About justingibbs

A Senior Product Manager at Playdom / Disney I build social games amongst other special projects. A non-gamer what drives me is the opportunity to help pioneer a new form of interactive entertainment - interactive drama. And I'm betting a good portion of the social game audience is looking for just that, if not now they will be.

All this Facebook talk reminds me a lot of the dot-com bubble

Bubbles are a way of life in Silicon Valley and if you’re lucky you can ride one. I was lucky enough to ride the great dot-com bubble at Yahoo! Like a wave it washed me from LA to the Valley and once here I hoped for more bubbles. We all dream of working on that next revolutionary product but we’re also gamblers. If we’re lucky our startup hits the jackpot and IPOs ala Netscape, but we also know that in bubbles even bad companies can profit. Just look at theGlobe.com.

Being a gambler I think I’ve gotten pretty good at spotting bubbles, similarities I saw in the dot-com bubble and the one of today with LinkedIn, Pandora, and Groupon.

They haven’t even begun to turn on monetization

This quote came from an article about  how P&G opened a store on Facebook.

Facebook will figure out a way to get people to sell on Facebook or through Facebook, and then figure out a way to take a cut from that. It’s a multibillion dollar opportunity.

Really? It’s that easy? So easy that they’re just waiting to turn it on when they need it?

They said the same thing about GeoCities in 1999. It powered some percentage of the whole Internet in those days and everyone thought it was only a matter of time before they figured out monetization. Yahoo! bought the service on those same expectations in 1999 only to close it down in 2009. Same words were mentioned about YouTube, it’s doing pretty well for Google but it’s more of a leverage play than a pure revenue source.

That isn’t to say that some companies haven’t figured out monetization, Google did. But more or less stumbled into it. There is a big difference between turning on monetization and trying everything under the sun until you hit strike gold. This talk of Facebook knowing exactly how to monetize but waiting to do so is crazy and such talk seems to become deafening during bubbles.

These are real businesses

A lot of people hold out that this bubble is different because these businesses have real revenues. True many in the Dot-com bubble didn’t but some did. I worked at Yahoo! and it had more than real revenue, it had growing profit. Even when things began to turn sour Yahoo! was still profitable and would tell the press that it was a very different company than those flaming dot-coms, it had real revenue. But soon it became apparent that a lot of those revenues were from those same dot-coms now on fire. When they burned out so went their ad budgets.

I’m betting the largest ad buyer on Facebook is Groupon and LivingSocial, then maybe Zynga. What if Groupon flames out? They’re already spending a massive amount on advertising, similar to dot-coms looking for portal deals in 1999. What if Zynga does? Facebook’s revenues might not look so hot.

What you should do is watch for slowing growth

A lot of these high flying tech companies get there by capitalizing on powerful trends and brand positioning. It was called first-mover advantage in the days of the dot-com bubble. In 1999 everyone thought they needed a place on the Internet and were planting their flag using GeoCities homepages. It was an unstoppable juggernaut but in time even that trend faded out.  The party atmosphere ended and the really difficult work began. Most companies never make the transition and muddle on for years like GeoCities did under Yahoo!

When things are going up everyone takes credit for the success. “We added a million new users because of my feature”, because of this or that. But many times that growth is almost inevitable due to the trend and brand. Riding trends is a lot more about not fucking it up.

So when the trend peters out you should take heed. If Facebook’s numbers are slowing I would begin to question all this talk of taking on Apple or expanding into mobile. It changes managements focus. You go from one day thinking you’re unstoppable and will rule the world, to suddenly pulling people off projects to kick start growth again. Soon you question everything. It’s like trying to hold water in your hand.

That said, Sterling still thinks the site may be vulnerable. “[Facebook CEO] Mark Zuckerberg has characterized Facebook as a utility — a communications utility — but I’d argue that it hasn’t yet made itself into one the way that Google has,” Sterling told PEHub. “In the same same way that we joined Facebook because our friends did, we’re likely to leave if those same friends become less engaged,” he says.

Then again there’s evidence that Facebook isn’t slowing at all. Hopefully the trend is still going for Facebook, and even if it isn’t they can ride the bubble and parlay it into something.

