One thing that has been remarkable about Facebook is its willingness to expand in developing markets that many other consumer Internet companies would otherwise write off because they’re hard to monetize.

But that growth abroad plus the company’s increasing headcount and share-based compensation expenses are eating into its operating margins, according to yesterday’s earnings numbers from a revised IPO filing. Facebook made $381 million in operating income (or 36 percent of its $1.06 billion in revenue) in the first quarter of this year. That’s down from $388 million in operating income (or 53 percent of its $731 million in revenue) from a year ago.

Net income is actually down 12 percent year-over-year to $205 million from $233 million a year ago.

What gives? A couple of things:

1) Share-based compensation is a huge part of it. These expenses came in at $103 million for the first quarter, up from $7 million a year earlier. If you take it out, operating margins are still down year-over-year, but not by as much. Net income would actually increase overall from $240 million a year ago to $308 million.

This isn’t necessarily a one-off though. Below is what Facebook expects to pay in share-based compensation expenses for the next several years in the hypothetical case that the IPO happened on March 31.

After that, Facebook will have to find ways of continuing to attract and incentivize the best technical talent if there is no longer as much as upside to its equity. That will be expensive, considering the options that the best engineers have at growing companies across Silicon Valley. If Facebook can’t lure them away from other startups with stock, it will have to bump up the cash component of compensation.

2) Growth is happening in emerging markets, where revenue per user is lower than it is in mature markets like the U.S. Overall, Facebook’s average revenue per user (or ARPU) climbed 6 percent year-over-year to $1.21 in the first quarter, but that pace was weighed by growth in developing countries. Facebook says, “The sequential decline in ARPU in the first quarter of 2012 was affected by the fact that our user growth was higher in geographies with relatively lower ARPU.”

Is this a bad thing? It depends on how you’re thinking about it. In online advertising, the spoils will go to those who have scale. As a platform reaching 900 million users with very targeted data about pretty much all of them, Facebook is becoming a must-have for any online display advertising campaign (if it isn’t already).

Furthermore, the key markets Facebook is growing in happen to be some of the largest, fastest-growing economies in the world. Facebook had 45 million monthly actives in Brazil last month, up 180 percent from a year earlier. That gives them a penetration rate of about 30 to 40 percent in the country, according to the filing.

Facebook is also growing in India, where it had 51 million monthly actives last month or more than double what it was a year earlier. That may not sound like that much in a country of 1.2 billion people, but keep in mind that India has low Internet penetration. Plus, many of these users experience Facebook solely through their mobile phones, which the company hasn’t completely figured out how to monetize yet. Facebook estimated that about 83 million of its monthly actives globally use the service only through their phones last month.

Facebook also thinks of itself as a mission-driven company, which exists to connect everyone in the world. You can debate the sincerity of those intentions, but getting every person on the planet connected to the network is what the company intends to do.

3) Overall growth in headcount. Even if you take out share-based compensation, Facebook’s costs for building and maintaining data centers and then hiring extra sales employees and engineers are rising at a faster pace than revenue is growing.

Cost of revenues is up 66 percent year-over-year, mostly because of data center costs. If you look at marketing and sales costs, those are double what they were a year ago excluding share-based compensation. Frankly, this is the less scalable part of the business. Facebook needs to hire more sales and customer service employees as it adds offices around the world.

Research and development, or engineering, is also growing at a faster pace than revenues. But not by as much as other departments are if you take out share-based compensation expenses. Engineering is the jewel of the company. The company prides itself on having about 1 million users per engineer if not more, so like I said above, it will have to spend to attract the best especially after upside is fully priced into Facebook shares after the IPO.

4) Lastly, declining margins are natural as a company matures: Facebook actually says this in the filing.

Now let’s also look at revenue.

Advertising revenue is scaling pretty much proportionally to user growth: They’re up 37 percent year-over-year to $872 million. Guess what’s also up by about that much? Monthly active usage, which also grew 32 percent year-over-year to 901 million.

To grow advertising revenues, Facebook needs to do one of two things. It either needs to get more users. Or it needs to get its current users more addicted (I mean, “engaged”) and exposed to more ads that are better-targeted.

Right now, sheer growth in the user base is compensating for slow growth in revenue per user. Facebook said the average price per ad for the first quarter of 2012 was unchanged compared to a year earlier, although it increased in key markets like the U.S. and Canada. It actually declined in Europe because of a weak local economy there. It’s not a great sign that ad prices are actually declining in mature markets like Europe.

But Facebook also has some remarkable cards up its sleeves. With ”like” buttons and more scattered about the web, Facebook could launch a web-wide display advertising network. The company has never confirmed this, but it’s a painfully obvious opportunity.

Payments revenue is maturing for gaming apps, so the question is where will it grow next? While payments and other fees revenue is almost double what it was a year ago at $186 million in the first quarter, it’s not really clear that how much this can climb unless Facebook pushes Credits for other types of apps. Payments and fees revenue is flat on the quarter. Because I hear about the exact same seasonal trends in revenue for apps on the iOS and Android platforms, that by itself isn’t that worrying.

