It’s been almost 2 months since I last posted anything here (I have no interest in blogging for the sake of blogging, and I’m sure you have no interest in reading self-important daily ruminations on the state of social media, society, or Steve Jobs (RIP)).

So, beginning today, I will be compiling – in keeping with my commitment to publish only when I have something worth publishing – recaps of a few of the various things I’ve discovered and shared during the previous month, be it via Twitter, Facebook, Google+, LinkedIn, or whatever other social brand made sense in the moment. I won’t be recapping ALL my postings and discoveries (saints preserve us!), but only those that I think still merit review, one month later. As noted above, I’ll be calling this regular entry “In Case You Missed It…”, and I welcome any feedback or input, as always.  So, without further ado, here is the first installment of this regular publication for your enjoyment, information, education, and perhaps even inspiration! (this first posting will cover a little more than the past month, just to get us all caught up):

Fundraising in the New Economy

As many of my readers know, I have been dedicating a big chunk the past couple of years to supporting a small variety of Not-for-Profit Organizations, helping them to strengthen their brand and financial positions during this economic downturn. Many NPOs are still wasting a lot of time pursuing legacy funding channels that no longer deliver the returns they used to bring, at the cost of other revenue generation opportunities. Crowd-sourced and network funding channels abound now, including ProFounder, Kickstarter, Razoo and others. NPOs need to have a dedicated New Funding Director, well-versed in emerging channels (from text-based through Social, and beyond). In July, Mashable published an interesting article offering some tips for NPO mobile campaigning. It was a little simplistic, but a great way to help NPOs start thinking along the right lines.

21st Century Pop

Later that month, I came across a very compelling site called thesixtyone, where “new artists make music and listeners decide what’s good”. Why it took me so long to check this out, I’ll never know, but I’m glad to see it still going strong, and now there’s another offering, exclusively for the iPad, called Aweditorium, which is similar, yet just different enough to make it worth looking in to. While Spotify, Grooveshark, Pandora, Mog, and Last.fm are hands down the best purveyors of mainstream music over the Net, it’s great to see intuitive, crowdsourced music experience such as thesixtyone and Aweditorium. Kudos to Reid Hoffman and Joi Ito for supporting such truly grassroots musical adventures as thesixtyone, and I’m eager to see what sort of UX the iCloud offers, to mitigate the lousy experience that is currently iTunes.

Gee, Plus or Minus

Also in July, I began using Google+, and I must say I am still struggling to adopt it as a preferred social network. I can see some potential, but it is so specifically reliant on the input of users that one wonders whether “we” are enough to ensure ongoing and continually expanding usefulness, beyond the fraternity of early adopters. This network may end up becoming little more than a glorified techie BBS, which is not a bad thing, just not perhaps what everyone had initially expected or hoped for. I yearn to be proven wrong, though, and see this evolve into a deeply enriching experience for a vast cross section of society, sufficiently differentiated from Facebook that it moves beyond being an “either/or” proposition. Other niche social networks are growing strongly, meanwhile, including photography site 500px (an alternative the increasingly messy deviantart).

Incremental Change

I’ve been waging a more than 2-year battle to have a major residential street in Burbank calmed sufficiently to allow for bicycle lanes, a center turn lane, upgraded signalization, and safe pedestrian crossing experiences. Just a few weeks ago, with the help of many friends and professionals, the battle was won, and we now move on to the next street, in this war (at least, that’s what it often feels like!) to make urban living safer, more manageable, and more sustainable.  My efforts were quiet and diplomatic (for the most part!), compared to the impressive actions of people like Vilnius Mayor A.Zuokas and Ed Begley Jr. While we may not all have the discipline, vision, & commitment of Mr. Begley, wouldn’t it be nice if we each moved an inch further in the right direction? Standing still on the issue of sustainable living isn’t going to improve air quality, landfill overflows, urban heat island effect, & the host of other challenges bearing down on us. Whoever said “ignorance is bliss” was a fool (Hello, Thomas Gray). As for the tank stunt: Is it all staged? Perhaps. Does it momentarily fulfill the fondest wish of many a pedestrian, bus driver, and bicyclist around the world? Definitely. The streets of our urban areas are supposed to be for ALL forms of transportation, not just cars. Does your city have the legislative tank commanders necessary to ensure you are able to get around a cleaner city, however you wish, and safely? Think about it, and maybe one or two more of us can act upon it…

In the meantime, while we fight to make our cities more inclusive, many among us are worrying about how our privacy is becoming compromised online. Facebook is certainly not to blame, if you are stupid enough to post drunken/naked/awkward pictures of yourself on your profile, or otherwise upload sensitive data. That’s all on you, bubba! However, your phone number, real estate records, social content, name, age, and so much more are easy to find on the web, regardless of your Facebook activity, thanks to a host of sites you may never have heard of. Clearing the data can be a bit of a headache, but finding all those sites has recently become a whole lot easier: Unlistmy.info is a free service that helps you identify those sites and remove your personal data from their records.

Speaking of records, the results from the 2010 Census came online last month, and they’re interesting to wander around, during your coffee/tea break… (some intriguing questions arise, such as: if all designated races experienced population decline in Los Angeles County, how did the overall population in that California county INCREASE by nearly 300,000 people?). Explore the 2010 Census here (courtesy of CNN).

Keeping The Fire Alight

More recently, Lots of new techie toys have been coming out: iPhone 4S, Amazon Fire Tablet, Kindle Touch, Samsung Galaxy S2 for T-Mobile and others, a couple of new Android tablets, some more Windows phones…Despite high unemployment, and a gasping economy, our almost unconscious desire for the newest consumer tech bauble remains as healthy as ever. At some point we will suddenly wake up to the fact that all these devices are nothing more than toys or tools, and as such need to be either mightily entertaining or extremely useful…and, in both cases, firmly reliable.

Let that day come sooner, rather than later.

The speculation surrounding the Amazon tablet release was perhaps the most feverish, with claims being made that the “Fire” was a potential “iPad Killer”. Despite press reports supporting this dramatic contention, nothing could be further from the truth, IMHO. As I said in one of my Quora answers last month, the new device from Amazon certainly opens up the market, with a price point ($199) that will bring fiscal fence-sitters into the arena. However, the feature-set on the Kindle Fire make it more like a juiced-up iPod Touch than an iPad. The Kindle Fire has no camera, no microphone, and no 3G connectivity. That said, it has two things that the iPad does not have: Amazon Silk and a vast content library (remember, Apps are not content, per se, they are applications!). The iPad will continue (for now) to dominate the upper end of the tablet market, with its dominant app collection and solid device performance. Meanwhile, the Kindle Fire represents a price and feature challenge to the rest of the market (Android and Windows8, essentially). To go out on a limb, just for the heck of it, I’m going to predict that that Kindle Fire does very well in the short term, while the new Kindle e-readers do astonishingly well, once they come out in November. Amazon may well take 2nd place in tablet market share, but not for long, as I have to believe the release of Microsoft’s Windows 8 tablet OS will force the Android Tablets and applications communities to mature at an accelerated pace. Amazon will take 1st place in mobile content delivery, and will keep it, so long as they maintain focus on their existing core capabilities.

I don’t think Mr. Jeff Bezos and Co. are looking to secure early advantage in the tablet race. Their objective is loftier. Amazon is in the multiplatform content delivery market for the long haul, as evidenced by their Kindle ecosystem. While the HTCs, Dells, Samsungs, RIMs, and Motorolas of the world (sorry, HP, but a jailbroken tablet can no longer be considered viable competition) fight it out in their respectively scrappy fashions, Amazon would do well to stick to its proven methodologies: manage and enhance a world-leading library of diverse content; produce competitively priced, robust, yet simple-featured devices; tying it all together with a superior (if still prone to outage) cloud infrastructure,

Market analysts have claimed that everyone who was going to buy a Kindle has already bought one, but the new touchscreen functionality and very affordable price point now position the Kindle e-reader as the only game worth playing in town. The Nook is in serious trouble (trapped between the Kindle Touch and Fire, yet costing almost as much as both combined). Watch for massive sales of this new line of Kindle e-readers, assuming the interface is solid, and the Whispernet deal (free wireless content delivery) stays equally secure.