The rise of Social Circles

Jason Schwartz, the founder of matchbook, says that we’re moving from the social network era into the social circle era. I agree, but I might be a bit biased as I’ve never been a big social network user. I didn’t use them much because I didn’t feel the need to share with “everyone” I added as a friend. Facebook is more of a phonebook for me, a way to connect with everyone I ever met but not a tool to share. If I’m going to share on Facebook I would just as likely share on Twitter so the whole world could see. If I’m going to share with friends I do what I’ve always done and email local friends, college friends, etc. This is also what’s at the heart of Schwartz’s argument and I’m sold on his concept of social circles. I could really use something like that, however I don’t exactly agree with his theory that such circles will be built automatically.

Facebook has quite a few tools for managing groups of friends.  These fail because they rely on the user to manually curate these groups. Users won’t do the manual work necessary to make a Social Circle work, just like they won’t be selective with whom they friend on a check-in service.

One of the reasons I don’t share is I don’t know who will see it. For me to safely share I need to know exactly who will see my message. I’ve already lost track of who are my friends on Facebook, but let’s say Facebook gives me a way to automatically filter my friends. My question then would be can I trust it?

But could Google manage to make one automatically?

I can understand the appeal that algorithms will magically create and administer social circles, but then again there’s always algorithms arguments floating around Silicon Valley. They also don’t usually pan out. If anyone can make it work I would think it would be Google – they’re known for algorithms. Maybe they could create a social circle using Gmail. Would I use it? I couldn’t trust it completely as in theory the algorithm would constantly be adjusting who’s in my social circle and who isn’t. But maybe I would use it some of the time, perhaps to invite people to a parade or something. I doubt that would be enough for me to feel like it is anything other than a feature of Gmail and I think social circles have more potential – to be services in themselves.

Betting the battle for social circles will be more about positioning

All this reminds me of classic positioning marketing. Of all the brands in the world we identify them with something – Heinz is ketchup,  Porsche is sports cars, Cadillac is premium but not as premium as BMW. Facebook is a phonebook to me. To many it might be something different but I doubt it will be difficult for them to morph into a social circle.

Schwartz thinks the leader in social circles will be whoever can crack the nut on how to create social circles automatically.

Solving this problem is going to be very tricky. If you want to know why Path and Color were able to raise so much money, it’s because they are tackling this problem, not because they solved it.  The investors were placing a bet that if anyone can solve something as difficult as this, it will be those teams.

I’m betting it will end up being more of a battle of marketing. I’m waiting for such services, now one just needs to click for me. Maybe it will be a friends recommendation or one that catches fire on mobile. I’m not against having to manually create my circle, but I have to be sure who and who isn’t in my network at all times.

Are Facebook customers happy or just trapped?

Silicon Alley Insider ran an interesting poll this week How do you feel about Facebook? Of the 900 who took the pole, most were not too happy with Facebook to which Nicholas Carlson  added his own anecdotal data.

This jibes with our own anecdotal data. Friends and colleagues tell us they use Facebook all the time, but they don’t actually “like” it. They feel stuck with it.

Such comments reminded me of when AOL increased the monthly fees for internet access just after the purchase of Time Warner in 2000. It went from $19.99 to like $20.99 and I remember reading that it was not a sign of trouble at AOL but more a move of strength. We all know what happened after that. Though in 2000 AOL looked to be on top of the world because they had such a lock on their customers, heck they could even increase the price and see no ill effects. But underneath it all customers had begun to hate AOL. They didn’t see the price increase as a fair exchange but more a sign that they needed to do everything they could to migrate away from AOL. As the following years would show, people hated AOL and felt trapped.

Now that doesn’t sound all that different from the comments Nicholas Carlson is hearing about Facebook. I doubt Facebook will fall as far as AOL did, but companies should be weary when their customers feel trapped. All those supposed lock-ins can fade quickly. AOL had a long list of lock-ins – email, chat, credit card data. It made switching harder but it didn’t stop what eventually became a mass exodus. How many of Facebook’s supposed lock-ins will fade?

Does Ping really need Facebook Connect?

Apple’s new social network Ping had Facebook Connect one minute and not the next. It’s a bit odd for a feature like that to disappear in less than 24 hours, but what I found intriguing was some people’s reactions across the blogosphere. Om Malik was severely disappointed:

As a long-time customer of Apple and its iTunes store, I’m severely disappointed that I can’t bring my pre-configured social graph to Ping. I hope Apple and Facebook both come to an agreement and kiss and make-up.

Maybe it’s just me but I don’t want my social graph to follow me. I like having different graphs at different services. Having Facebook Connect would help me pull those that I might want over, but at the same time I’m kind of hoping the cool ones will move on their own and we’ll create a new social graph. I think it’s the same way with dive bars or clubs – you always keep moving.