What is concerning is that revenues for casual games on the Facebook canvas are maturing. You can see a very visible quarter-over-quarter slowdown in Zynga bookings, but I also hear about it anecdotally from many second and third-tier developers who frankly don’t find the Facebook canvas as attractive a place to be anymore. There are only a handful of sizable gaming companies that are making noticeable investments Facebook canvas games like Germany’s Wooga, King.com and midcore developers like Kixeye. Many others are simply moving off toward iOS or Android.

The easy days of high virality and fat profit margins are over for Facebook game developers. It’s becoming more about making real, high-quality games. Growth will either come from non-casual games like the ones made by Kixeye, or it will have to come from other kinds of non-gaming apps. Facebook acknowledges this, saying, “We may seek to extend the use of Payments to other types of apps in the future.”

Since Facebook made Credits mandatory for canvas games last July, It would be ideal if Facebook could start a big push for payments in other types of apps around the same time this year. That way the company can show favorable year-over-year growth.

• FACEBOOK

Facebook is the world’s largest social network, with over 500 million users.

Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz and Chris Hughes to help build Facebook, and within four months, Facebook added 30 more college networks.

The original idea for the term…

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/3CTeunFgba4/

Right after racing to the top of the App Store charts, Viddy just announced that it has raised an undisclosed amount of funding from a long list of celebrities — not just tech celebrities, but also the kind that non-techies have heard of.

Here’s who invested: Twitter co-founder Biz Stone, Omniture founder Josh James, Skull Candy chairman Jeff Kearl, Roc Nation (the record label and entertainment company co-founded by Jay-Z), Overbrook Entertainment (founded by Will Smith and manager James Lassiter), ShoeDazzle founder Brian Lee, professional skateboarder Rob Dyrdek, soccer star Gerard Pique, and (I’m quoting from the press release here) “pop culture icon” Shakira.

Viddy actually raised a $6 million Series A back in February from a more traditional group of venture investors, but co-founder and CEO Brett O’Brien told The New York Times that bringing on celebrities was a way to help the service maintain its momentum. He noted, for example, that “Shakira has 40 million fans on Facebook and she is huge in Latin America. I’m pretty sure this will help us get bigger in Latin America.”

The company (which allows you to shoot 15-second videos from your smartphone, customize them movie/music clips, and share them), launched in April 2011. It credits its recent growth to the effort it put into recruiting celebrities and influencers, plus its recently launched Facebook Timeline app.

• BIZ STONE
• VIDDY

Biz Stone is co-founder of Twitter, a real-time, one-to-many network that is changing the way people communicate around the world. Previously, Biz helped build other popular social media services Xanga, Blogger, and Odeo. After launching the journalling service Xanga in 2000, Biz went on to publish two books about the origins and social significance of blogging.

In 2003, Google invited Biz to join a recently acquired Blogger.com team at its Silicon Valley headquarters in a full-time, senior role. Biz helped…

Learn more

Viddy is a simple way for anyone to capture, beautify, and share amazing videos with the world. Capture key moments of your life, instantly produce it into a beautiful video, and share it with those who matter most. We’ve imagined a better way to experience mobile videos:

Instantly create visually stunning clips using our cinematic production packs.
One-click sharing to the social web, including Facebook, Twitter and YouTube.
Meaningful feedback from those who matter most – friends, family and more.
Realtime video discovery…

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/ligRh7B3-tY/

Zynga and Facebook are ever gradually trying to separate from each other. It’s working — sort of?

Facebook said today that 15 percent of its revenue in the first quarter came from either advertising or payments tied to Zynga games.* That’s down from 19 percent during the same time a year earlier.

About 11 of the 15 percent in revenue was from the 30 percent revenue share Facebook takes from transactions in Zynga games on the platform or advertising that Zynga directly paid Facebook for. Another 4 percent comes from advertising shown alongside Zynga content.

Facebook continues to emphasize that any bad blood between the two companies could hurt financial results. Zynga recently overhauled its site as a web destination for gaming that it hopes will attract users away from the Facebook canvas. The social network is still powering payments for the site, however, meaning that Zynga is still paying Facebook its 30 percent share.

“Zynga may choose to try to migrate users from existing Facebook-integrated games to other websites or platforms,” Facebook said in an updated filing for an initial public offering. “We may fail to maintain good relations with Zynga or Zynga may decide to reduce or cease its investments in games on the Facebook Platform. If the use of Zynga games on our Platform declines for these or other reasons, our financial results may be adversely affected.”

Overall, Facebook’s payments and fees revenue is pretty much double what it was a year ago at $186 million, up from $94 million. It makes up 17.6 percent of Facebook’s overall revenue, up from 12.9 percent in the first quarter of last year. But this isn’t a perfect comparison since Facebook’s 30 percent revenue share for transactions on the canvas only became mandatory last July. Payments and fees revenue is basically flat on the quarter too.