The Kindle Fire represents a widening of the market for tablet users, not so much a direct challenge to the iPad (although it may convince Apple to lower the price on their current model, and keep it on the market when the next iPad iteration comes out, all depending on whether there is sufficient differentiation between their current model and the next release. Most signs point to this not being the case).

The new line of Kindle e-readers positions Amazon to garner such a massive and insurmountable lead over all other book distributors, digital or otherwise, that the Big 5 publishers are going to have to come back to the table soon, with their tails between their legs. Although Apple’s iBook may have better UI, the Kindle App gives readers a degree of mobility and flexibility that is unmatched.

Amazon is pursuing software and hardware innovations in full support of their core competencies, and the company will prosper mightily as a result. If AWS can reduce outages, and their Cloud infrastructure is able to handle the load that might come to bear when 50 million (or more) tablets and e-readers and other devices call for content at the same time, then Amazon will be the new leading entertainment studio of the 21st century: in charge and in control of distribution more content to more people, in more places, on more devices, than any other entity.

That brings me to the end of September, and I haven’t even mentioned my Twitter postings (tweets). So I’ll just post a few from the beginning of July below, to give you a taste of what you can usually find there! In the meantime, I look forward to next month’s recap and, if you prefer to connect in a more timely fashion, I encourage you to follow my regular (almost daily) tweets on Twitter, and/or my weekly short posts on Facebook.

A few Twitter tweets of note for early July:

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With economies crumbling, politicians posturing, nations in upheaval, and “Wizards of Waverly Place” canceled, one can’t be blamed for thinking humanity has lost its bearings, and all is lost. However, I believe that nothing could be further from the truth.

After decades of conspicuous consumption, corporate and personal greed, and upended priorities, the double-dip depression (that’s what I’ve been calling it, and I’m sticking by it) is forcing many of us to review our lifestyles, and reconsider what is really important. Statistics suggest that the undeniable financial stresses of late are not increasing divorce rates, but rather reversing the trend (divorce rates are down year-on-year since 2008YE), and families are growing closer, with adults moving back in with parents, resulting in shared costs and shared burdens. The high cost of oil (regardless of recent gimmicky dips) is accelerating the drive toward alternative fuel vehicles (here’s hoping that we blast through the not-so-green hybrid and electric cars currently on offer, and really get it right with 2014 models). Citizens of cities around the world are increasingly clamoring for alternative modes of urban transportation (bicycle, pedestrian, public transport), leading to the exciting redesign of urban landscapes – incorporating  complete streets, more green spaces, pedestrian safety, increased access to local retail businesses, air quality improvements, mitigation of obesity rates, and reduction of urban heat island effects.  The process is slow, sometimes painfully so, but it is at least progressive, and I believe accelerated by the pressures brought to bear by our collective and individual financial woes.

The struggles faced by our society are reinvigorating our awareness of the communities within which we live, work, and play. More to the point, they are humanizing an existence that seemed to be losing itself in an entropic vortex of “technology for the sake of it”, rampant consumerism, and material one-upmanship. Individuals are becoming more aware of the truth of our shared reality. Nobody is in this alone, and this noble cliché seems to be reawakening an almost instinctual urge to share what little we have with those around us. The amount of dollars being given to charity may be down, but the number of people making donations  is up. This drive is manifesting itself in some wonderfully strange ways, a few cherry-picked examples offered her below, as evidence:

Airbnb is trying, with varying degrees of success, to connect private homeowners with regular travelers, for mutual benefit. Have an extra room (or whole residence) sitting empty at any particular time of the year? Offer it up for rental, and airbnb will help find a tenant.  As soon as the service manages to work out how to minimize vandalism and theft, and refine the availability calendaring (hopeless at present), it’s going to be fantastic (then again, the moment it solidifies its value proposition, I’m confident one or more of the VC firms backing it will insist it “pivot” to some nonsensical alternative business model, in the hope that ROI might be accelerated).

Meanwhile, one wonders what the point of grassroots lodging is, if one doesn’t have a clue what to do in the city one is visiting. MyGuidie to the rescue! This service, still in alpha mode, is building a database of professional tour guides offering their professional services to travelers seeking to explore a destination properly. However, the real clincher about this site is the fact that it is ALSO registering volunteer locals willing to offer up a little guide time in return for a cold brew or friendly meal! Salacious potential aside, this is civic pride in action.

Don’t rely solely on your guide, however, when you consider that restaurants, museums, and many other places to see and be seen are actively pursuing ways to connect with their customers, fans, and clients. The obvious Foursquare and Facebook check-in mechanisms are but the proverbial tip of the iceberg, marking the spot in an ocean of opportunity. Underneath these well documented landmarks in communications and interconnectivity lie some very compelling niche programs worth checking out, such as – to give but one example among an increasing horde – the Connections program from the Metropolitan Museum of Art, where staff are sharing their personal histories and perspectives on art, and overlaying these worldviews on the more specific  touchpoints offered in the museum’s collections.

While on the subject of taking people out to lunch, or visiting a place of interest, it’s intriguing to note that We&Co, a Foursquare outcrop app, is providing users the ability to leverage the increasingly ubiquitous “check-in” to recognize and thank the people who make a particular moment in our day a pleasant one, be it our waiter, retail clerk, dentist, or tour guide.

These are but a few of the apps, sites, and services cropping up (and growing fast) to accelerate this healthy compulsion many of us are experiencing: now that we have less money, perhaps we’ll focus a little less on building or buying more, and  instead take a little more time to show some interest in those things that truly make life worth living: the people and places that comprise our world. As my close personal friend, Henry David Thoreau, once said: What is the use of a house if you haven’t got a tolerable planet to put it on?

Henry David Thoreau, in 1861.
Image via Wikipedia

My friend, Mike Brown recently posted a short piece on his own blog, entitled “Who is creating social media content in your organization?”, exploring where the departmental responsibility for social media (or “social engagement”, as I prefer to call it) lies within an organization. I added a comment to the posting, which drew some very flattering responses via Twitter, Facebook, LinkedIn, and email – so I thought I’d post my comments here below (as much to remember what the heck it was I wrote, as to keep the conversation going!):

Perhaps above and beyond the obvious impact Social Media is having, in terms of offering new opportunities for brand evangelists to introduce and moderate their platforms in existing or new constituencies; for product and solution marketing teams to try and launch “campaigns” via new channels; for corporate representatives – be they CRM, legal, or otherwise – to try and cautiously bring their brand and offering connection closer to the end-user, in response to an increasing demand by consumers and clients to participate in the valuation of offerings, further up the value chain….above and beyond these and other immediately evident opportunities, benefits, or enticements (presented across the still primordial social engagement landscape), there is growing one even larger opportunity that has been only tangentially addressed here, and deserves to be directly examined:

Instead of attempting to qualify which existing department should or does own or lead social engagement activities, within traditional corporate infrastructures and silos, the real question of deepest worth may be “has the advent of social engagement, greater organizational transparency, transversal responsibility for failure and success alike, and deeper demands from every part of the process (including consumers) for collaboration in development, innovation, productization, distribution, and iteration (breathe here) created not just an opportunity, but a demand, for organizations to review their org. charts, and functional infrastructures, in order to best respond to and manage new models and ecosystems in customer and client relationships, product sales and management, and other aspects of B2B and B2C business?”.

Perhaps the answer lies not in shoving social media activities into one or the other pre-existing pigeon hole, but instead taking this opportunity to stir the pot more than just a little, and take some time to divest ourselves of 1950’s functional structures..?