Facebook Connect will most likely not return to Ping

Some speculate that this just part of corporate one-upmanship.

Otherwise, Ping would really suck and the big losers in this game of corporate one-upmanship are the consumers, who probably — like me–  just want recommendations from our friends, then buy those tunes.

Some believe that once it’s worked out, Facebook Connect will return. I highly doubt that, simply because Facebook charges for access.

According to AllThingsD, Facebook was responsible for turning off Apple’s access to its Facebook  Connect API. Typically this API is open to just about any application developer. However, with higher-volume apps (think social games and services with lots and lots of users), Facebook apparently requires a special agreement for these kinds of connections.

Apple is huge, they’re the product company everyone wants to emulate, their fans are rabid. Why would they need to pay for access? I’m sure what Apple asked itself is what’s the value add for Facebook Connect? Given who they are and that there are people like me out in the world who actively want to recreate social graphs they couldn’t justify the expense.

When I asked Jobs about that, he said Apple had indeed held talks with Facebook about a variety of unspecified partnerships related to Ping, but the discussions had gone nowhere. The reason, according to Jobs: Facebook wanted “onerous terms that we could not agree to.”

Ping is directly challenging Facebook’s place as the de facto social graph

We would be surprised if this feature didn’t make a reappearance at some point. That’s a good thing, because Facebook is becoming the de facto social graph for many users and makes the friend discovery process much easier.

I would agree that it is the de facto social graph today, but that is what Apple is challenging directly with Ping. My money isn’t so much on Ping, but more on the fact that Facebook’s lock on the de facto social graph is fading. I can still remember when there was only one place to build a personal homepage – GeoCities. Eventually people discovered other places, then entirely new ways to establish a home on the Internet.

Facebook seems unstoppable as of late, but this encounter with Apple could open up some cracks in the walls.

Frivolous mediums evolve – so will social games

Adam Rafkin has a very opinionated piece on GigaOM – Why Google has no game. It’s an interesting read but I feel like he’s just on the Facebook bandwagon. I remember a time when everyone was on the Google bandwagon and it was Yahoo! who looked like the chump. That’s the way they hype cycle rolls in Silicon Valley.

Adam starts off with quite a stretch.

Real social engagement comes from photo-sharing and chat. I thank Fred Wilson for that insight. It’s why FriendFeed was such a fantastic acquisition for Facebook: because they deeply understand that. Google should start by turning Picasa into a social application. If Google really cares about social engagement, copy Flickr.

As if all else doesn’t count as “real” social engagement. What does Adam mean by “real” social anyway? I’ve heard countless conversations started around social games.

Reading further you get the feeling that Adam just dislikes social games.

Many people are just not into social games. That’s right, half of Facebook users don’t play games, and many users hate games. Plus, the whole gaming ecosystem feels like it’s about to collapse on itself. It’s no wonder that Playdom sold out. For Facebook, games were a means to an end: a way to experiment with the pay-for-application-installs business model long enough to evolve into an advertising unit allowing brands and companies to promote (and pay for “likes” on) their Facebook Pages.

Lesson one of Product Management: Listen to your customer

I got into the social game industry six months ago and I was skeptical like many. Was it all a fad? I hated the viral spam as much as anyone. But social games had already done the impossible – garnered a large woman audience. That’s what intrigued me and the potential for interactive drama. Being a Product Manager I went in with open eyes and was a bit amazed at what I found. Some players actually loved sending virals, it was part of their game play. What was most encouraging though was how passionate some of the players were. Some of the games had become part of their daily lives and they would certainly let us hear it if we tweaked something they liked or were down. That kind of passion is a rarity. It’s what excites me about the medium and keeps me and the likes of  Bing Gordon hopeful for it’s future.

We knock what we don’t understand

A lot of what Adam says reminds me of my friend and manga. My friend grew up on American comics and can’t stand manga because it’s black and white. To him it’s a step backwards, he doesn’t understand why people get so into it. However they do and they’re plunking down millions to feed their hunger.

A frivolous medium

Interestingly both comics and manga were considered frivolous when they began. However through the passion of their audiences and efforts of talented artists they both evolved.

Osamu Tezuka (1928-1989) is the godfather of Japanese manga comics. He originally intended to become a doctor and earned his degree before turning to what was still then considered a frivolous medium. With his sweeping vision, deftly intertwined plots, and indefatigable commitment to human dignity, Tezuka elevated manga to an art form.

-Back cover of Ode to Kirihito

Seeing audiences passion I expect the same evolution for social games.