Category: Tech news

Editor’s Note: This is a guest post written by Alex St. John, President and CTO of hi5, on the state of the social gaming market.

When Facebook recognized that early social media games were getting a free ride on their network, they shut down the free viral channels these games relied on for audience, started charging market prices for advertising, and demanded a cut of all commerce transactions (see “Facebook Credits”). This changed the economics of social games dramatically. Reaching a large audience easily and for free ceased to be a benefit of developing social media games. In the downloadable casual game business, game developers get a 25%-35% share of the revenue their games generate online when published via channels other than their own. With Facebook charging a 30% premium for Credits and taking an additional cut on advertising, it’s likely that the cost of marketing a social media game is converging on what it costs in the mature downloadable casual game business.

With free virality shut down, social game developers are now forced to compete in the full online game market where a slew of great multiplayer games (such as Club Penguin and Runescape), which interestingly are not called “social media games” because they don’t NEED a social network for distribution, succeed and thrive purely on their viral merits with no investment support or dependence on Facebook for their enormous popularity. This creates a very interesting situation: games that nobody wants to play unless they are inside a social network competing against great viral multiplayer games that monetize and spread more efficiently than social media games once “normal” market pricing for promotion is introduced on Facebook. The only advantage social media games have currently is that the Valley thinks they are “hot” and is willing to invest lots of money in them.

The next stage we’re likely to see is a replay of what happened in the casual game space between 2004-2006 when capital flooded downloadable casual game companies enabling them to buy audience and distribution at prices ABOVE the monetizable value of the games they were selling. Casual game companies went to war, propped up by investment dollars that enabled them to overspend on audience acquisition, which produced the illusion of user and revenue growth even as every customer acquired in this manor returned less revenue than the cost of acquisition. As long as the investment money flowed, casual game publishing seemed to grow, but once the bubble popped in late 2008, it became very clear which companies had built sustainable publishing businesses and which ones had overextended themselves. RealNetworks, once flush with cash from its victory over Microsoft in an anti-trust lawsuit, was apparently the largest and fastest growing casual game publisher, today it is spiraling into decline.

This same cycle is now taking place in social media. When Facebook changed the rules, the early leaders in the space faced two extremely unpleasant realities: 1) Unlike casual gaming, their popular franchises were ineffective at acquiring Facebook audience directly and 2) Paying market rates for audience made their books look a whole lot less pretty. Faced with this challenging circumstance, social game development studios have started taking aggressive steps to remedy their situations, including:

1. Finding buyers as fast as possible before people realize that their growth and maybe even their businesses are not sustainable
2. Leveraging the abundant capital available to try to buy their way out of dependence on Facebook by either acquiring their own standing audiences or by acquiring non-Facebook dependant game companies
3. Overspending on marketing to try to buy audiences to preserve their apparent growth even as their books leak money and their earned audiences decline

What does it mean that Zynga abruptly canceled its deal with MSN to carry Farmville? Probably that they paid a lot for the distribution only to discover that the game did not perform well enough there to justify the expense. Outside of Facebook, Farmville simply can’t hold its own against games like Bejeweled and Scrabble when it comes to monetizing a casual audience, and these games set the market price for advertising on the sites they dominate.

Want to see which games dominate the online economy in a competitive market where distribution doesn’t come for free? Simply check out the front pages of the leading downloadable casual game publishing sites. The minute that Farmville genuinely has superior online economics, it will displace these games. But, until then, it appears that Cubis monetizes best on MSN, and Zynga will lose money by buying its front page position to promote Farmville.

In the end, I believe that “social games” as we know them will be a forgotten internet fad, ultimately consumed by the already mature online market for downloadable and multiplayer games. The only NEW discoveries that remain will be the realization that social networking itself is a new kind of game play, social graphs are an extremely efficient way for games to market themselves and that microcurrency business models blended with advertising are a superior way to monetize online games in general. Everything else will be consumed by the highly competitive and established downloadable and multiplayer online game market. If some of the big names in social media gaming survive, it will be because they leveraged their abundant access to capital to transform themselves away from dependence on Facebook.

In an effort to compete with services like Facebook, Yelp and Foursquare, Google is preparing to distribute millions of custom mobile devices to small businesses around the U.S., says a source with knowledge of the program. These devices will allow customers to check-in and rate the businesses and perhaps even purchase items via Google Checkout. Eight million of the devices will be distributed, says the source.

Another source has said the 8 million devices figure may be significantly higher than the actual number of devices being rolled out.