This is the moment to loosen our grip on the past and present, and see this undeniably disruptive practice of social engagement as a chance to reinvigorate and possibly reinvent the way we manage innovation, human resources, market penetration, customer service, and so much more. Let’s not get carried away with a presently rather shallow tide, but let’s recognize that the tides have nevertheless shifted, and the currents are moving in compelling new ways which will certainly change the landscape. Where your ship lands depends on how well you learn to navigate these currents and tides, and how efficiently you reassign your crew.

My fundamental suggestion is that corporate and organizational models are ripe for transformation, reflecting massive evolutions in internal and external communications, operations, personnel management and education, marketing, and customer relations – to name but a few areas that are both deeply impacted by and – in turn – heavily influence hierarchies and processes within organizations. The way social engagement permeates an infrastructure could prove invaluable in effecting valuable transformation: watch the practice as it flows through the organization: something akin to a corporate blue dye (BDT) and modified barium swallow (MBS) test! Should Marketing and Communications continue to be lumped together (“MarCom”)? Is the skills set of Marketing best maximized as a Sales support function, or is there a more strategic opportunity therein? Should Communications really be a satellite support function, activated only whenever a Business Unit or other department determines there exists a need to “push” information outward, or is more potential just itching to manifest itself? The communal nature of social engagement gives organizations the priceless opportunity to move beyond legacy charts, developed to manage the 19th Century industrial revolution. Several revolutions have taken place since then, and this latest one – effectively disrupting how we connect, communicate, and transact with one another – presents an opening that should not be overlooked.

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As professional reviewers and taste-makers find themselves increasingly marginalized by the aggregate insights and observations of “the crowd”, one wonders whether the demise of printed news may actually be beaten to the punch by the obsolescence of the once-all-powerful critic.

It used to be that we relied on Patricia Wells or Brad A. Johnson to guide us from one fine dining experience to the other. Indeed, reading their restaurant reviews in the Herald Tribune or Angeleno (respectively) represented something of a tasty appetizer, prior to the main experience of visiting an emerging “hot spot” discovered by their renowned palates.

Today, we are far more likely to turn to the legion of self-anointed food critics that live on Yelp, and – by parsing their experiences – so determine our choice of venue.

Of course, this trend is not limited to food: IMDB, Metacritic, and rottentomatoes.com are but a few of the resources available to moviegoers seeking to crowdsource their entertainment choices; a slew of new apps and engines, such as Weddar (location-based, people-powered, social weather reporting) and Fflick (twitter-based movie recommendation engine, recently acquired by Google), to name but a couple, are rapidly making anyone with the inclination a “retail influencer”.

It seems that for every institution, industry, and brand, there’s an app or a site ready to offer up a plethora of user-generated reviews. Amazon’s main value proposition is arguably not so much its products or pricing, but rather the fact that every one of those products is accompanied by a rich diversity of opinions from past shoppers. Groupon and Foursquare give users the opportunity to share “tips” and other product insights, and what’s Facebook if not one big moshpit of “Like/Unlike”? From PCs to software downloads, cars to cancer treatment, the experienced insights of trained professionals or deeply experienced specialists are being usurped, in favor of the massed choir of “fellow shoppers” in whom we prefer to somewhat blindly place our faith – jaded by a glut of advertising, and suspicious of prognosticators that seem less perfectionist and more political…a classic case of “quantity trumps quality”, based on the assumption that a sufficiently large aggregate of diversified opinions and reviews will yield a more truthful mean insight than one or two “professional” perspectives.

During the early days of this trend, the notion that one could turn to our peers for honest pre-purchase evaluations was both compelling and valuable. Sites such as Epinions.com and eBay fostered communities of idealistic shoppers, keen to ensure that their fellow consumers benefited from their prior experiences with a brand or product. As with most movements, the early days were a refreshing and invigorating alternative to what had admittedly become a somewhat stuffy status quo of entrenched, predictable, and unimaginative thinking. However, with mass adoption comes an exponential raising of the volume. The signal-to-noise ratio has diminished so swiftly that  I believe the “great experiment” risks expiring, gorged on the fat of its gluttony. Opinion aggregating sites such as Yelp are working frantically to develop and perfect algorithms that will mitigate the mess, but code often confounds the issue (many Yelp users – consumers and businesses alike – are complaining that their bona-fide reviews are being filtered for no apparent reason, and Yelp representatives explain that they have no control over the automated process of removing reviews that its algorithm deems “suspicious”).

This leaves us at the proverbial crossroad: either engineers or programmers discover and develop a stronger mechanism for managing the overwhelming pool of reviews attaching themselves to every book, diaper, TV, ointment, and car available on the Web; or we begin to find ourselves gravitating toward, and eventually anointing a select few regular reviewers, and making them the professional critics of the 21st Century, hired by their readership/viewership, and empowered to guide us all once more, as we seek out – albeit a little more frugally than our parents may have done – the next great meal, deal, or wheel.

What is certain, IMHO, is that crowdsourced review pools are fast reaching their saturation point and, unless someone begins to refine and maximize the resource, it will be as appealing and nourishing as sitting in a pool-full of marshmallows: the idea was thrilling, and the initial experience inspiring, but eventually the reality proves somewhat mind-numbing, and perhaps even a little sickening.

I disagree with the contention that social media is “…just a plural term for any online vehicle that allows for, and encourages, interaction” (see one of my previous postings on Social media for details).  Additionally, I predict that business websites will soon be far less crucial to a brand’s marketing strategy and market engagement than one might think (but more on that in a later post).

For the rest, I found Brazilian social media marketing strategist Gina Gotthilf’s recent article very helpful on several points that might prove of particular value to B2C businesses (B2Bers can still glean some useful tidbits, but the article is primarily speaking to e-commerce and e-consumer engagement). Ms. Gotthilf kindly agreed to have what I consider the most salient points excerpted here below, and I believe you’ll find some good tips on improving digital marketing tactics and optimizing your connection to your online audience/prospects:

When incorporating social media into a marketing strategy, most companies focus on Facebook and Twitter. Those who hire social media strategists also venture into niche platforms and new technologies, racing to stay ahead of the competition.

Yet what is often forgotten is that social media does not necessarily entail a dedicated platform – it is just a plural term for any online vehicle that allows for, and encourages, interaction. Hence, one of the most important steps in making your brand social is incorporating social elements into your company website.

Here are the top 6 questions to ask in determining if your website welcomes interaction.

1) Is your content shareable?

This may seem obvious but is more than often overlooked. Sure, readers can always copy a URL they find interesting and manually paste it into an e-mail to share with friends, or into Facebook to share with their network… but they more often than not WON’T. The rule of thumb is, and will always be: your community is lazy, no matter how much they love you. Use ShareThis to facilitate and encourage sharing by making (at least the most basic) buttons available by any post, photo or item on there. But don’t make EVERY button on the face of the internet available – your readers are too lazy to look through them and easily confused. But remember – just because you put a button there doesn’t mean people will click. Shareable content needs to be unusual, interesting, humorous or controversial. Keep this in mind when planning content and layout.

2) Can readers affect the content of your website?

Of course your professional website isn’t a wiki – open for endless edits by well-humored kids located in some non-English speaking country. Yet readers like feeling as though you’re listening enough to incorporate some of their thoughts and opinions. If you publish written content, perhaps offer the possibility of suggesting topics. If you publish visual content, give your readers the ability to submit their own for photos and video for display in a designated UGC (user generated content) area of your site. If you sell products, consider letting users vote on what models and colors they’d like to see made available for purchase or suggest changes to existing items.

3) Can your audience submit public comments or reviews?

Sure, your own description of your product may be accurate and what you sell or write may actually be life-changing. But readers want to hear that from other readers. Comments and reviews make your site look honest, transparent, and not afraid of public opinion. Of course, as with any other social media platform, monitoring is necessary to ensure that comments and reviews are appropriate, non-offensive and properly responded to if necessary.