*Note: There was a 12% figure that was widely reported a few months ago when Facebook first filed for an initial public offering. But that was Zynga’s share of Facebook’s revenue for all of 2011 and it excluded advertising bought by other companies that shows up alongside Zynga games.

Here’s the exact text if you want to read it yourself:

In 2011 and the first quarter of 2012, we estimate that up to 19% and 15% of our revenue, respectively, was derived from Payments processing fees from Zynga, direct advertising from Zynga, and revenue from third parties for ads shown on pages generated by Zynga apps. 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.

In 2011 and the first quarter of 2012, Zynga directly accounted for approximately 12% and 11%, respectively, of our revenue, which was comprised of revenue derived from Payments processing fees related to Zynga’s sales of virtual goods and from direct advertising purchased by Zynga. Additionally, Zynga’s apps generate pages on which we display ads from other advertisers; for 2011 and the first quarter of 2012, we estimate that an additional approximately 7% and 4%, respectively, of our revenue was generated from the display of these ads. Zynga has recently launched games on its own website and on non-Facebook platforms, and Zynga may choose to try to migrate users from existing Facebook-integrated games to other websites or platforms. We may fail to maintain good relations with Zynga or Zynga may decide to reduce or cease its investments in games on the Facebook Platform. If the use of Zynga games on our Platform declines for these or other reasons, our financial results may be adversely affected.

More big Facebook news from today:

Facebook’s Amended S-1: 901 Million Users, 500M Mobile, Paid $300M Cash + 23M Shares For Instagram

Facebook Buys AOL Patents From Microsoft For $550 Million In Cash

Rather Than Pay Off Yahoo, Facebook Built A Fortress 1400 Patents Strong

You Earn Facebook An Average Of $1.21 Per Quarter

• ZYNGA

Zynga was founded in July 2007 by Mark Pincus and is named for his late American Bulldog, Zinga. Loyal and spirited, Zinga’s name is a nod to a legendary African warrior queen. The early supporting founding team included Eric Schiermeyer, Michael Luxton, Justin Waldron, Kyle Stewart, Scott Dale, John Doerr, Steve Schoettler, Kevin Hagan, and Andrew Trader.

Zynga’s mission is connecting the world through games. Everyday millions of people interact with their friends and express their unique personalities through our…

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/vI7a1nzm8Io/

Although Facebook didn’t buy AOL’s patent portfolio the other week — it was gobbled up by Microsoft for $1 billion — it’s going to get a big serving of those patents anyway: Microsoft and Facebook today announced that Microsoft would be selling to Facebook 650 of the 925 patents that it bought  from AOL to Facebook for $550 million in cash.

It will also get a license for the remaining 275 patents that Microsoft bought from the AOL portfolio, which Microsoft will continue to own. On top of this, Microsoft also has a license for the 300 patents that AOL still owns; but at this point, Facebook will not have a license for those patents still owned by AOL.

The deal gives Facebook a much stronger position in the world of patents, where it had been weak up to now and has been facing lawsuits, most notably from Yahoo, over infringement. It now appears to own 1,460 patents (750 from IBM, these 650 from Microsoft/AOL, 60 of its own) plus applications for more, plus any it may be getting through acquisitions.

This is also a big coup for Microsoft, since it helps it gain back some of the astounding $1 billion it spent on those patents in the first place:

“Today’s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction,” said Brad Smith, executive vice president and general counsel, Microsoft. “As we said earlier this month, we had submitted the winning AOL bid in order to obtain a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”

It’s also not terribly surprising: when the AOL/Microsoft deal was first announced, we wondered if the followup would be some kind of deal with Facebook, given that Microsoft is a shareholder in the social network.

The news today comes on the heels of Facebook buying a patent trove from IBM and gives the company yet further artillery to defend itself against lawsuits from other companies claiming infringement on some of the social media mechanics that Facebook uses on its site.

Most notably, Yahoo has been suing the company (and Facebook is suing back).

“Today’s agreement with Microsoft represents an important acquisition for Facebook,” said Ted Ullyot, general counsel, Facebook. “This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term.”

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/y3wfsNo86PE/

Pinterest has been on a hot streak this year. Or should we say hype streak?

In February, comScore reported that the site had passed 10 million monthly unique users faster than any standalone site ever. Then we started to hear from sources on Sand Hill that the company has attracted interest at a $1 billion valuation. But numbers from third-party sources like Facebook app tracking service, AppData, are pinning a slightly different picture on the image and link-sharing site.

Pinterest’s monthly active users on Facebook — or the number that has connected to Facebook over the past thirty days — have dropped to 8.3 million, from around 12.2 million a month ago when the site did a major redesign. Daily Active Users are also down but not by as much: on April 21 they were 930,000, from 1.1 million on March 22.

The highest-ever number of DAUs on Pinterest was on March 18, when the site had 4.4 million unique visitors, according to AppData. That’s two days after Pinterest did a redesign that evidently irked many users.

A couple other sources including Google search trends, Compete and mobile app tracker App Annie are also showing a picture of decelerating growth. App Annie reports a dip in download rankings for Pinterest’s mobile app.