Google clearly wants to get a lead in the potentially very lucrative local business market for both checkins (Foursquare, Facebook) and reviews (Yelp). Online to offline commerce is “a trillion dollar opportunity.” Money spent at coffee shops, bars, gyms, restaurants, gas stations, plumbers, dry-cleaners, and hair salons, etc. makes up a very large percentage of overall spending, and online services want a piece of that. Yelp touches this world, as does Foursquare and others. Groupon’s growth can be attributed to the huge untapped potential in local online to offline promotions as well.

Google wants their piece.

The devices will presumably allow customers to check in to businesses, leave reviews and possibly even purchase items via Google checkout. But there’s a lot we don’t know. We’ve heard that Google will give these first devices away for free, but we don’t know if they’d plan to charge once the product is more established, for example.

We’ll update as we get more information. We’ve reached out to Google for comment.

We’ve reached out to Google for comment.

It’s no secret that embattled MySpace is working on a complete redesign of its site in hopes of reversing the staggering loss of users and traffic over the last couple of years. In December 2008 MySpace had 125 million unique visitors and 43 billion page views. Today they have 95 million unique worldwide monthly visitors and…wow…just 12 billion page views (Comscore).

The redesign is meant to be a dramatic restart to get users excited about MySpace again. Futura, which is the internal name for the project, is set to launch for some users on October 15, although our sources say that date may slip. It will include a much simpler interface, lots of white space, and a focus on the activity stream, say our sources. Much like Facebook.

Many of the design elements were lifted from the Remaking MySpace project that was terminated after CEO Owen Van Natta left the company earlier this year, we’ve heard. And many of the changes are just obvious and are intended to clean up the site.

Parent company News Corp. will be watching how Futura is received very closely, say sources close to MySpace. The hope is that there will be a positive spike in traffic, and that momentum will help News Corp. package the company for a sale or spinoff. News Corp. has already pushed Fox Advertising Network into MySpace after President Adam Bain bailed for Twitter last month. Before those entities were merged it would have been difficult to sell either company.

We’re keeping an open mind until we see the redesign ourselves. But no matter how full of awesomeness it is, it’s unlikely to bring the masses back fast enough to make MySpace relevant again.

The whole “flash sale” phenomenon is interesting. Traditionally, the idea of “impulse buying” has been viewed as a somewhat bad thing. Purchases are supposed to be thought out and studied — made only after you’ve considered things for a while, right? The Internet has flipped that idea on its head. But that’s not a bad thing.

Bloomspot is one of the newer players in the flash sale scene. Launched in January of this year, they currently cater to three cities: San Francisco, New York, and Los Angeles. But unlike competitors in the space, they’re not all about as moving as much of a product as possible in a short amount of time. Instead, they’ve about creating relationships between clients and customers. The features (they don’t call them “deals”) are simply the first step to facilitate this relationship.

And Bloomspot also differs in that they’re going for a very specific type of both client and customer: luxury hotels, restaurants, and spas that cater to more affluent, mature clientele. And now Bloomspot has just raised a $9 million Series A round of funding to further pursue this market.

I sat down with Jasper Malcomson, Bloomspot’s CEO and co-founder (and a former manager of travel and commerce at Yahoo), to talk a bit about the service today. He has very clear vision for what he wants the company to go after. They’re not trying to be Jetsetter, selling people dreams of traveling around the world on a whim. They’re trying be cater to the more practical-minded but still affluent audience who perhaps just want a weekend getaway.

Bloomspot is focusing on places people want to go already — such as a winery in Napa Valley — but hesitate for whatever reason. These aren’t places across the world, these are places relatively close by. By giving them a limited-time offer attractive package, it pushes them over the edge. It’s not so much about deeply discounting rooms as it is about adding experiences on top of the price (such as spa treatments, etc) that make it that much more appealing.

This idea is important because Bloomspot isn’t aiming to become the way that everyone can experience luxury cheaply. They just want to entice the people who would likely be suited for these types of places, to go. The venues love that because they know that these type of people will fit in with the overall experience and will still be willing to spend the money on other things like food once they’re there.

In other words, they won’t be cheap.

And, if those people enjoy the experience enough, the likelihood that they’ll come back greatly increases. In that regard, Bloomspot is almost like an interactive advertisement or a try-before-you-buy service for these venues.

“The long term way to attack the space is customer quality,” Malcomson says. In group buying, that doesn’t matter because a merchant doesn’t care who buys an article of clothing as long as it’s sold. It’s different with these more experience-oriented clients that Bloomspot deals with.

And Bloomspot offers them a way to help move unsold slots if it’s a slow time of the year or business is down for whatever reason. Bloomspot just needs a few days to put a new feature in place.