4) Is your content dynamic?

Static websites are the equivalent of stores that never change their collections (I don’t know of any in real life, other than antique stores). Keeping your content new and fresh will encourage your readers to visit on a regular basis – to read new articles, check out new products or admire new images. Readers will most often share content from websites they are familiar with as a credible source of information – they don’t want to look foolish. Moreover, new content means new things to share… and more visitors entails more members for your new thriving community!

5) Does your homepage offer a relevant social experience?

When a reader is perusing your content… is he/she hanging out alone or with others? In other words, are there indications that other people are there too at that particular time or that their friends have been there before? Facebook Connect offers an easy solution to bringing people’s networks into your site without altering content and letting your readers find out what articles or products their friends have personally endorsed. Making buzz public (such as number of current visitors or total pageviews) and adding chat plug-ins are also easy, effective upgrades.

6) Is your site optimized for mobile platforms?

It’s no news – people are constantly browsing the web and looking for relevant information on -the-go. Browsing the web on your computer is so last year! Whether they own a Blackberry, iPhone or iPad, your audience will want to check up on sales when they’re close to stores, see if you sell something they need, or want to reference your content when it’s most relevant to them geographically. Make sure to create a mobile version of your website or ensure that your existing website functions properly on multiple mobile devices. Additionally, consider creating a relevant branded application and maintaining up-to-date on Facebook’s Open Graph mobile features.

Gina Gotthilf is a Social Media Strategist with several years of experience in developing, managing and analyzing social media marketing campaigns for luxury fashion brands. She loves observing and predicting behavioral and market trends online. 

It’s been quite a while now that “gurus”, “pundits” and “experts” have been bandying about the term “Social Media”, proffering it as the catch-all for market penetration and business success, without honestly having any sort of traditionally measurable proof of merit in hand.

There’s no question that Social Media is an exciting activity sector, promising diverse new and enhanced points of connection with customers and clients. Quite how those connections will translate in to the type of metrics favored by traditionalist CFOs and shareholders is still under debate.

While the aforementioned experts continue to find ways to align this new engagement paradigm with traditional Cost/Benefit analysis modeling, I suggest that such ROI measurement is perhaps something of a fool’s errand, (1) because marketing has never been measurable in the manner that so many companies historically demand, and (2) because the commitment required to successfully maximize the potential of today’s emerging platforms and tools for customer engagement is far less measurable than ad or PR campaigns have been, in the past.

Social Media is more than a marketing campaign ecosystem, wherein one might deploy emerging product offerings or test possible brand evolutions. In fact, I would love to get rid of the term “Social Media” altogether, because it brings with it an unfortunate sense of frivolity that has been compounded by the visible (yet relatively small) part of social media, known as Social Networking (domain of Facebook, MySpace, Youtube, et al).

From a business perspective, the notion of “Social Media” stinks too much of an ongoing teenage chat session, with no goal in site.  Many social media gurus will argue that this is quite so, and crucial to a business’s success in the 21st Century. While I strongly concur that engaging in a more open and collaborative dialog with consumers and users is an imperative in the contemporary marketplace, I also feel strongly that there exist few businesses that can afford to invest time and money in open-ended discussions with their prospects, “just because”. In the end, a business has something to sell, and its activities should be focused on this goal, as well as the post-sales services necessary to ensure the new customer becomes a de facto account executive for the brand. Smart marketing is a strategic endeavor, managed at the C-Suite level, and designed to position a company’s offering(s) as impactfully as possible, with the ambitious objective of turning salespeople into customer relations advocates.

By all means let’s call it “Social Media” when we’re reconnecting with old High School friends and sharing photos with cousins across the world.  With respect to B2B and B2C connections, let’s expand the term, and call it “Social Engagement”. That is, after all what it’s about, isn’t it? The more measurable activity is whether and how we might engage with and activate our end-user community to become partners in the enhancement and advancement of our brand (and its varied offerings).  In some instances this will be sociable (Facebook Pages, Twitter feeds, comments threads, etc), in others more buzz marketing oriented (viral branded content, competitions, internal communications, polls, etc), and in yet others wholly functional and tactical (SEO, brand monitoring, bookmarking, corporate HR, medical resource sharing, media asset management, and so on).

There’s a lot we can do with the tools, platforms, and channels available to our businesses today, but we need to think of our Social Engagement strategy as more than “getting on Facebook” or “starting a blog”. It is a commitment – both online and offline – to connecting with our users, employees, and clients in a more dynamic and potentially rewarding manner than ever before. It is a far more organic and open-ended engagement than we are used to (and perhaps comfortable with). However, it still merits careful strategic forethought and measured management.

To begin, despite that fact that she uses the term I have renounced above(!), I am thrilled to introduce our latest contributor, Pam Dyer, a marketing consultant from Seattle. Her article below offers up a dozen arguments in favor of Social Engagement in the online space. I know that you and I could together come up with an additional 12 reasons, specific to your particular situation, so and I therefore challenge you to make your own list of 8 more, just for the fun of it (and DON’T limit yourself to online opportunities). With 20 compelling reasons to activate your “Media Engagement” endeavors, you will soon be leveraging a previously confusing array of ever changing networks and tool sets, in service to your brand and, more importantly, the long term health of your business.

Social media is fast becoming an essential part part the marketing mix for brands. Companies are increasingly using social tools to monitor conversations about their products, competitors, and industry, and engaging with their customers to build strong relationships. According Forrester Research’s most recent Interactive Marketing Forecast, social media marketing will grow at an annual rate of 34% -– faster than any other form of online marketing and double the average growth rate of 17% for all online mediums:

And new research from Access Markets International Partners shows that almost 70% of small and medium businesses actively use social media sites like Twitter, Facebook, and LinkedIn to promote themselves. But simply posting what your CEO had for lunch isn’t going to help much with your branding efforts — it’s important to strategically use social media tools to increase exposure and reach your target audience.

Here are 12 compelling reasons to use social media to help grow your business:

1. Own your brand’s social presence: If you don’t create official channels online, it’s only a matter of time before your fans do it for you and create their own profiles and communities around your brand. It’s important to claim your brand name across all the major social media platforms. Here are two sites that will help you do this:

  • KnowEm: KnowEm has the highest number of sites (over 350) available for checking username availability. Simply by entering your desired username, you’ll be able to find out instantly if it’s still available. KnowEm also offers paid plans, from just signing up and registering you at 150 sites, to a full-featured plan which also fills in all profile details, complete with pictures, at 100 to 300 different networking sites.
  • namechk: Covering 72 major social networking sites, namechk is simple, fast, and easy to use. If your desired username or vanity URL is still available, you simply click through each one to claim it. If your brand isn’t consistent across the Web, namechk can help you by determining which usernames are still available on a number of the most popular sites.

2. Look like you “get it”: Your target audience is becoming more shrewd about leveraging social media sites as an integral part of their daily lives. If you want to appear relevant and in-step with the latest advances in technology, your potential customers will want to see you on these sites as well. If you don’t have a presence, you appear as if you’re not very savvy.

3. Brand recognition: You need to go where your customers are, and they are increasingly spending a great deal of time on social networking sites. Using social media enables your company to reach a huge number of potential customers. Getting your name out there is incredibly important — studies suggest that people need to hear a company’s name at least seven times before they trust and respect it enough to become a customer.

4. Take your message directly to consumers: Social media tools enable you to directly engage consumers in conversation. Be sure to build trust by adding value to the community consistently over time.

5. Increase your search engine rankings: Social media profiles (especially those on Twitter, Facebook, and LinkedIn) frequently rank highly with major search engines. Creating keyword-rich profiles around your brand name can help generate traffic for your both your social-networking sites and your company’s Web site.