Figures from Compete note that Pinterest had over 18 million unique visitors in March but that growth appears to be slowing.

 

Now all of these data sources are flawed in their own way. They’re not perfect. AppData only shows users connected to Facebook and Pinterest accounts may only touch the Facebook platform when users sign-up or post something to the social network. So it’s more of a proxy for sign-ups than a good barometer of daily engagement. Then Compete is often inaccurate in terms of raw numbers. Then Google search trends just shows the number of people looking for Pinterest, not the number of Pinterest users.

But taken together, they do paint a portrait of a site that is cooling.

So what gives?

1) The redesign really did turn users off.

2) There was an iPhone app update that apparently gave some users trouble while logging in through Facebook. Another update apparently fixed it three days ago on April 18.

3) The drop in active users may simply be a correction for the some of the meteoric rise in attention that we’ve seen for the site: that is, people propelled by all the coverage Pinterest has gotten who have registered in the last couple of months, but who aren’t actually using it much, if at all.

4) People may be logging in and signing up less through Facebook: AppData measures MAUs and DAUs on Facebook log-ins, but you can also sign up and sign in using your email or Twitter account. Perhaps usage numbers from those two other channels have still been climbing, and Facebook is getting used less (that begs the question of why the turn away from Facebook).

There is also that issue of spam and copyright questions: two no-nos for the mostly-over-36, female audience that uses the site. We have reached out to Pinterest for a comment on these numbers and will update with its response.

• PINTEREST

Pinterest is a social networking site with a visually-pleasing “virtual pinboard” interface. Users collect photos and link to products they love, creating their own pinboards and following the pinboards of other people whom they find interesting.

The site is currently invite-only, and it has experienced rapid growth in recent months.

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/g8wxditWUMg/

Editor’s Note: This article is co-authored by Nir Eyal and Jason Hreha. Nir is the founder of two acquired startups and blogs at NirAndFar.com. Jason is the founder of Dopamine, a user-experience and behavior design firm. He blogs at persuasive.ly.

Yin asked not to be identified by her real name. A young addict in her mid-twenties, she lives in Palo Alto and, despite her addiction, attends Stanford University. She has all the composure and polish you’d expect of a student at a prestigious school, yet she succombs to her habit throughout the day. She can’t help it; she’s compulsively hooked.

Yin is an Instagram addict. The photo sharing social network, recently purchased by Facebook for $1 billion, captured the minds of Yin and 40 million others like her. The acquisition demonstrates the increasing importance — and immense value created by — habit-forming technologies. Of course, the Instagram purchase price was driven by a host of factors, including a rumored bidding war for the company. But at its core, Instagram is the latest example of an enterprising team, conversant in psychology as much as technology, that unleashed an addictive product on users who made it part of their daily routines.

Like all addicts, Yin doesn’t realize she’s hooked. “It’s just fun,” she says as she captures her latest in a collection of moody snapshots reminiscent of the late 1970s. “I don’t have a problem or anything. I just use it whenever I see something cool. I feel I need to grab it before it’s gone.”

THE TRIGGER IN YOUR HEAD

Instagram manufactured a predictable response inside Yin’s brain. Her behavior was reshaped by a reinforcement loop which, through repeated conditioning, created a connection between the things she sees in world around her and the app inside her pocket.

When a product is able to become tightly coupled with a thought, an emotion, or a pre-existing habit, it creates an “internal trigger.” Unlike external triggers, which are sensory stimuli, like a phone ringing or an ad online telling us to “click here now!,” you can’t see, touch, or hear an internal trigger. Internal triggers manifest automatically in the mind and creating them is the brass ring of consumer technology.

We check Twitter when we feel boredom. We pull up Facebook when we’re lonesome. The impulse to use these services is cued by emotions. But how does an app like Instagram create internal triggers in Yin and millions of other users? Turns out there is a stepwise approach to create internal triggers:

1 — EDUCATE AND ACQUIRE WITH EXTERNAL TRIGGERS

Instagram filled Twitter streams and Facebook feeds with whimsical sepia-toned images, each with multiple links back to the service. These external triggers not only helped attract new users, but also showed them how to use the product. Instagram effectively used external triggers to communicate what their service is for.

“Fast beautiful photo sharing,” as their slogan says, conveyed the purpose of the service. And by clearly communicating the use-case, Instagram was successful in acquiring millions of new users. But high growth is not enough. In a world full of digital distractions, Instagram needed users to employ the product daily.

2 — CREATE DESIRE

To get users using, Instagram followed a product design pattern familiar among habit-forming technologies, the desire engine. After clicking through from the external trigger, users are prompted to install the app and they begin using it for the first time. The minimalist interface all but removes the need to think. With a click, a photo is taken and all kinds of sensory and social rewards ensue. Each photo taken and shared further commits the user to the app. Subsequently, users change not only their behavior, but also their minds.