Malcomson says that 68 percent of Bloomspot’s audience is 30 years old or older. You can compare that to group buying sites where around 70 percent of customers are 18 to 35. Again, affluent and older, that’s what Bloomspot is going for.

Bloomspot gets a 30 percent commission on sales pretty much across the board, no matter which feature they’re selling, Malcomson says. This means that they’re already pulling in a fair amount of revenue, though they are not yet profitable.

While Bloomspot is currently live for the three aforementioned cities, they will also be launching in Boston and Washington D.C. on October 3. After that, Chicago, Dallas, and Houston are up next.

This Series A round of funding was led by Menlo Ventures with participation by seed investors True Ventures and Harrison Metal.

This $9 million is on top of the $2 million seed round from March 2009 that included investors Jeff Weiner (CEO of LinkedIn), Erik Blachford (Chairman of TerraPass and former CEO of Expedia Inc.), and Brad Garlinghouse (President at AOL, Consumer Applications Group).

One Kings Lane isn’t just a hot flash commerce site. It’s a hot commerce site that has been backed by Kleiner Perkins, First Round Capital and Reid Hoffman. And cofounder Ali Pincus is married to Mark Pincus of Zynga fame.

The site launched in May 2009 and offers users deeply discounted high end home furnishings via daily sales. Like Groupon most of the inbound traffic comes from daily emails sent out to registered users. And repeat buyers are basically camping out on the site, driving 80% of total orders. The really rabid ones don’t even wait for the email, they just hit the site at 8 am to buy stuff before it sells out.

Revenue is nicely up and to the right, up 500% over last year. New CEO Doug Mack started in May when the company had 30 employees. Today they have 65 and are hiring like crazy.

They’ll announce three new executive hires tomorrow – Ed Komo as vice president of engineering, Jim Liefer as vice president of operations and Yulie Kim as head of product. This group has experience from Walmart.com, eBay and Hotwire…and in the case of Ed, the dreaded Jigsaw.

I’m a customer of One Kings Lane, and have made a few purchases for my new house. They always have really interesting curated stuff for sale at every price range, and they buying process is simple. Like Groupon and Gilt they seem to have found a business model that really works.

It works so well, in fact, that it isn’t out of the question that the Pincus household could have not just one but two IPOs in the coming years – Zynga and One Kings Lane.

Mack is aggressively building out his executive team, he tells me. They are recruiting a VP Marketing and a CFO right now. So if you’re looking, they may be the right fit for you.

One month ago, Facebook unveiled Facebook Places, its long-awaited location feature that lets friends check-in to real-world venues. Unfortunately, Facebook’s main website still hasn’t quite caught up to the new feature — for example, there’s still no way to get an at-a-glance view of where your friends are. Places also has a few shortcomings that normal users might not have noticed, including the fact that adding an application to a Facebook Place Page is a pain.

It’s possible to do it: Facebook is willing to port over the apps you have installed on your normal Facebook Page once you provide it with documentation proving you own the venue in question. But Facebook hasn’t done anything to showcase which applications actually make sense to include on a Place Page, and it’s unnecessarily difficult to find the option to install an application to a Place Page yourself. TechCrunch Disrupt finalist Appbistro wants to help.

Appbistro offers a marketplace for Facebook Page applications, allowing developers to charge for their apps (which Facebook doesn’t facilitate) and for users to review the apps they’ve used. Today the site is launching a section dedicated to applications that are suited for Facebook Places — at this point, there is no comparable section in the official Facebook Directory. Note that you can actually install any application to a Place Page, but many of them don’t make sense, which is why Appbistro is curating them.

Appbistro is also making the flow for installing an app to a Place page a little easier than it currently is. Normally, it’s pretty straightforward to install an app to a Facebook Page directly from Facebook: you find the application and hit the ‘Install to my page’ button. But there isn’t currently an ‘Install to my Place Page’ button, which means you have to go through a roundabout process of navigating the directory using a link at the bottom of your Facebook Places Page. Yeah, it’s extremely confusing.

The install flow for installing an app using Appbistro is a bit more straightforward, mostly because you don’t have to go hunting for the directory. That said, it’s not perfect — at one point you have to click an “Install on Facebook” button in two different places, which isn’t intuitive.

In yet another executive departure, David Ku, who’s been with Yahoo since 2002, is leaving the company. His most recent title was SVP, Advertising Products.

Yahoo confirms the departure:

Yahoo! confirms that David Ku, SVP for Yahoo’s advertising products group, has decided to leave the company. He’ll be working very closely with Mark Morrissey, who will expand his current role as SVP of the Search Alliance transition to include this group.