6. SEO benefits: Many social media bookmarking sites use NOFOLLOW tags that limit the outbound link value of posts made on their sites, but there are still many leading sites that allow DOFOLLOW tags — including Friendfeed, Digg, and Mixx. You can also benefit from posting to bookmarking sites that use NOFOLLOW tags if people read your posts and link back to your Web site.

7. Social media content is now integrated with search results: Search engines like Google and Bing are increasingly indexing and ranking posts and other information from social networks. Videos from popular sites like YouTube can also be optimized for indexing by the major search engines.

8. Brand monitoring: Having a social media presence gives you a better understanding of what current and potential customers are saying about your products and services. If you actively monitor social conversations, you have the opportunity to correct false or inaccurate information about your brand and address negative comments before they take on a life of their own.

9. Generate site traffic: You can create additional traffic if you regularly post updates on social networks that link back to your Web site. Social media bookmarking tools like Digg, Reddit, and Stumbleupon can also generate additional traffic to your site if you create frequent articles and blog posts.

10. Find new customers through your friends: You shouldn’t neglect your personal social media accounts as potential avenues to promote the activities of your business. Posting regular updates relating to your business and activities can remind your friends about what your company does and influence them to use your services or make referrals.

11. Find new customers through your company profile: Your company profile is a great opportunity for you to post regular updates on your activities and about important news and trends in your industry. This will attract the attention of new customers interested in your industry and increase your reputation as an expert in your field. It’s important to post regularly if you want to increase your followers or fans and convert them to potential leads.

12. Niche marketing: Social media enables you to reach very specific subsets of people based on their personal preferences and interests. You can create unique social media profiles to target these audiences or create strategies based on addressing individual interests.

Pam Dyer has 14+ years of MarCom experience, in-house for a number of years at Northwest Nexus and Winstar, and now as a consultant.

If you ask a CMO at one company what social media represents to her, she will likely provide a starkly different answer to that proffered by the CMO at another company. The difference in answer might be exacerbated if the companies work in different market sectors, or if one is B2C and the other B2B, of course. However, the largest source of differentiating interpretation would lie in the fact that social media marketing is perhaps the most abused instrument available to corporations at present (though in some businesses the employee may hold that dubious distinction), simply due to the fact that its potential value is undeniable, but its specific function and application is as yet unwritten.

Let me correct myself on that last point: the function and application of social media marketing is not unwritten, but rather so buried in the ink of prognostication and postulation, that it would suffocate even an arctic seal.

For my money, Social media marketing is NOT an exclusively online or digital undertaking, but rather a relatively recent opportunity that recognizes the influence and power of the end-user, as a partner in the introduction and evangelism of products, services, and solutions. This recognition can be manifest via myriad platforms and channels, including the Internet, mobile applications, WoM, and more. Successful social media marketing is a transversal commitment to manifest and nurture a brand valuation across multifarious sectors. In this way, one is able to both maintain the vitality of a brand, and also reinvigorate it almost instantly through the maintenance of carefully managed yet open dialog with the users of this brand proposition. The cost of such an undertaking are not, as some have suggested, greatly lesser than conventional marketing practices. They are simply transferred, from media to labor.

This factor, along with several others, deserves clarification, and I am pleased to therefore present the musings of my colleague, Tom Pick, below.

As an independent consultant and through B2B technology marketing firm KC Associates, Tom shares expertise in SEO, search marketing, social media, content marketing and interactive PR. In this article, he explores some of the myths surrounding social media marketing.

Though social media marketing is rapidly advancing in terms of adoption and sophistication, many marketers and business executives still struggle with it. They wonder if their organizations are doing enough, if they are doing things right, even if they should be involved in social media at all. This confusion is partly due to some still-common misconceptions about social media marketing…:

1. Social media is so easy we can hire an intern to do it. Because social media is fundamentally about conversations, the individual(s) behind your social media activities is often perceived as the public face of your company. This person is answering questions about your products and/or services, responding to or redirecting complaints, sharing interesting content, providing more information…you’ll probably want to be a bit careful about who gets this responsibility. ->

2. Social media marketing is really hard. True, there are techniques that work better than others, guidelines that are good to know, rules of etiquette to follow and common mistakes to avoid, but the general skills called for aren’t all that uncommon, and the specifics are teachable. It helps to be creative, curious, articulate, friendly and helpful. Okay, so not just anyone can do it, but it’s not rocket science either.

3. Social media is only for the young. Argh, no! On the consumer side, the largest cohort of Facebook’s user base is the 35-54 age group, and the fastest growing is the 55+ cohort. On the producer side, the most important attributes are interpersonal skills and industry knowledge. Age is irrelevant in social media usage, and life experience is a plus for social media marketers.

4. Social media is free. Um, no. While recent studies show that about half of marketers say that social media reduces their overall marketing costs, it is by no means without a price. The primary budget effect of social media marketing is to shift costs from media buying to labor. The tools of social media are (mostly) free, but the time, effort and expertise required to make social media marketing effective has real costs.

5. Since social media marketing is labor-intensive, we should offshore it. Ooh, not a good idea. While offshoring works well for tasks like IT consulting services and software application development, it tends to be less efficacious for market-facing activities. Thoughtful companies keep their SEO efforts local (to avoid link-spamming, for example) and after evaluating all of the costs, many are even moving call centers back onshore. And see myth #1 above.

6. Social media marketing success is all about rules and best practices. Not really. True, there are guidelines as to what works well (being sincere, helpful and knowledgeable) and what doesn’t (trying to use social media sites as one-way broadcasts of your marketing brochures), but the field is new enough that many of the “rules” are still being written. While there are some techniques that seem to work well and are worth replicating, and others that should clearly be avoided, there’s also a great deal of space for creativity in this rapidly expanding and evolving area.

7. Social media marketing has no rules. Now, just because there isn’t an established cookie-cutter approach to social media marketing success doesn’t mean there are no rules. Don’t be excessively self-promotional, don’t try to automate everything, be sincere, add value—there aren’t a lot of rules, but these are a few very important ones.

8. Social media marketing gets immediate results. Almost never. Sure, you may run across an example somewhere of this happening, just as you may hear about a couple who got married three weeks after they met. It can happen, but isn’t common and shouldn’t be expected. Social media is about building relationships and influence. It takes time, but the payback can be much more lasting than a typical “marketing campaign” as well.

9. Social media marketing is too risky. This fear is most common in the medical, financial services, and other regulated industries. And it’s certainly true that there are situations where a company has to be somewhat cautious about its social media participation and content (another reason to keep myths #1 and #5 in mind). By all means, be aware of your specific industry and regulatory environment and put necessary safeguards in place. But people in your marketplace—customers, prospects, analysts, journalists, shareholders and others—are talking about your company and/or industry across social media channels right now. The real risk is in ignoring those conversations.

10. Social media marketing is new. Not really. Certainly the tools are new: Twitter has only been around since 2007, Facebook since 2006, and even blogging has been popular for less than a decade. But social media marketing is fundamentally about participating in and influencing the direction of conversations about your industry and brand. Those practices are timeless, but social media has increased the velocity and magnitude of such conversations.

11. Social media marketing doesn’t apply to my business. There are isolated niches where this is true. For example, if you build weapons systems for the U.S. military, you not only don’t need social media marketing, it would probably be best to avoid it. And there may be a few other such situations. For virtually every other type of business however, someone, somewhere is discussing your brand, your industry or your competitors in social media. You’re missing out if you’re not listening and participating.

To read more of Tom’s articles, go to his award-winning Webbiquity site, where he covers B2B lead generation, social media, interactive PR, SEO and search engine marketing. In fact, he has an article coming out soon that I think will be especially representative of one of my biggest pet peeves: the very mistaken notion that social media marketing can be undertaken in much the same manner as previous, more traditional, marketing campaigns. I’ve said it before, as have several worthy business friends (such as the wonderful Paul Dunay), and I’ll say it again: Social Media is a commitment, not a campaign.