3 — AFFIX THE INTERNAL TRIGGER

Finally, a habit is formed. Users no longer require an external stimulus to use Instagram because the internal trigger happens on its own. As Yin said, “I just use it whenever I see something cool.” Having viewed the “popular” tab of the app thousands of times, she’s honed her understanding of what “cool” is. She’s also received feedback from friends who reward her with comments and likes. Now she finds herself constantly on the hunt for images that fit the Instagram style. Like a never-ending scavenger hunt, she feels compelled to capture these moments.

For millions of users like Yin, Instagram is a harbor for emotions and inspirations, a virtual memoir in pretty pixels. By thoughtfully moving users from external to internal triggers, Instagram designed a persistent routine in peoples’ lives. Once the users’ internal triggers began to fire, competing services didn’t stand a chance. Each snapshot further committed users to Instagram, making it indispensable to them, and apparently to Facebook as well.

Photo credit: Dierk Schaefer

• INSTAGRAM
• NIR EYAL

Instagram is a free photo sharing application that allows users to take photos, apply a filter, and share it on the service or a variety of other social networking services, including Facebook, Twitter, Foursquare, Tumblr, Flickr, and Posterous. The application is compatible with any iPhone, iPad or iPod Touch running iOS 3.1.2 or above or any Android device running Android 2.2 or above.

In an homage to both the Kodak Instamatic and Polaroid cameras, Instagram confines photos into a square…

Learn more

Nir Eyal founded and sold two tech companies since 2003 and today is an advisor, consultant, and investor in several Bay Area companies. His last company, AdNectar, received venture funding from Kleiner Perkins and was acquired in 2011. Nir serves as a mentor at several incubators including 500 Startups, Founders Institute, and the Thiel Fellowship and is a contributing writer for TechCrunch and Forbes.
Nir blogs about the intersection of psychology, technology, and business at www.NirAndFar.com

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/dwFmGIAixXI/

Editor’s note: Dean Alms is the VP of Marketing Business Development at social entertainment company Milyoni. Follow him on Twitter @deanalms.

Roughly 16 billion Facebook Credits were distributed and consumed in 2011. In 2012, I predict that the use of Facebook Credits will soar by three times to over 40 billion Credits spent on virtual goods, digital goods and more. The growth will be fueled by new digital content available on Facebook, use of Facebook Credits to reward brand loyalty and better marketing of a social currency that is still in its infancy.

The following chart shows the growth of Facebook Credits revenue reported by Facebook from 2009 to 2011.

This chart demonstrates that with a growth rate of 300 percent in 2012 (lower growth rate than in prior years) the number of Facebook Credits in circulation will soon reach 47 billion. If 7 billion remain unused in consumer accounts by the end of the year, then 40 billion will have been spent on social gaming, social entertainment and new innovative applications. At 10 cents per credit, total revenue generated from the Facebook Credits market in 2012 will reach approximately $4 billion.

Can Facebook Credits really grow to over 40 billion in circulation in 2012? The answer is yes. Here are some of the key assumptions and business drivers of this new international currency for virtual and digital goods.

• Facebook, seeing the opportunity and its contribution to the bottom line, will put forth a stronger marketing effort in order to communicate the value this currency brings to both merchants and consumers. Facebook Credits are still new and their value can still be hard to understand. Many don’t know much about this currency, where to get them, what they can and cannot use them for, and why they matter. This marketing effort will likely leverage mainstream marketing channels: TV, Radio, and Print to simply get the message out—Facebook Credits are hugely valuable and everyone should use them.
• Retail efforts will pick up steam. iTunes gift cards will face stiff competition from Facebook as young consumers begin asking for these cards for birthdays and holidays instead of a single-brand card like iTunes. The variety of apps with built-in social interaction will create a strong demand for the next-generation of entertainment.
• Hundreds of big brands and thousands of smaller brands will use Facebook Credits in 2012 as an incentive tool. Facebook Credits will be the airline miles of the next decade as consumers are rewarded with Facebook Credits for brand loyalty. Companies will encourage customers to visit online stores and reward customers with Facebook Credits in varying amounts because the online world-of-mouth and viral effects are endless.
• Social Gaming will continue to grow with new games and new audiences playing them. Social Gaming, currently led by Zynga, will make billions of dollars in this market with Facebook taking a fee from every transaction conducted on its social network.
• Social Entertainment will grow in size and significance. In 2012, thousands of movies and hundreds of live events (concerts, sporting events and more) will be available on Facebook for 30 to 100 Facebook Credits each. Today, 89 of the top 100 Facebook Fan pages are entertainment-oriented – music, movies, and sports properties or personalities—and fans always want more content from these pages. In 2012, they’ll be more and more likely to use Credits to access it.
• Facebook Credits are a global currency. My company, Milyoni, has created a number of live and video on demand offerings on Facebook. Many of them have reached fans from over 30 countries using Facebook Credits as the only currency. This frictionless currency conversion experience is a key factor in the global adoption – no need to worry about exchange rates or fluctuating monetary values. Facebook provides seamless currency conversion for 47 currencies, and climbing.
• The Facebook Open Graph. Less appreciated, but very important, is the open graph API’s and Facebook’s support of the platform where people, apps and interactions continuously grow. If Facebook’s team does not meet a specific need, there are other innovative start-ups that will leverage the Open Graph to produce the apps and services that both consumers and merchants need to make this ecosystem thrive.