In the eight years David worked for Yahoo!, he led strategy and execution across a number of key advertising product areas, ranging from the launch of Yahoo’s Search Marketing Platform (Panama) and APT platform, to playing an instrumental role in the Yahoo! Microsoft Search Alliance agreement. We thank him for all of these contributions and wish him well on his next endeavor.

This isn’t just another run of the mill departure. Like Ash Patel, who left Yahoo earlier this year, Ku was both a long term Yahoo’er and was known as a guy who gets things done.

I can’t imagine what morale must be like over there right now.

At this morning’s launch of IE9, Microsoft tried to reignite the browser wars with its latest iteration of Internet Explorer. You can test drive it yourself by downloading the beta version on BeautyOfTheWeb.com, but if that sounds like too much effort, you can also sit back and watch our video tour with Senior Director of Internet Explorer, Ryan Gavin. Video above.

While the new design of Twitter.com itself is big news, just as big is what it means for the Twitter ecosystem. I’m not talking about the third-party clients that have similar features to the ones Twitter just rolled out, but rather the partners that Twitter is (or is not) working with to bring more content directly into their environment.

Specifically, I’m talking about Twitter’s initial 16 partners: Dailybooth, DeviantArt, Etsy, Flickr, Justin.TV, Kickstarter, Kiva, Photozou, Plixi, Twitgoo, TwitPic, Twitvid, USTREAM, Vimeo, Yfrog, and YouTube. Each of these services now has content which can be viewed directly from Twitter.com — potentially taking pageviews away each of them. Why on Earth would they agree to that?

Some of those companies have already given their diplomatic answers — that this way will be better for the end users. That’s undoubtedly true, but many of those sites rely on the advertisements they show alongside the media they host. Such ads will not be shown on Twitter.com. So again, why agree to do this?

I spoke with Jason Goldman, Twitter’s Vice President of Product, yesterday after the announcement about this. His answer was fairly interesting. He notes that many of the major picture and video companies early-on started showing the value of having their media embedded elsewhere. YouTube and Flickr were two examples he cited.

“Those strategies increased the value of their brands,” Goldman said. And while obviously, YouTube and Flickr don’t need too much help expanding their brands any more, the smaller players could certainly benefit from this. If you see a friend sharing a picture on Twitter via Twitgoo or Dailybooth, you might decide to sign up for those services yourself so you can do the same, is the idea.

Goldman reiterated that Twitter wasn’t going to allow these partners to show their own ads next to the pictures in the new right-side pane on Twitter’s site, but thinks the pictures themselves are almost like a great branding ad for the services themselves.

He also noted that they’re not going to stop YouTube or the other video service from running pre-roll or post-roll video ads in their embeds — so the videos services will retain one way to monetize this embed view.

Obviously, Twitter is open to doing more of these deals with different content partners as well. The Kickstarter and Kiva deals are particularly interesting because they don’t involve embedded media, but rather embedded content. Expect to see a lot more of those. In fact, I’m going to not go out on a limb and guess that a lot of the location services will start showing content in the right-pane on Twitter.com shortly. Foursquare is already integrated in a similar way into Twitter’s iPhone app.

In their quest to make Twitter.com a more seamless experience for users, Twitter is also creating a new sort of mini platform. Previously, their platform was entirely off-site, with the right-side pane, it’s now on-site as well. I suspect we may see some interesting ideas spring up around this.

Earlier this year we wrote about Grogger, a CMS that would allow blogs to crowdsource their content. That product didn’t work out — publishers didn’t want to have to change to a new CMS — but the company has now pivoted to tackle a related problem, and it’s got a new name: Kapost. Today the company is announcing that it’s closed a $1.1 million Series A round led by High Country Venture and Highway 12 Venture, with Zelkova Ventures, Kal Vepuri, Tango, David Tisch, Jason Kiefer, and David Cohen participating (the company was also a part of the TechStars Boulder program).

So what exactly is Kapost? CEO Toby Murdock describes it as a newsroom platform that publishers can use to manage content submitted by a large number of contributors. Murdock explains that many online publishers that feature content from many contributors, like The Huffington Post, have to build their own custom systems for managing, editing, and eventually publishing this incoming content — Kapost wants to fill this niche. And unlike Grogger, which required publishers to tie a new CMS into their workflow, Kapost will integrate with existing CMS solutions.

At this point the product is still pretty early — it includes core functionality like assigning stories to authors, but some of the more advanced features, like distributing payments to contributors and editorial calendars, are still in development. We’ll have more Kapost as it continues to build out its featureset.

