SEO Werkt!

Here’s another nugget from the release of Facebook’s 10-Q today: Zynga accounted for 14 percent of its revenues in the first six months of 2012, but that number is down from the 19 percent of revenue that Zynga made up in 2011.

Revenues that Facebook collects from Zynga include payment processing for purchases made through its social games, advertising that third parties show on its gaming apps, and Facebook ads that appear on Zynga.com.

On the first two counts, Facebook is seeing marked declines in its exposure to Zynga’s performance: It reported that payments and direct advertising from Zynga accounted for 10 percent of its revenue in the first half of this year, down from 12 percent for the full year 2011. Display ad revenues from third parties that Facebook runs on Zynga’s social games also declined as a share of the social network’s overall business. Facebook reported that in the first half of 2012, approximately 4 percent of its revenues came from those display ads, which declined from 7 percent during fiscal 2011.

Meanwhile, Zynga’s launch of a social gaming network on its own site, Zynga.com, had little impact on Facebook revenues. While Facebook can display ads and Sponsored Stories on the site, the company said that it did not generate any meaningful revenue from those ads.

The decline in Zynga’s came as Facebook grew ad and other payments revenue in the quarter. But it also came as Zynga failed to meet analyst expectations in the second quarter. Zynga blamed Facebook in part, noting that the social network began emphasizing new games in its news feed and other channels, which led to a 15 percent decline for existing games.

For its part, Facebook’s reduced dependency on Zynga is probably a good thing. In the Risk Factors section of its 10-Q, it pointed to Zynga as a possible drag on revenues and stock price, if the social gaming company can’t get it together. “If Zynga does not maintain its level of engagement with our users or if we are unable to successfully maintain our relationship with Zynga, our financial results could be harmed,” it wrote.

Looks like a talent acquisition. Smells like a talent acquisition.

Meebo, the chat and publishers tools company that Google acquired for roughly $100 million, is going to see most of its products shut down next month. That includes Meebo Messenger, the sharing widgets and mobile apps.

The one major product that will keep running is that Meebo Bar. (Yes, that one.) Haters aside, Meebo Bar does actually generate some meaningful revenue for publishers, but it sometimes irks visitors with ads that pop up from the bottom, left-hand side of the page. All of the products, except for the bar, will go down on July 11.

Google typically shuts down products it doesn’t want to service when it has talent acquisitions. The reason? It costs money and time and it distracts the acquired team from working on things that Larry Page and Google’s senior management want them to work on. In this case, that’s Google+, which is Page’s Captain Ahab-like attempt to spear the white whale of Facebook. We reported earlier this week that Meebo’s product team will be using its expertise to help build out publisher tools for Google+.

Meebo’s sale to Google is a graceful exit for a team that is well-regarded in the Valley, but didn’t find the momentum it needed to be a sustainable, independent platform. The company did accomplish many notable things, however. It had 100 million monthly active users. Its mobile apps, which had seamless chat between desktop and mobile devices, predated Facebook Messenger. Its sharing widgets were built with some noteworthy JavaScript hackery.

But Meebo had raised $70 million in venture capital. So a $100 million sale is not a win. Hopefully Meebo’s integration with Google+ will not make this tweet from Vic Gundotra, who oversees Google’s social efforts as a senior vice president, seem rather ironic.

Many people complain about Facebook’s mobile experience. For the longest time their app was just not very good. Even with the latest improvements the Facebook mobile experience still leaves a bit to be desired.

While it seemed that Facebook was simply focused on building their 900 million user powerhouse and mobile was backburnered as a result, that may not have been the case at all.

CNBC reports that as a result of early investor meetings there has been a change to the filings for Facebook’s IPO which indicates the trouble Facebook has with mobile.

Facebook said growth in the number of users using Facebook on mobile devices, which is hard to monetize, “may negatively affect our revenue and financial results.”

In an amended regulatory filing, the company said the number of people logging into Facebook is continuing to grow more quickly than the number of ads delivered.

Facebook said this is in part because more people are using the social network on mobile devices, where it shows a very small number of ads.