Given this context, spending 40 billion Facebook Credits or $4 billion in virtual and digital goods is achievable. As music, movies and other entertainment content supplements an already growing base of social gamers, this number may end up being on the low side. The bottom line for all businesses with social media ambitions is: create a strategic initiative to leverage Facebook Credits; ignoring it means missing out on the massive market opportunity they represent.

• FACEBOOK
• MILYONI

Facebook is the world’s largest social network, with over 500 million users.

Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz and Chris Hughes to help build Facebook, and within four months, Facebook added 30 more college networks.

The original idea for the term…

Learn more

Based in the San Francisco Bay Area, Milyoni, Inc. is the leader in F-commerce. The company’s technology provides entertainment and lifestyle companies with a way to connect and engage with Facebook fans, and turn them into customers. Whether it’s watching a live concert, movie or sporting event or shopping your favorite brands, Milyoni enables companies to monetize fans pages through a unique level of engagement and a shared, social experience. Milyoni’s services reach over 150 million fans from industry…

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/IxqWQTY0POk/

Video chat service Tango is moving in a new direction, and this week the company closed a round of $40 million in Series C funding which will take it there, it hopes. Many think of Tango’s service as an up-and-coming Skype competitor, as it, too, is about real-time communication, specifically video calling, between users. But the comparison to Skype may no longer be apt. Tango is working towards becoming a more social service – something more akin to the micro social network Path, in fact.

On the roadmap are several new social features, some of which make sense for a phone replacement utility (like text messaging), others which seem more like a shift to a social network (like exchanging photos).

Tango’s co-founder Eric Setton describes his vision for Tango’s future not as a video chat service, or even a communications service, but as “a service that keeps you closer to those you care about.”

Getting there has been all about taking baby steps, Setton explains. “We’re very cautious in everything we introduce,” he says. “We first want to check with the market that everything we’re thinking isn’t just our imagination,” he says. Features don’t roll out fully baked, but are introduced, tweaked, and then expanded upon.

Case in point: the slow way that Tango has rolled out video messaging. This newer feature, which allows users to leave video messages for others, was originally introduced in December as a kind of “video voicemail” option. In January, responding to user feedback, Tango allowed users to send these messages without having to first dial the recipient’s phone. This week, the company rolled out support for one-to-many video messaging, perfect for sharing things like baby’s first steps with the entire family. Soon, Tango will add video message replies, too.

If the latter additions make you think that Tango is beginning to feel a little bit more like a social network than a utility, you would be right. Setton says the company has been asking itself, “what do we want to be when we grow up?” 

“We’ve clarified that a lot over the last six months,” he says, “and here’s what we see it as: because of the nature of video calls, which is so much more personal and intimate, we’re addressing a small audience around you – your spouse, your kids, your parents, your really close friends – what Path calls the ‘intimate social network’….we, by default, play within that circle.”

And in this more intimate network – the ones you’ve deemed “favorites” within Tango’s app, for example – it’s about sharing, not just phoning.

“When you think about these people [in your personal network], what do you do with them? These are the people that you call with your normal phone, these are the people that you text, these are the people that you exchange pictures or videos with, these are the people that you actually want to celebrate occasions with, etc…so rather than thinking about us as a phone replacement, it’s really about bringing all these interactions to the service,” says Setton.

Tango is now working on the video messaging component, and the infrastructure needed to store your saved video messages in the cloud so your messages are still available as you move from phone to phone. It also recently introduced animations (Tango Surprises), which you can add to messages to give them a little flair.

Although Tango is free, it’s starting to monetize through in-app purchases for things like more storage space for messages or different animations.

As for the future, text messaging and photo-sharing are on the way. What about status updates and checkins, we asked? “We can’t share the whole roadmap,” Setton hedged. But in terms of what social features he didn’t think would be a good fit going forward, he only said that public sharing wasn’t something under consideration.

“Tango is not really about blasting,” Setton explains, referring to networks like Socialcam which are meant for sharing video to a larger audience on social networks. “The ‘following’ model – that’s not really us,” he says.

The obvious comparison, then, if Tango is going the social networking route, is with Path, also deemed an intimate network of your closest friends and family. But while Tango is clearly moving into Path territory, it’s doing it its own way.

“We come from the communication angle – that’s been a very strong driver for growth – we don’t really approach it from the same angle…real-time communications will always be an integral part of the things that we do,” says Setton.  ”Also,” he adds with a grin, “I don’t see you stopping using the phone anytime soon.”

The real-time communications angle has, indeed, proven to be successful so far for Tango’s growth. The number of daily calls has doubled in the past four months, and the number of daily registrations have doubled since July.

There are now over 45 million people on Tango, 10% of whom use it daily, and 44% of which are active users.