A post has just gone up on Diaspora’s blog revealing what the project actually looks like for the first time. While it’s not yet ready to be released to the public, the open-source social networking project is giving the world a glimpse of what it looks like today and also releasing the project code, as promised.

At first glance, this preview version of Diaspora looks sparse, but clean. Oddly enough, with its big pictures and stream, it doesn’t look unlike Apple’s new Ping music social network mixed with yes, Facebook. A few features they note:

• Share status messages and photos privately and in near real time with your friends through “aspects”.
• Friend people across the Internet no matter where Diaspora seed is located.
• Manage friends using “aspects”
• Upload of photos and albums
• All traffic is signed and encrypted (except photos, for now).

But no matter what Diaspora looks like now, the point is to have many different versions hosted all over the place. Some will look different than others — so it make sense to have a simple, clean base to build off of.

The team notes that the public alpha of the project is still on course for October, and will include Facebook integration off the bat, as well as data portability.

“Getting the source into the hands of developers is our first experiment in making a simple and functional tool for contextual sharing. Diaspora is in its infancy, but our initial ideas are there,” the team writes today. “Much of our focus this summer was centered around publishing content to groups of your friends, wherever their seed may live. It is by no means bug free or feature complete, but it an important step for putting us, the users, in control,” they continue.

Diaspora is a particularly interesting project because it was first unveiled at a time when Facebook was facing a lot of user backlash due to privacy issues and changes being made. This helped the project raise over $200,000 in crowd-sourced funding via Kickstarter.

Of course, Facebook continues to grow and is now well past 500 million users, as much of the controversy that existed a few months ago has died down — as expected. The project also faces the hurdle of trying to popularize an open source project — these projects often sound great on paper, but doesn’t work too well in practice. That said, Diaspora is still interesting, and we’re rooting for these guys to pull it off.

Developers, get building — you can find the code on github here. But note their warning:

Feel free to try to get it running on your machines and use it, but we give no guarantees. We know there are security holes and bugs, and your data is not yet fully exportable. If you do find something, be sure to log it in our bugtracker, and we would love screenshots and browser info.

Recommendation engine Hunch is rolling out partnerships with seven large sites to provide personalized recommendations for their products, services, or content. Interactive Corp’s Gifts.com, Bluefly, Buzzfeed, Heyzap, ShopStyle, Milo and FanBridge are the initial partners, and Hunch says more will be announced shortly.

“These companies will either build applications that reside on Hunch.com, embed Hunch functionality within their own sites, or both,” says Hunch.

The partners will us a rebuilt-from-the-ground-up API to show personalized recommendations to users, says Hunch CEO Chris Dixon. The Hunch website itself is built using the same API that is being made for partners.

This also gives Hunch a potentially lucrative revenue model. There will be a free version of the recommendation engine that most partners will use, But ecommerce sites will share revenue generated from purchases recommended by Hunch.

“Our whole business is centered around the API,” says Dixon.

Dixon says that the company spent the first year or so after launching in learning mode, building out the data and finding connections. Now they have enough data, and 20 billion “connections” to be confident in making recommendations to people on just about anything at all. Cofounder Caterina Fake made similar statements when I interviewed her earlier this year.

Pew Internet has just completed a survey of nearly 2000 mobile users in the US and has come up with some not particularly startling statistics about phone and app usage. Still, it’s good to have some cold hard numbers to look at, even if the sample size seems a bit small.

Here’s the gist of the survey and writeup, which is rather wordy.

Continue reading this article…

While the phone itself launches in October, Seesmic has just posted a preview video of what the Seesmic app will look like on the Windows Phone 7 platform. Seesmic recently launched Seesmic Desktop 2 and hinted that there would be a Windows Phone 7 app coming shortly. The above video highlights some of its features including Dashboard, Search and Spaces.

We’ve learned that super stealth advertising related startup AK Networks has closed an $8 million round of Series A funding. A SEC Form D filing reveals that the round was co-lead by True Ventures’ Jon Callaghan and DCM’s Dixon Doll and that the company, founded in March, is based out of New York (with the distinction of a Park Avenue address, even). About.com founder Scott Kurnit, listed on the filing as executive and director, is CEO.

We’ve confirmed that the plethora of other investors in this round included Spark Capital, betaworks, First Round Capital, the New York Times, Lerrer Ventures, David Cowan, Stan Shuman, and Kurnit himself. The New York Times investment is particularly notable as Kurnit’s previous venture, About.com comprises a large proportion of its online revenues.

Oh and guess what? They’re hiring!

Thanks: FormDs