Could Facebook actually be the victim of the world’s move to mobile which is happening so rapidly right before our very eyes? Back in February when the first announcements for Facebook’s mobile ad plan were brought to light, this concern was there. At that time Facebook had admitted that it had failed to monetize the already 425 million mobile users it had and it did not go unoticed

The disclosure sent up red flags for analysts, because the company also said it does not “currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

Facebook’s stating this initially was concerning but moving to the new wording that seems wary of rapidly growing numbers of mobile users and its potential to negatively affect revenue and financial results is a big jump. It should also be one that makes us all wonder just what can Facebook possibly do to monetize their mobile presence without frustrating users with too many ads in too small of a place. I’m not an analyst but this sounds pretty bad. Insurmountable? No. Pretty bad? Yes.

Maybe this is why Google has been content with letting Google+ slowly grind away in the background. Google already has the mobile ad thing working with search which is further bolstered by a 95% share in the mobile search game. It doesn’t need Google+ for monetization (although that doesn’t mean they won’t try). Imagine people en masse discovering that Google+ could be the place to connect with people in a mobile environment without being pitched every 2 seconds? Could Facebook’s absolute need to monetize the mobile experience be the reason for people to finally consider Google+ for real?

Far fetched? Maybe but I don’t see this development for Facebook as something that can be easily overcome. Could Facebook have missed this one so badly and painted itself into a corner that it may not be able to get out of?

What are your thoughts and impressions? As Internet marketers what does Facebook become if it cannot deliver in the mobile space?

Facebook has just filed an amended S1 form with the SEC, and in it, we learn just how the social network’s acquisition deal with Instagram went down and how much of the $1 billion pricetag was split between cash and company stock.

The filing reveals Facebook paid 23 million shares of Facebook common stock as well as $300 million in cash to acquire mobile photo-sharing app Instagram. Also, Facebook will pay out a $200 million breakup fee if regulators don’t green-light the acquisition.

Just days before the $1 billion deal, Instagram took a round of funding valuing it at around $500 million.

According to today’s S1 update, the deal is expected to fully close within the second quarter of 2012.

“Following the closing of this acquisition, we plan to maintain Instagram’s products as independent mobile applications to enhance our photos product offerings and to enable users to increase their levels of mobile engagement and photo sharing,” the filing reads.

“We believe that mobile usage of Facebook is critical to maintaining user growth and engagement over the long term, and we are actively seeking to grow mobile usage, although such usage does not currently directly generate any meaningful revenue.”

In the filing, Facebook admits that large-scale acquisitions such as the Instagram deal are still fairly uncharted territory, and future acquisitions of similar scope might “require significant management attention, disrupt our business, result in dilution to our stockholders, and adversely affect our financial results… Our ability to acquire and integrate larger or more complex companies, products, or technologies in a successful manner is unproven.”

The SEC filing today still contains no details on where Facebook’s stock price will start, and it names no date for the IPO to take place. Stay tuned for those details over the next couple weeks.

Filed under: deals

This is a guest post from Dave Lifson, co-founder of Postling, a unified social media dashboard for small businesses. It originally appeared here. 

I believe e-commerce can make Tumblr over $100M a year. I’ve shared my thoughts with the Tumblr team directly, but I figured I’d share it with all of you as well. It comes in two flavors: independent stores (bottom up) and retail partnerships (top down).

Independent stores are like Etsy, but not limited to handmade – Tumblr users can sell what they craft, draw, photograph, and compose directly to their followers. Tumblr facilitates the transaction via credit card or Paypal, taking a modest 5% transaction fee. Not only does this generate meaningful revenue, it creates a really amazing virtuous cycle for user growth: sellers promote their tumblogs offline to drive business, which drives more users registrations, which create more sellers, who then promote their shops, etc. At least, that’s what we saw at Etsy.