The service’s $40 million C round, announced earlier this week, brings in new investors Qualcomm Incorporated, acting though its venture arm, Qualcomm Ventures, and Access Industries, Inc., the industrial holding company founded by Len Blavatnik. It also sees additional investment from members of Eric Setton’s family, who have been early supporters. Other investors include Draper Fisher Jurvetson, Michael Birch, Andy Bechtolsheim, and Bill Hambrecht. Tango now has $87 million in total funding to execute its vision.

Tango is available on Android, iOS, Windows Phone, and Windows desktop and is working to bring a native iPad app out in the near future. Setton wouldn’t comment on the company’s Mac plans, however, but hopefully it, too, will arrive soon.

• TANGO

Tango is a free, high-quality mobile video calling service for iPhone and Android that works on 3G, 4G, and Wi-Fi.

Tango empowers people to share what they see and to have fun with video calling whether at home or on-the-go. Tango offers high-quality video calling for iPhone 3GS and iPhone 4, and Android devices including Motorola Droid X, HTC EVO, HTC Incredible, and Google Nexus One, and works with carrier phone and data plans, and on Wi-Fi networks….

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/G6gcRoExAaQ/

Why? Because the term sheets were signed weeks ago. The deal was only announced this week. (Yes, sorry, there isn’t a more interesting reason.)

However, Scott Raney, a partner at Redpoint Ventures, the firm that led the deal, suspects the valuation would have almost certainly gone up in this TCTV interview. (He didn’t comment on the previously reported $250 million valuation number.)

To be fair, I’ve heard arguments both ways. One the one hand, the $1 billion price that Facebook paid for Instagram might set a benchmark price for other mobile social networking apps. It might compel a competing consumer Internet company (ideally with more than $1 billion at its disposal) to go in with a splashy mobile acquisition too. On the other hand, Facebook’s deal may take it out of the market as a prospective buyer, leaving fewer players to bid up the prices on remaining properties. This is all totally ungrounded speculation though. We’ll see what happens when or if Path ever comes back to the funding table again!

Raney also talks a little bit about how the firm managed to get into the deal. A longstanding relationship with Path chief executive Dave Morin really helped, especially after Morin saw how the firm handled the sale of SimpleGeo, a location services company that was acquired by Urban Airship. Unfortunately, he doesn’t dive into the nitty-gritty details of how the deal went down, except to say that it was very competitive.

While Raney doesn’t confirm or share the valuation, he doesn’t feel that Path is too richly valued. Just to compare (even though I know that valuing companies on a per-user basis is extremely flawed, especially in a high-growth space), Instagram had a little over 30 million users at the time of its sale.

The $1 billion price tag suggests that Facebook paid approximately $33 per user. Path, in contrast, has about 3 million users. If the reported (though not confirmed) $250 million post-money valuation is true, that puts Path at a very rich $80 per user. Also keep in mind that both companies are essentially pre-revenue, although Path sells some filters.

Raney says Path has a very strong team and that Morin is clearly in it for the long haul.

• PATH
• REDPOINT VENTURES
• SCOTT RANEY

Path is the simple and private way to share life with close friends family.

Founded by Dave Morin, previously Co-Inventor of Platform and Connect at Facebook with Shawn Fanning, creator of Napster, and Dustin Mierau co-creator of Macster.

Learn more

Redpoint Ventures has helped entrepreneurs build innovative businesses that defy convention, shape the future, and change the world. From early investments in industry pioneers like Netflix, TiVo, and Juniper to companies such as RightMedia, Zimbra, Heroku, LifeSize, Danger, Fortinet, and Pinwheel, we stand behind our entrepreneurs helping them go all the way to the top. With our deep experience and focus on quality, we offer entrepreneurs a culture and approach that values mutual respect, meaningful relationships, and…

Learn more

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/L_JSsCEi7hc/

Editor’s note: Patricia Nakache is a General Partner at Trinity Ventures where she invests in early stage social commerce and entertainment companies. Trinity Ventures is an investor in the following companies mentioned in this article:  BeachMint, Gigi Hill, Kixeye, Primalistas, Ruby Ribbon, ShopIgniter, and Zulily. You can read more about Patricia at the Trinity Ventures website or follow her on Twitter @pnakache.

Speak to people who think Facebook will be a screaming buy at its likely IPO valuation of $100b+ and they will say with confidence, “Facebook is just getting started.” What they mean is that Facebook is just starting to find ways to monetize its 845 million users; the social network started with the lowest hanging fruit, which was advertising, then moved on to taking a cut of in-app virtual goods purchases, and now presumably has a long laundry list of other ways to enmesh its users and grow its top line.

High on that list is a controversial proposition: commerce on Facebook, otherwise known as F-commerce. Though an initial rush of branded retailers set up storefronts on Facebook pages, several of them, including GameStop, JC Penney, Nordstrom, and The Gap, decided in February to shut them down. It turns out that simply replicating a web storefront on Facebook isn’t compelling for consumers, particularly when the brand’s fully-functioning and pretty convenient web site is only one click away. Moreover, brands were leery of driving commerce traffic to Facebook rather than to their own sites where they could better control the experience and manage consumers through a purchase conversion funnel.

