’ve had was trying to push a dev issue, that was a roadblock to the companies API. Yes, they offered a public API, but as a consumer data-processing, they neglected some key functionality required for 3rd-parties to offer clients, while also being completely absent from a huge market. I had jumped in to try and help build a client not realizing the issue when I started. Once I found it though, after a few weeks work, I sent several emails and had a discussion with a non-technical person to try and get the issue fixed. I received no replies, aside from the non-technical person, even when I stepped out of the support chain and contacted a developer explicitly. I gave up after a few weeks of trying to get a response. I still support this company’s mission, and wish them all the best.

A big one that killed my big project I was working on at the beginning of the year was that the team had no focus. We were all on different pages, and sometimes there was a delay in one area, or someone pushing hard in areas that wasn’t necessary at the time. Getting off the rails and trying to keep going further is a recipe for disaster. If you fall off of a clear path, collect yourselves, lock-in what needs done, and focus on your goal. Also, don’t let what you’re doing be driven by press reasons, that’s the wrong place to focus and will have you running everywhere.

While I wish I could say that I haven’t and won’t again make any of these mistakes, I can’t. I will absolutely try, and they are things I don’t want to forget because they cost me a lot of time, energy, and passion. When it comes down to it you’ve just got to focus on the product.

  • Problem #1: You’re just a data-processing company.
  • Problem #2: Developers aren’t involved in technical support.
  • Problem #3: Your team doesn’t have the same goals or reasons.

Pip.io Plowed Under As Seeds For Harvest Are Sown

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I was stumbling my way around on Quora and saw a link to Pip.io, which I used, for a period, as it was a promising alternative to Friendfeed. I decided to click the link to see how the service has changed since my last use, and discovered a message saying it had shut down. The message is embedded below.

Dear Pip.io Members,

Thank you very much for your guys’s support! We couldn’t have done it without all of you!

I have decided to shutdown Pip.io and pursue other dreams.

When I started Pip.io, I dreamed of a social web that was more than just what Facebook and Twitter offered.

I dreamed of a social service that could unify and simplify the social experience people have on the internet.

However, even though I will be shutting down Pip.io, I have not given up on those dreams.

The best way to stay up to date with what I’m doing is on my blog at http://www.leoshimizu.com

Thank you members and hopefully we’ll meet again!

Sincerely,

Leo Shimizu
Founder & CEO

After reading, I had two questions, the first, “When did it close,” and the second, “What is he working on now?” So first I checked out the link he posted, but there wasn’t much there, but the Twitter widget on the side was interesting; it was pushing a link, http://ha.rve.st/, multiple times. Checking it out, from as close as I could get, it is reminiscent, in look and style, of Pip.io,  but the copy on the homepage, is intriguing.

Harvest is an easier and better way to consume the social web. Harvest is a communication platform that not only gathers your posts into one stream in real-time but lets you be you. Experience the social web in a way you never have before!

It lets you be you, by at least, discussing the concept of social circles, or “Personas,” where the problem is you only want to share with certain groups selectively.  It also, appears to manage imaginary connections across services, though I don’t completely understand their solution there. It also appears to be a cross-client and aggregation tool. You can check out a few public pages of the interface at http://ha.rve.st/leo/ and http://ha.rve.st/matt/, most others appear to be private. Image at bottom.

As for the other question, when did Pip.io close, I had to travel through Leo’s twitter feed. On May 16th, he discusses the possibility of a Pip.io mobile app coming soon. His next tweet, on May 18th, pushes http://ha.rve.st/ to a user quoting the phrase, “I have decided to shutdown Pip.io and pursue other dreams.” So I assume that means the Pip.io was shutdown on May 17th.

Best of luck to Leo and his partners, on this new project.

Harvest Acount for Leo

The Game Can Change In A Blink

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…Or how dreams go can go down the sink.

Earlier, this evening I found out that my cousin was pregnant, but she’s like a little sister, so I feel like I’m going to be an uncle. I’ve been having a hard time trying not to judge and just be happy, but it’s hard. She’s known for years what she wanted to do, and has had it all planned out, and then out of nowhere a surprise that’s going to shake her life. The unexpected turn that can derail even the best laid plans. Now I’m trying to fight myself off, I know she’ll be a great mom, but I can’t help but wish there was another way.

I’m fighting myself over being judgmental, but also fighting my own hypocrisy; when I was 16 my girlfriend got pregnant, it wasn’t mine but that didn’t matter to me. I offered to help her raise it, and be the father that the child would need, and started prepping for it. A few weeks later, after having discussed it, but without telling me until it was done, my girlfriend had an abortion. I understood the reason, fully, but it still hurt, then as it does now. My girlfriend, was trying to get rid of a bad dream for her, and open back both of our opportunities for the future.