At last estimate, Etsy did ~$3M/month in revenue, an easily attainable goal for Tumblr. The integration is non-instrusive: Tumblr users can choose to add a “Purchase” button to the bottom of their post that is tied to an item they’ve added to their tumblr shop (also viewable at user.tumblr.com/store). Followers who click the button input their billing & shipping info via an overlay to purchase, then are returned right to where they were in the dashboard. Like at Etsy & Ebay, Tumblr processes the payments but otherwise leaves transaction coordination to the buyer & seller. Down the road, Tumblr could aggregate all of these items together into a Tumblr Marketplace, for people who want to exclusively browse the items for sale by all Tumblr users.

Retail partnerships would work like this: Tumblr does custom integrations with the major retailers (Barneys, Nordstrom, Gilt) so that every time a post containing a link to a partner’s product page is detected, a “Purchase” button is embedded at the bottom of the post. Clicking the button leads the user through a purchase pipeline. Tumblr gets a 5-15% affiliate fee. I believe Tumblr can negotiate very aggressive revshare deals because of the volume, the incremental revenue, and the demographic. The reason why nobody can do this except Tumblr is because Tumblr’s users are curators, and curators are the missing component. Amazon is great at selling books but is awful at softlines (retail speak for fashion items) because there are so many items and they go out of style every 3 months. (Read my post for more detail.) Tumblr’s community of curators is the secret ingredient that I believe can bring e-commerce’s current single digit share of the $225 Billion US fashion market into the double digits.

Here’s the math: Tumblr claims 60M posts per day or 22B per year. If we assume 0.1% of posts fall into the e-commerce category, each post gets viewed by 200 followers, 1% of those followers buy something, and Tumblr makes a $2.40 transaction fee per sale (8% on $30 item), that’s $105 Million per year.

Given a small team with the right skills, Tumblr could get this going in 3-6 months. The $100M question is, why aren’t they already doing this?

Image via Flickr user InaFrenzy

Filed under: social

Apparently, when Facebook filed its plans to go public, analysts saw nothing but “red flags” that the social network had thus far failed to monetize its 425+ million mobile users…

The disclosure sent up red flags for analysts, because the company also said it does not “currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

Talk about a “glass is half empty” attitude. For me, that looks like a huge opportunity for Facebook and I suspect that the dire warning was nothing more than the obligatory pessimistic statements needed when making any financial statement.

Anyway, it appears Facebook’s ready to give mobile advertising another crack with a major announcement in New York on February 29th.

Of course, the big question is, will mobile Facebook users tolerate ads appearing in their smart phones and tablets. And the answer? Of course they will!

Oh sure, they’ll be some huffing and puffing by many Facebook users. Heck, I’m sure profile pictures will be changed and anti-Facebook Pages will be created, but when all is said and done, we’ll just get used to it and move on. Anyone remember the outrage over Facebook’s Ticker? Heck, I kinda like it now!

One “social-media expert” went as far as to say…

Facebook could end up “irritating their user base by inundating them with ads,” he said.

Since when has that ever stopped Zuckerberg et al? Over 400 million in unmonetized users? I have one word for ya: ka-ching!

It’s a $2.5 billion slice of the online advertising pie, but few brands or their agency advisors are prepared to fully bake mobile in to their campaigns.

David Hewitt of SapientNitro, writing in TechCrunch notes that “many brands still do not have a mobile or encompassing digital strategy in place. Moreover, many agencies are still growing a set of basic mobile capabilities.”

Why haven’t brands made more gains in mobile? Maybe because mobile is so much more than another platform for serving up ads. Mobile is a lifeline to one’s world, via phone, email, social sharing, plus instant and text messaging. The question, therefore, is where in all that one-to-one, one-to-many and many-to-one is there room for advertising?

Marketers and their agents do not have “the answer” to that hard question, nor do the largest social platforms like Facebook. In fact, Facebook recently admitted that “we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

Facebook currently does not display ads to its 420 million mobile users. But companies like Celtra are busy building “serious products that lives on top of the Facebook platform,” according to Adweek.