I’ve received a number of emails in the past couple of months, asking me to explain different functionalities of this blog, so I’m taking this quick opportunity to provide a quick primer on the different sections herein:

Main Body

Obviously, the body of text inhabiting the majority of the page represents the “content” of this blog, with entries posted on an “as inspired” basis. A link at the beginning of each entry allows visitors to leave comments, which you are warmly encouraged to consider doing, should you have thoughts, insights, questions, cookie recipes, or other valued contributions to make.

Right Column

Here’s where you can find some additional fun stuff!

The Subscribe tab let’s you enter your email address to subscribe to blog updates (no spam or other use of your email address). After you become a subscriber, you can also revisit this tab to manage your subscription details, or unsubscribe (though you would be sorely missed!).

The Categories tab allows you to selectively extract articles which relate to one or another particular topic area.

Recent Posts, Archives, and Search are self explanatory, I believe.

The GoodReads tab features a few random suggestions of books I have enjoyed, while the Good Tech tab features software or hardware I have found particularly compelling (currently, I am featuring Kovid Goyal’s impressive e-book management software app, “Calibre”; Scott MacGregor and Sherman Dickman’s powerful email management application, “Postbox”; and Matt Pizzimenti’s “Privacy Reclaimer”). The Good Sounds and Good Sites tabs respectively share some of my recent musical and internet discoveries.

Of course, if you find something in your wanderings that you think I and our readers might appreciate, please don’t hesitate to let me know!

Across the bottom of the whole site sits the Wibiya toolbar, which offers site search or Internet search tools, a remarkably accurate Multilanguage instant translation application, windows into my Facebook and Twitter pages, tools to share pages with all sorts of social bookmarks or sites of your preference, a “Facebook Like” button (which I do hope you will click!), a handy arrow to take you instantly to the top of whatever page you are on, and a minimize link, to hide the toolbar away discreetly.

Access

The blog can be accesses from any page in the site, simply by clicking the green “db” icon at top right. Alternatively, you may follow the navigational hierarchy, and find the blog section within the “The Process in Action” section of the site.

So there you have it, a quick and easy primer, which I sincerely hope will make your time on this blog, and the site as a whole, more enjoyable and rewarding.

I am thrilled that you enjoy my and my fellow writers’ entries, and thank you for both reading and sharing these articles with your friends. We (myself and my fellow writers) are always aware that our contributions are part of larger conversations, and we hope that some of what we record here encourages you to get more actively involved in one or more of those interactions.

Have you heard of Habbo, MyLife, Netlog, Orkut, QZone, Tagged, RenRen or Vkontakte? These and plenty of other social networking sites boast impressive numbers of registered users on each, and they are but a few of the high fliers that may have nevertheless slipped under your radar.

Social networking is – despite its paradigm shifting promise – a business proposition not unlike many others: it begins with an exponential market grab, representing the transition from fad to trend more than anything else. That stage is now passed, and is being replaced by the inevitable “backlash and absorption” period: For every Facebook, there are many Bahus, Mugshots, Pownces, Sixdegrees, Soundpedias, Yahoo360s, et al. The list of broken and dissolved social networking sites will grow as alarmingly as once did the numbers of people registering on some of those same sites. This list will be matched only by the accelerating roster of social media companies being purchased, absorbed, liquidated, and otherwise consumed by more robust and aggressive “co-opetition”. This happened in the automobile industry, in the banking industry, in the airline industry…and it will happen with this new socially impactful dynamic.

So all this was predictable enough, and shall come to pass (it has already begun). However, there is a 3rd – and less quantifiable – dynamic which is inexorably rising in influence, and could prove more impactful than any of the other aforementioned mitigating trend milestones: user burnout.

When new social networking sites cropped up over the past few years, many of us felt compelled to sign up with each and every one, for fear of finding ourselves on the wrong bandwagon, stranded at the starting point while everyone else rode thrillingly forward on the roller coaster of social media engagement. Today, it is not unusual for individuals to belong to 5 or more social networking sites, and consequently spend a large portion of their day managing their online presence. This investment of time is not matched by the reward, and the ROI (Return On Investment) must be at least balanced for an initiative to survive. While the social media brands will do their part in the coming months to raise their value proposition via conglomeration, acquisition, and improvement, this will not- in and of itself – suffice.

I predict (not sure you can predict something that is already manifesting itself, but there you go!) that the next 4 months will see a powerful degree of social network decline and realignment, as consumers and users begin to streamline their social presence online, and deactivate certain accounts, in favor of others. We have kicked the tires long enough, and the testing phase is over. Selections will be made, and loyalties cemented.

Facebook
While Facebook has made several missteps along the way, I see most people sticking with that brand, so long as Messrs Zuckerberg et al don’t really screw things up: we sense there is a bigger, more long-term vision at play here, and are willing to stay on the ride, for the present.

LinkedIn
With a little spring cleaning, and cross-platform functionality (the Blackberry app is very weak, and the TripIt app seems occasionally buggy, to name but a couple), this brand could prosper during this phase. It remains to be seen how the business model will integrate itself with potentially complementary offerings.

Orkut/Plaxo
Can more than one address book aggregator survive? Is there a merger in the offing? Which will be the first to aggregate in the Cloud with full effectiveness? Will LinkedIn realize that it could – in fact – slip past these two in that offering, and become the default Cloud business address book, as well as online profile and professional group discussion environment?

iRead/GoodReads/Amie Street/Last.fm/ReverbNation/deviantART/Shelfari/Buzznet/ANobii/Librarything/etc…
There are way too many book and music social networks out there. Watch as the smaller ones either become absorbed into larger offerings (will Pandora and Slacker also move more aggressively in to the space and compete, or will partnerships such as the recent FB bridge suffice?), or carve out ever more specialist niches for themselves, like crabs scuttling out of reach of their predators..?

Stickam/OneWorldTV/FilmAffinity/YouTube/imeem/Gather/Flickster/Auters/etc…
How many social networks can the movie-fan community support? With Hulu and others bound to upgrade their social media integration, I imagine this will be another area ripe for confluence.

With over 400 (at last count) social networking sites currently in operation, and a plethora in the offing, we have finally reached the point, I believe, where saturation has peaked and integration and selective pruning will ensue, manifest from all quarters. As I suggested above, brands will dissolve through neglect or lack of differentiation; others will be absorbed by stronger enterprises, for better or worse; and still others will find themselves deselected by their user base: the Dodo birds of Social Media.

After a period of fat trimming, including some new introductions that make sense (Social Media for the under 13 set is a challenging but attractive sector, so long as the privacy and protection issues are well-managed, and there are several compelling players coming out in the next month or two), social media will settle in to its next phase of existence: less intrusive yet more smoothly integrated into our daily lives. The novelty has worn off, and the value needs to clarify and communicate itself. More importantly, the value must find a way to unobtrusively integrate itself in to our daily lives, so that it becomes a tool in our quotidian existence, as opposed to a distraction.

Habbo (162,000,000 registered users), MyLife (51,000,000 registered users), Netlog (62,000,000 registered users), Orkut (100,000,000 registered users), QZone (200,000,000 registered users), Tagged (70,000,000 registered users), and Vkontakte (73,000,000 registered users).