So what kind of shopping experience works on Facebook?  The answer, in a nutshell: event marketing.

In the offline world, events have long been an effective marketing tactic for generating excitement among customers, driving foot traffic into stores, and selling product. Of course, the most common events in retailing are sales events, some of which have become so widely recognized that they are brands in their own right. Think Nordstrom’s Half Yearly Sales. Other flavors of events in bricks and mortar commerce include celebrity events, such as author speaker series at bookstores, or trunk shows in department stores to preview the latest offerings from high-end designers. These different types of events all accomplish the same goal:  get people in the store and get them excited to buy stuff.

One sector that has fully tapped into the power of event marketing is the party selling industry. Companies like Pampered Chef, Stella Dot, Gigi Hill or Ruby Ribbon understand the irresistible draw of a party event thrown by a friend paired with an opportunity to buy great product. The direct sales industry is sizeable, with $30b in sales in the US driven by 15 million sales people, and is attracting an increasing amount of venture investment as party sales become recognized as “social selling” that can be turbocharged with technology.

Over the last few years, event marketing has also transformed ecommerce. Private sales sites such as Zulily and “daily deal” sites such as Groupon create excitement around daily sales events with limited inventory and for limited time periods. Moda Operandi and Primalistas are bringing trunk shows online with pre-order “events” for high-end fashion.

Given the proven effectiveness of event marketing, it stands to reason that events could provide the linchpin for commerce on Facebook. A healthy percentage of the social network’s 845 million users are milling around on the site at any given time browsing for interesting content or entertainment. What better venue to organize an event?

Social commerce leader BeachMint pioneered event marketing on Facebook with its live 2011 CyberMonday sales event. Hosted by 2 bloggers, the 90 minute video event featured pre-taped footage of BeachMint’s celebrity influencers, live call-ins from those celebrities, and lots of great deals on limited quantities of products from across BeachMint’s 4 brands, JewelMint, StyleMint, BeautyMint, and ShoeMint. The results of the event were compelling with over 50,000 visits and all items promoted selling out. BeachMint is now planning a series of live events on Facebook, including one today with StyleMint.

Social gaming companies are also savvy to the power of event marketing on Facebook. Kixeye, which develops strategy games on Facebook, periodically hosts tournaments and other special events across its three titles, Backyard Monsters, Battle Pirates, and War Commanders. Battle Pirates, for example, has featured a series of “Base Invader” events that rally players to work together to defeat The Draconians, an evil nemesis. During these events, Kixeye sees its visitor and revenue metrics spike as players flock to the event.

A few established retailers are getting into the act with innovative event-based campaigns of their own. Home Depot has used a tactic called “like-gating” to create a game-like atmosphere and generate excitement around sales events. For their Spring Black Friday sale last year, Home Depot posted on Facebook that if the post received 250 ‘Likes’, the retailer would unveil the next item in its sale.  Within 8 minutes, the post had over 1000 ‘Likes’ and, within 2 minutes of the sale item being unveiled and made available for purchase, it was sold out. The results of the 3-hour event: Home Depot added 61,000 fans (a 28 percent increase) and sold out of all four sale items.

Instead of creating its own sales events, Target capitalizes on the meaningful events in its customers’ lives to drive commerce. The retailer launched a “Give With Friends” app on Facebook powered by social commerce platform provider ShopIgniter that facilitates gift-giving for events such as birthdays and anniversaries Friends, colleagues and family, in other words the people in your Facebook social graph, can chip in together on a gift card and personalize the card and message to the occasion. The recipients can redeem the gift cards online or in store through their mobile phones.

In the bricks and mortar world, retailers have long understood that different venues call for different retail formats – think of the differences between a flagship Starbucks in a downtown location relative to a Starbucks tucked inside a Safeway supermarket. The same principle holds true in ecommerce. Retailers will succeed in driving ecommerce on Facebook but they will need to adapt their approach to the venue. My bet is their formula for success will involve event marketing.

• PATRICIA NAKACHE
• TRINITY VENTURES
• FACEBOOK

Learn more

Founded in 1986, Trinity Ventures is an early stage venture capital firm dedicated to partnering with passionate entrepreneurs to transform revolutionary ideas into reality. With over $1 billion under management, Trinity Ventures believes in personal engagement, mutual respect and goal alignment with the entrepreneurs. Trinity focuses on early stage and seed technology investments with particular emphasis on social commerce and entertainment, digital media, Saas, and cloud and infrastructure.

Trinity Ventures has invested in such leading companies as Aruba Networks,…

Learn more

Facebook is the world’s largest social network, with over 500 million users.

Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz and Chris Hughes to help build Facebook, and within four months, Facebook added 30 more college networks.

The original idea for the term…

Learn more

Article source: http://feedproxy.google.com/~r/techcrunch/social/~3/ATab-Q1zKBI/