In other words, it’s a matter of minutes before ads begin to regularly appear on my handset, and yours. We will most likely recoil, because our handset is conceptually private space, unlike the TV in the living room (which is programmed by strangers). Brands aren’t all that welcome in this private space, unless they make themselves welcome by providing killer entertainment or utility.

It seems to me that betting the house on an ad-based model is the wildest kind of speculation. Facebook’s IPO is coming up and millionaires will be made by the thousands, but much of the valuation is based on the belief that a workable ad model will someday emerge. I don’t understand the confidence.

The success of mobile advertising is not a given. For that matter, the success of online advertising is not a given. We keep trying to lay 19th and 20th century frameworks on a 21st century media. Who’s going to step back and see the problem with fresh eyes? My guess is it will be someone with very little knowledge of CPMs or CTRs.

It’s a topic we will also take up tonight during the recording of this week’s edition of TheBeanCast with host Bob Knorpp. I’m on this week with Ken Wheaton, Bill Green and Åsk Wäppling.

Among the many compelling sections of Facebook’s landmark S-1 filing last week—which included Zuck’s “The Hacker Way” founder’s letter, its $1 billion in profits last year and of course, the money spent on private jets—one area really stood out among the numbers and hyperbole. The risk, and of course on the flip side, massive opportunity, that mobile represents to the future of Facebook.

In an admission that surprised many, Facebook revealed that while its monthly usage figures on mobile were of course jaw-droppingly huge, the company still hadn’t figured out a way to make real money from those mobile users. As the S-1 states: “We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

Recent reports now state that Facebook is readying its first foray into mobile ads, with the launch of “sponsored stories” – a well-timed move if so, knowing that its mobile vulnerabilities would be revealed in the S-1.

So, now that Facebook is finally ready to commit to mobile revenues, how can it reap the rewards of having such a huge mobile user base (a stunning achievement of 425 million monthly active users)? What are the secrets behind encouraging high grossing user behavior across the mobile platform?

In my role as VP of Mobile at Badoo, I’ve experienced first hand the challenges and the rewards of scaling mobile users and revenues on a global scale. Here are some of the lessons I’ve learned:

Mobile ads aren’t Always the easy answer

To allow ads or not to allow ads – that’s the philosophical question that founders like Zuckerberg have long wrestled with. Facebook famously delayed advertising on its primary site until it had a critical mass of users that were already hooked into the experience, had willingly given up mounds of personal data, and who wouldn’t desert the addictive platform if ads came along.

So when it came to mobile, they took the same approach. “Users first, revenues later.” Of course, in the case of Facebook’s mobile strategy, it turned out to be revenues “much later.” But, many companies struggle to even get scale in terms of mobile users, and Facebook has managed that better than anyone – nearly half a billion monthly users.

And while we’re on the topic of mobile ads, let’s be clear, turning on an integrated ad platform is no simple task. And while the mobile advertising market is now projected to grow to $17.6 billion by 2015, for a long time, it’s been the runt of the litter in terms of overall digital ad revenues. So while Facebook has been slow on the uptake, it’s hard to fault them for prioritizing other revenue streams that speak to its Internet roots, while quietly building an unparalleled mobile user base.

The challenge for Facebook now is to “turn on” mobile ads effectively, without sacrificing users. At Badoo, we chose not to go the ad route and embraced a freemium model that enhanced the user experience and paid dividends across both web and mobile platforms.

Make the right decisions on what to mobilize

The features that have attracted millions of users and developers to the Facebook Web platform are not just the widely emulated social functions, but the FB “app” platform, messaging and credits, to name but a few. What differentiates mobile at this stage, compared to say, the Web four years ago, is that so much of what makes Facebook special on the Web has already been executed brilliantly on mobile.

Messaging? You’ve got that out of the box on mobile, or you can download apps that will talk to any one or all messaging platforms. Apps? As a mobile developer, I have loads to choose from and they are really rich. I can even get them to talk to Facebook and get access to the social gold mine they’ve built. Credits? Yes. (Although paying for anything on mobile globally is still a challenge.)