Former equity analyst, domain name broker, and social networking early adopter Lou Kerner shares here his (and his co-author, Eli Halliwell’s) research in to the true market value of Facebook:

Current trading price in private market: $38      Target price:     $100

 

Overview:

  • Facebook is the most powerful website the world has known : With over 400 million reported users spending an average of 55 minutes per day on its site, Facebook is the most ubiquitous and transformative media company on the planet poised to create tremendous shareholder value as it begins to monetize its vast audience. Facebook already has ¾ the reach of Google and three times the average time spend per user, yielding Facebook double Google’s aggregate global time spent; and Facebook is on a dramatically steeper growth curve, growing its reach by 150%+ in 2009 vs. 40% growth for Google.
  • Facebook already drives more traffic to the leading portals than Google: While Google has long been the major driver of traffic to the majority of websites in the world, “friendcasting” on Facebook (when a friend uploads a link to content and someone clicks on it) is already a larger driver of traffic to sites like Yahoo and MSN than Google, according to Compete.com. If Facebook successfully leverages its new relationship with Microsoft’s Bing, implements more social search tools, grows its fan pages, and enables the continued natural growth of “friendcasting”, Facebook should surpass Google as the largest driver of traffic globally later this year.
  • Facebook is tracking to be a $100B company: Google has demonstrated how to monetize the time and data users give to the site daily. Facebook’s potential to monetize both time spent and data shared may be even greater than Google as it generates more time and significantly greater data on its users. Facebook also benefits from a network effect that doesn’t exist at Google. Each incremental user adds geometric value to the network. As Facebook achieves its goal of building the dominant global networked communications platform, it will begin to leverage its reach and earn its share of global advertising, ecommerce and payment revenues, possibly rivaling Google’s earnings potential. We estimate that Facebook will be worth more than $100 billion by 2015 using the same multiples on Facebook’s forecast 2015 EBITDA as Google is valued at today. More aggressive (but still reasonable) multiples and growth rates would yield values rivaling Google’s market cap of $140+ billion, ex cash.
  • Facebook is worth $50B today: If Facebook is worth $100 billion in 2015, discounting that valuation back to today with a 15% discount rate, gives the company a current value of ~$50 billion. Regardless of the discount rate you use, Facebook offers a very compelling investment opportunity at current prices.
  • Facebook is privately traded at 60%+ discount to its current value: Most investors don’t know you can buy Facebook shares today, pre-IPO. While the market for Facebook shares is not robust, there were millions of shares traded last year through private marketplace websites like Second Market.com, SharePost.com and others. Only accredited investors are allowed to participate. Currently, ask prices are about $38/share, implying a market cap for Facebook of ~$19 billion. Relative to the $50 billion fair market value we see in the company, this represents a 60%+ liquidity discount.
  • Facebook only has to earn $7 per user in EBITDA to justify our valuation: Dividing our $50B target by Google’s current trading multiple of 18X EBITDA implies that Facebook currently has earnings power of $2.8B in EBITDA. Dividing the $2.8B by the current base of 400 million users implies $7 of EBITDA per Facebook user. Facebook will have far more than 400 million users in 2015, so this is a conservative estimate. Even at $7/user, our projection is that Facebook would earn significantly less per user than other major internet companies. Amazon earns $15/user; Google earns $20/user; and eBay earns $34/user. While each of these companies operates with different business models, they all rely on aggregating huge volumes of users to create value for their investors. Facebook will earn ad revenue like Google, commissions on transactions like Amazon and eBay, and fees on payment processing like eBay. In presenting this metric we are demonstrating that even if Facebook’s earnings power is significantly less per user than other major internet players, it would still command a $100B market cap.

Quick Facts (according to Facebook , Alexa.com and Compete.com):

  • #2 website globally in total page views behind Google; should pass Google in first half of 2010.
  • At 30%, Facebook has the same global reach that Google had 1 year ago.
  • Both Google and Facebook should have global reach of ~50% by end of 2010.
  • 2 years ago Facebook’s global reach was just 6%.
  • Internet users spend 3x as much time on a Facebook page as they spend on a Google page.
  • Over 700mm pieces of content are uploaded on Facebook daily (eg. 100mm photos daily).
  • Average user spends 55 minutes/day (~23% of total time online) on Facebook, 50% of users log on daily.
  • 67% of US online users are on Facebook.
  • ~70% of Facebook users live outside the US.
  • Among top 36 countries: Facebook’s page view rank is #1 in 4 countries; #2 in 23 countries; #3 in 9 countries.
  • Facebook just received approval for patenting its news feed, the core functionality of its website.

Investment Thesis:

Facebook is already the world’s dominant website

  • However you measure it, Facebook’s global scale and growth are astounding. Of its reported 400+ million users, ~120 million are in the US.That’s 120 million out of ~180 million US internet users (according to Commscore); indicating that about two-thirds of all US internet users are now on Facebook. Facebook says the average user is on Facebook 55 minutes per day, out of a total average of four hours per day of total internet usage by the average US internet user. Those statistics are consistent with recent research based on Compete.com statistics indicating that Facebook now accounts for 25% of total US internet page views and 15% of page views in the UK. As a result of its dramatic surge in uniques and page views, Facebook is now directing more traffic to major portals like Yahoo and MSN than Google through “friendcasting” – the name given to the process of clicking on a link your friends post in their Facebook newsfeed.In this report we want to discuss two implications of Facebook’s dramatic growth.

Facebook has blown by MySpace in social networking and is poised to pass Google in 2010 in directed traffic

  • The world of television presented us with about 10 channels in the 70’s, which grew to 500 channels as digital proliferated in the late 90’s. The internet now brings us hundreds of millions of channels (i.e. websites, Facebook profile pages, blogs, etc.), which we have only been able to navigate with search. Yahoo dominated search in the early days, but they were passed by Google when Google came up with a better algorithm presented in a simpler design. Because they are the dominant search engine, Google emerged in the early part of the last decade as the dominant source of traffic for most sites.
  • MySpace was the early dominant “social network”, but the users weren’t really networked. We had to surf MySpace or hope someone came to our MySpace page to get any real value, and significant technical improvements were glacial.
  • Facebook’s improvements were simple but monumental. They used basic newsfeed technology to enable us to know what our friends are doing, thinking, buying, playing, or posting, simply by going to our own newsfeed.They also opened up their platform to third party developers, who quickly provided the Facebook community with a wide array of incredibly popular applications like Farmville, which has over 80 million players. In fact, Facebook states that there are more then 250 applications that have more then 1 million active users. While many of us used to go to Google to find the latest news, or would surf major or minor news sites to see what was going on in our world, our news and information is increasingly brought to us by friends who post news of interest to them or about them, which appears in our newsfeed. Friendcasting on Facebook will be complimented by Facebook’s increasingly deep integration of Bing’s search tools on Facebook, as well as by other social search applications on Facebook that let us mine the behavior and opinions of our friends. We believe Facebook will pass Google in terms of traffic generation to other websites in 2010.
  • Because we tell Facebook so much about ourselves, and because we spend so much time on Facebook, Facebook knows dramatically more about us than any other website in history, and Facebook’s willingness to share this data makes them an incredibly attractive partner to websites who like user data (which is almost every website). The question now is: how will Facebook leverage its powerful position to generate revenue and profits for their shareholders?