During those few weeks, I felt invigorated, filled with more passion than anything before. During those weeks, I realized I had to fight, not for me, but for the child’s future. I’m not a fighter, when it comes to myself, I do what I do to survive, but I don’t really try harder than that. It’s unnatural to me. Tonight, that passion was revived,  this time I’m fighting for not just my ‘niece/nephew’ but also for my cousin’s future. I really don’t want to see her end up on the same path, I’ve gone down. I don’t want her dream to die.

It’s time to drop my humble approach towards life: Allow life to happen. It’s time for me to grab the bull by the horns and take this life for a run. The only thing that could happen is that I fall, and have to get back up. Infinite Upside. I’ve got nothing to lose, and so much to give.

…Or why business plans stink.

So far this post has been pretty personal, now let’s talk about business; business plans to be exact. The idea of a business plan is to provide some guidance about the market, your growth, competition, and strategy to achieve that growth. It used to be that the plans were long-term, 5-10 years. The problem with this, is that as our world becomes ever quicker to adopt new changes, your strategy can be invalidated. You very well may be stuck playing checkers, while everyone else plays chess, if you stick to the business plan.

If you want to stay alive, you have to change your strategy to fit the new rules of the game, otherwise you will lose. This means that you need to constantly be on the ball, and willing to change as you get new data, which requires that you actually acquire, analyze, and adapt to some set of data. And you need to be constantly aware, but also have some lag on decisions, so that you don’t get stuck working on a fad. Business plans have become near useless, for long-term prediction.

The important things now, aren’t the plans, per say, but that you understand your market and competition, can do what you say, and are willing to keep going with the feedback you get. You have to preempt competitive maneuvers and always be on the look out for new competition. The game is now not just about who gets there first or who does it better, but who does most of what I need, how I want

If you do everything according to plan, you will be beat, there is no doubt in my mind. You become predictable, you have to change the game that’s being played, and adapt to the new rules, when others change the game. If your plan is invalidated, don’t fight to save the plan, take that information and adapt to it. If you can’t stop there, then maybe you should go hang out with the telecom and cable giants, they’ll keep clawing to keep their duopolies on the market, but the casket will close on them if they aren’t careful. The status quo is deadly.

Be prepared to go to the brink, for what you believe.

You’ve got to take everything you’ve got and just go headlong into the fray. Life doesn’t stop because you want it to;  don’t try to stop it. Enjoy it, all of it, even hardships. What doesn’t kill you only makes you stronger, after all. Make your moves with patience and diligence, but do make your moves before the clock stops.

“When the going gets tough, the tough get going.”

Living Last Mile

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I apologize for any cursing I do, this is an issue I fight with daily, and it’s a ridiculous one.

I live in semi-rural WV, but I also live without adequate access to information, at a nominal rate. In order to get an internet connection, where I live it costs roughly $50 on top of a phone bill for 768kbps ADSL. There is also no means of getting television, besides paying for satellite service, which also doesn’t come with local channels f or some absurd reason. Ever since the Analog-to-Digital transition in June ’09, the reception which is known to be bad in mountainous areas, dropped completely off the map, because it became an all or nothing signal.

What you end up with is exorbitant costs for minimal service, even though people within a mile, have no such issues; cable is provided along the main road on the backside of the property, but it’s about 3/10th’s of a mile. Currently, the two bills are $80 for TV, for mid-range satellite service, that isn’t 2/3 Christian broadcast, receiver rental, and 2 broadcast station feeds, that should be locally provided, and $65 for Phone & Internet. It pisses me off to know that just because we live just outside, the service area of the cable companies, we are charged out the ass.

If our house was moved less than half a mile, we would have a more stable internet connection that is 10x as fast, basic enough tv with local stations, we really only need broadcast stations. For about half the price. This needs to be addressed, as well as anti-competitiveness in areas, companies trade off in areas and create virtual monopolies on local markets. I’m just frustrated at how close, and yet how far the access to information is, and I also know that I’m not the only one in the area that feels this way.

Our nation, has turned its back on those that live last mile, and the infrastructure required to provide its citizens decent access to information. We are solidly driving forward, in improvements, but those improvements are generally within the large metro areas, where they see maybe a 2x increase ever 3-4 years, while those living last mile slip further behind. I understand it’s not feasible for the companies to create the infrastructure, that they won’t see a return on any time soon, but there has to be a way to improve our nations information infrastructure(IPv6 should be included).

Super WiFi is probably the only decent technology for this area, considering everyone is stretched rather thin, the infrastructure costs would be lower, but that’s not a likely roll-out option for at least 4-5 years, if not a decade. That’s how slow progress is, when you’re living last mile. It’s infuriating to see improvements so close, and simultaneously know that it will be held right in front of your face, but out of your grasp.