And in the latter case, the value chain is very long, from banks and card processors, through mobile carriers, aggregators, specialist payment providers and even Google, Amazon, Apple, etc. – none of whom will want to hand over this key part of their business to Facebook (although some might be too dumb to prevent it).

So Facebook’s challenge has a meta-layer – not how to “port” FB to mobile, but what to mobilize, and how to pull users from apps they might already be using. How they can offer people more than they’re already getting?

Build high grossing user behavior into the DNA of your mobile app

When it comes to mobile apps, analysts predict that in-app purchases and a freemium approach will become the dominant apps business model in the future, and that paid apps will decline as a main source of revenue.

So when considering how to make a freemium model work for your mobile app, you should think about the following:

• Are you making your users do the work? If you’re asking users to make purchases from within a free app, you need to make sure that purchase is a no-brainer and that it leads to some tangible and instant gratification.
• Is there a logical flow to the user experience, where purchases make sense? In Badoo’s case, we offer “Super Powers” which are micro-payments that help you stand out in an online crowd. If you want to meet new people using our app, Super Powers will help, so even though the core of our product is always free, there is real value from upgrading your account.
• Are you thinking beyond games? While Zynga regularly tops the chart of high grossing free apps, there is life beyond social games. So think about how to make your monetized features fun and engaging in different ways. And always link it back to the core user experience, and how an in-app purchase could deepen your relationship with your user.
• Location-based behavior can help encourage higher grossing user behavior, but remember users buy into products and services – not technologies. Your location-based services need to add to your product, rarely are they a product in themselves.

Think global, but respect local

There are many challenges inherent in scaling a mobile strategy globally. There is clearly huge diversity in terms of mobile user behavior, platforms and devices, as you look region by region, country by country and even sometimes city by city.

So, how can you build something that represents your global brand, but is local enough to appeal to every user and therefore unlock a high percentage of revenue-generating behavior?

It’s a lot of work. At Badoo, we’ve spent the last 18 months designing and deploying to acquire millions of users in 180+ countries onto our multiple mobile platforms including iOS, Android, Blackberry and WAP (for non-smartphones). And when you think about the hugely complex billing and carrier aspects of a global mobile deployment, which need to be carried out without a whiff of disruption to the user experience, it’s easy to see why mobile engineers are in such high demand. It’s a huge job, it isn’t easy and it takes time.

We built location-based behavior into the core of our product, guaranteeing local relevancy to every user, wherever they were in the world. But getting them there, keeping them there, and encouraging them to make purchases, was and still is, a mammoth undertaking.

There’s currently no good substitute for the hard work of identifying local partners for things like payment integration. In our case, our London location and hugely diverse team from over 25 countries gives us a great head start in building out our local services globally.

Interestingly, when it comes to our mobile revenues, we’ve found that our mobile web users are almost as likely to pay for additional features as our app users. This insight provides some useful cues for companies looking to build a mobile audience that goes beyond “early adopters” in highly developed countries and into the global mainstream.

While apps are clearly hugely successful, and we’ve talked about the potential for in-app monetization, there’s still plenty of room for the mobile web, particularly when building a global product. Don’t neglect core mobile web users at the expense of iPhone and Android users if you want to build a truly global path to mobile monetization.

Wrapping up

Facebook has consistently innovated and executed at a rate that has left most of us breathless over the last few years. While its mobile revenue strategy might have taken a back seat until now, the revelations in the S-1 have surely lit the fire. The path to mobile monetization still has many turns ahead, so it will be interesting to see how Facebook explores the global mobile opportunity.

Matt Woolf is VP of Mobile at Badoo, the largest social network for meeting new people, with more than 136 million users worldwide.

Facebook on Android phone photo: Johan Larsson/Flickr

Filed under: mobile, social, VentureBeat

With Facebook’s financial situation firmly in the spotlight after its IPO filing, the company will finally address the problem of generating revenues from mobile users by introducing mobile ads in the next few weeks.