Facebook will be worth over $100 billion

  • Facebook will generate revenue from advertising, both display ads and through increasingly integrated search tools. Microsoft’s Bing, as the search provider on Facebook worldwide, compliments Facebook’s powerful “friendcasting”. Rather than merely offering links, the Bing integration will present more of the features available on the search engine itself. For display advertising, Facebook will increasingly be presenting ad formats that feature social actions. Social integrated ads perform better and provide a better user experience since they are consistent with the context and feel of Facebook. Facebook ads will also be increasingly targeted to people based on the information they provide Facebook. This combination of targeting and social relevance will drive enhanced performance and rates for Facebook display ads.
  • Global internet advertising is poised to grow to $96 billion in 2015 (according to Magna), a 10.5% five year CAGR. Traditionally in media, companies with scale are able to grab outsize share of ad spend. Therefore, as Facebook has the most global scale, its safe to assume that Facebook will attract its fair share of the market. While Facebook is still growing rapidly, we assume in our valuation thesis that they account for only 15% of total internet traffic in 2015. According to Drake Direct, based on Compete.com data, Facebook is already at 15% in the UK, and they are at ~25% in the US. We believe 15% is a conservative view of Facebook’s page view and time spend share in 2015, given its current trajectory. We estimate that Facebook’s 15% share of the global internet audience yields them a 15% share of the global internet advertising market, yielding a forecast of $14.5 billion in advertising revenue in 2015. Today this may seem like an aggressive assumption based on the fact that Facebook currently does not command a comparable CPM to many other websites for their display ads. But Facebook has just really begun to monetize their traffic and weave in targeting and social relevance, and they haven’t even begun monetizing social search. Where Google offers advertisers strong targeting for purchase intent, Facebook is the holy grail of targeted brand advertising, and is posed to make significant headway in search.
  • Facebook Connect is another powerful platform for Facebook to leverage and eventually monetize its user data. Facebook Connect is quickly becoming a de facto registration platform on the net. Currently, over 80,000 sites have already implemented Facebook Connect, including many large sites like CNN. Facebook Connect is emerging as the internet “passport” that enables people to enter any website, as well as interact with their friends who are also on that website. This will likely become another significant revenue platform, as Facebook could potentially harness Facebook Connect to create a leading ad network, leveraging their deep relationships with advertisers and their mountains of user data. For purposes of this analysis, we’ll assume they derive zero revenue from Facebook Connect in 2015. Therefore, in our analysis, investors are getting a free call on this massive business opportunity.
  • Next up, and just as interesting, is Facebook’s recently introduced payment system. Initial testing on Facebook indicates Facebook consumers prefer Facebook’s system to the other payment systems available on Facebook.Facebook is charging a whopping 30% fee to the publishers selling virtual goods (similar to Apple’s 30% take on applications sold on its iPhone platform). The system includes many other benefits for publishers (e.g. preferred placement in the gaming directory, better advertising rates) that only Facebook can provide. Analysts estimate that Facebook’s payment system will grab more then 50% share of payments on Facebook and generate $200 million this year based on projected sales well north of $1 billion in virtual goods in 2010. But payments on Facebook will be just the beginning for the payment system. Facebook Payments is well positioned to take meaningful share from PayPal all over the internet as users will increasingly be using Facebook Connect on ecommerce sites around the net. Paypal is expected to generate $3.3 billion in revenue on a base of 88mm active accounts in 2010. We believe Facebook Payments could grow to a $2 billion dollar business by 2015.
  • Given the simple analysis above, we project Facebook will drive $16.5 billion in revenue in 2015. While this is a big number, it is just over 1/3 of what Google would be projected to generate in 2015 if Google grew revenue at a 12% CAGR (about ½ it’s recent revenue CAGR of 20%). For ease, we assume Facebook achieves the same 35% EBITDA margin as Google is currently experiencing. Let’s similarly assume that Facebook, as a public company, would be valued using the same EBITDA multiple as Google is valued at today, which is 18X 2009 EBITDA. The math above implies a value of $103 billion based on 2015 projections.

Facebook is worth $50 billion today

  • If we discount $103 billion back by 15% per year, we get a price target of $51 billion today. This implies a value that is more than two-and-a-half times the $19 billion value Facebook shares are currently trading at on secondary private marketplaces. The table below looks at how our valuation would vary depending on various multiples and discount rates. Even at a 21% discount rate, Facebook would be worth more than 2x the current share price.

 

  • Another way to value Facebook helps put our target in to perspective. Based on current membership levels, we are valuing Facebook at $125 a member.If Facebook were valued on an 18X multiple of EBITDA today, that implies that Facebook has the power to generate $7 in EBITDA on average off its members, or $20 on average per member in revenue (assuming 35% margins). Neither number appears a stretch. Amazon earns $15/user in EBITDA, Google currently earns $20/user, and EBAY earns $34/user. We recognize these companies all have different business models, but we think it is helpful to put some context around our $7 EBITDA per Facebook user projection.
  • Is a 15% discount rate too low given that we’ve seen other social networks appear and then fade, most recently MySpace? We’ve seen other internet leaders founder – is Facebook like Yahoo? Is it possible Facebook is just a fad, as some argue? Our thesis is that Facebook is already deeply ingrained in our daily lives, and this is just the beginning. There are many reasons why the switching costs are significant, and Facebook keeps adding new ones – most recently Facebook was granted a patent on “the feed”, a core feature of Facebook’s functionality. Facebook is averaging over 100 million photos uploaded per day. People don’t like to leave those behind. With an average of 130 friends per user, almost everyone has many connections that only exist on Facebook. The average person is a member of 13 groups. As we increasingly move to mobile, we are bringing Facebook with us. The Facebook iPhone app has been downloaded by over 28 million people. In addition, every wireless operator is advertising the availability of Facebook apps on their phones.
  • Maybe our estimates are too conservative? 15% share of online ad revenue and 35% operating margins could prove too low. The data table below shows that each 1 percentage point of share of the online ad market for Facebook is worth $3 billion present value at a 35% margin. With 30% reach of global internet usage today, it is conceivable that Facebook ad share could be well over 15%.

Facebook shares are available for accredited investors to buy and sell, and the current value is $19 billion

  • There is a secondary private market for Facebook shares on sites like Sharepost.com and SecondMarket.com that make markets in shares of dozens of private firms, enabling employees to monetize some of their options.
  • After proving you’re an accredited investor, the transaction is papered, with the seller paying transaction costs.
  • While Facebook enables employees to sell their shares, the buyers of these common shares are prohibited from subsequently trading their shares until Facebook goes public or is acquired.
  • Right now, shares are being offered at $36-$38 per share, implying a market cap of $19 billion.

Catalysts:

  • With only $600 million in rumored revenue in 2009, Facebook has done little to monetize its vast reach. As Facebook revenue generating initiatives start to scale, private market values should increase.
  • When the company goes public, the liquidity discount will evaporate and prices will rise to fair value.

Risks:

  • Shares bought in the secondary private market are not liquid and do not entitle the owner to the information usually provided by public companies to their investors.
  • Another competitor could arise and take market share from Facebook. In fact, to the degree that Facebook attracts 15%+ of all internet time, every other website on average is generating 15% less traffic. So it’s easy to imagine other sites working together to try and thwart Facebook. But like Google, other websites will increasingly see Facebook as a “frenemy”, a strong competitor for the mindshare of internet users but also a driver of massive traffic.
  • Facebook either may not be capable of or may not be concerned with generating massive revenue or going public. This is unlikely since history has shown that once eyeballs are assembled, advertising and other monetization opportunities present themselves. Some people thought no one would advertise on MySpace, and they were proven wrong. And Facebook is far more advertising friendly than MySpace as pages are much less free form. While a few companies (most notably CraigsList) appear uninterested in maximizing revenue, Facebook’s significant VC investors will help drive both monetization and an eventual liquidity event. In addition, like Google, Facebook will need to generate cash to help finance its increasing spend on R&D to drive innovation.
  • Privacy remains a significant concern of internet users globally, and with all the data Facebook aggregates and make available, they are walking a fine line. Facebook has clearly had some missteps in the past, most notably its Beacon information sharing product in 2007 that caused an outcry from privacy groups. They have also had technical glitches, one as recent as last week where messages were misrouted. As a result of these lapses, Facebook is acutely aware of the privacy issue and they appear to be thoughtful in their approach. Google also struggles with privacy, as evidenced by their recent bungling of the introduction of Google Buzz.
  • Given Facebook’s increasing stranglehold on internet usage, governments in the U.S. and elsewhere could step in and, in some way, break up the near natural monopoly on social networking that Facebook will have.

Lou Kerner currently runs a portfolio of parked domain names and is COO of Gamers Media, an ad network for online casual gaming sites. Lou has a BA in Economics from UCLA and an MBA from Stanford University. This article is reprinted from a research report published yesterday on the research site track.com, a subscription site featuring the work of ex-Wall Street analysts.  Mr. Kerner’s personal website can be found at http://loukerner.tumblr.com/.