One of Facebook’s biggest risks Facebook listed in last week’s IPO filing was “mobile,” and the company said it generates no “meaningful revenue from the use of Facebook mobile products.” One solution would be to launch a Facebook-branded phone that would help the company better control the experience and serve up new ad products. But a more reasonable and quick solution is to start serving ads through its popular mobile apps and the mobile version of the web site.

The company will launch mobile ads, called “featured stories”, within weeks, according to the Financial Times. Essentially, Facebook’s will start putting ads inside of your News Feed that look similar to other stories with no way to block them. That’s quite a similar approach to what Twitter does with its “promoted tweets,” and its likely the smartest way to immediately start generating mobile revenue while working on other advertising products.

Facebook’s mobile presence is staggering, with more than 425 million monthly active users active on mobile devices. Its users have access to the service through mobile sites, feature phone products, and smartphone apps on Android, iOS, and Windows Mobile. In the S-1 filing last week, it claimed that the Facebook application is the “most frequently downloaded app across all major smartphone platforms in the United States,” according to a third-party report. The company believes usage across mobile will continue to grow, especially with young users, so it needs to start monetizing that usage.

While users will likely be vocally upset with the inclusion of ads on mobile like they were with Twitter, those users will likely not leave because of it. If I had to take an educated guess, they’ll just complain bitterly about the change to their friends on Facebook and then a few days later get over it like they do with every major design change.

What do you think about the inclusion of advertising in your mobile News Feed?

Facebook on Android phone photo: Johan Larsson/Flickr

Filed under: mobile, social, VentureBeat

One of the biggest risks Facebook listed in yesterday’s high-profile IPO filing was “mobile.” The company hasn’t quite figured out what to do with advertising on phones, so it could struggle to bring in the bank as more users choose phones over PCs.

But Chris Silva, mobile analyst for Altimeter Group, told VentureBeat that the company has a possible way to help solve this issue: the highly rumored “Facebook phone.”

“If they are taking this risk as seriously as they should, a mobile product with Facebook branding is a big way to mitigate that risk,” Silva said. “All they need is a hardware partner and to optimize the experience with Facebook features.”

Facebook indicated in its S-1 filing yesterday that 425 million monthly active users are mobile, so targeting those users on a Facebook-branded phone makes sense. In regards to risk, Facebook said:

Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results.

We had more than 425 million MAUs who used Facebook mobile products in December 2011. We anticipate that the rate of growth in mobile users will continue to exceed the growth rate of our overall MAUs for the foreseeable future, in part due to our focus on developing mobile products to encourage mobile usage of Facebook. Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices. We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. Accordingly, if users continue to increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected.

There is no guarantee that popular mobile devices will continue to feature Facebook, or that mobile device users will continue to use Facebook rather than competing products. We are dependent on the interoperability of Facebook with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook usage on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that our products work well with a range of mobile technologies, systems, networks, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards. In the event that it is more difficult for our users to access and use Facebook on their mobile devices, or if our users choose not to access or use Facebook on their mobile devices or use mobile products that do not offer access to Facebook, our user growth and user engagement could be harmed.

The rumors about the “Facebook phone” took on a new degree of certainty back in mid-November when AllThingsD ran a series of reports about the upcoming device. It said the phone, called “Buffy”, would launch within 18 months of that time and be manufactured by HTC. It also delved into background about how the phone started as a highly controversial project within Facebook’s walls.

Silva agreed with the prior rumors about Taiwan’s HTC being a likely candidate, but he also said manufacturers like South Korea’s LG and China’s ZTE would be good choices as well.

“With Google and Motorola being so cozy, other Android phone manufacturers have to be looking at this as an option to differentiate themselves,” Silva said.

Features that the phone could include could simply be optimized Android software that emphasizes the Facebook experience. Or it could go further, with hardware-powered features such as NFC-enabled ability to “friend” someone you meet while out and about.

Facebook will have to be cautious about how it approaches the mobile handset market though, or else its phone will end up being yet another aspect of mobile weighing it down.

Facebook on Android phone photo: Johan Larsson/Flickr

Filed under: mobile, social, VentureBeat