Yahoo! And Facebook – a good potential match

I’ve been watching the stories about the rumored acquisition of Facebook by Yahoo for $1 billion and finally feel compelled to comment on the rumors, something I usually don’t do. Here are a couple of the thoughts that I’ve shared with several clients and reporters over the past day:

- Facebook is worth a lot of money in the market. I’m no financial analyst so can’t really say what Facebook is worth, but here are some thoughts on how to value it. First, take a look at the recent IPO of Mixi, the leading Japanese social network. I wrote a post on it last week that looked at how to use it to value US-based social networks. Mixi’s IPO value was a little shy of $1 billion for its 5 million members. Using that as a base, Facebook’s 7.5 million members would be worth roughly $1.5 billion.

- Yahoo! needs a social network. The reason Yahoo! is so interested (and willing to pay top dollar) is that it’s core strategy is built around social media, with people and profiles at the center of the strategy and technology. One of the core components of a social strategy – and of social networks – are robust profiles (I wrote about this in a research piece waaay back in July 2004, “Profiles: The Real Value Of Social Networks”). On Yahoo!, there’s no strong, integrated use of profiles.

Here are two examples of my profile on Yahoo!. The first is the one associated with my Yahoo! ID – there’s not much there. The second is from my Yahoo! 360 ID, which has links to the reviews I’ve done across Yahoo!. Note that they are completely different and not really linked. Even more telling, at Yahoo!’s analyst day earlier this year, Yahoo! executives talked extensively about their social media strategy – and never mentioned Yahoo! 360 once. Yahoo! 360 is kaput, so they need to jumpstart their social networking initiatives – and an acquisition is the fastest way to do it to counter the growth of MySpace and YouTube.

And there’s also substantial affinity between Facebook users and Yahoo! According to Nielsen//NetRatings, 83% of Facebook users also visited Yahoo! at least once in August 2006. Also, Google has the same amount of overlap – 83% of Facebook users also used Google that month.

-         The rumor effectively tests how Facebook members will react to an acquisition. After the news feed fiasco, Facebook can hardly be blamed for being cautious about moving quickly. This rumor effectively is a great test to see how its members will react – and if they will bolt to another service if an acquisition goes through. There is an official petition on Facebook called “Don’t Sell To Yahoo!” which 502 members have joined (as of this posting), which is nothing compared to the almost 700,000 members of the “Students Against Facebook News Feed” group. But give it some time – there is substantially less value if the Facebook membership objects strenuously to the idea of an acquisition by Yahoo! (or anyone for that matter).

So what’s really going on, especially with the antics described in the WSJ.com article? This is the classic case of a hot hot hot company sitting in a very nice spot with many options. Facebook (and its investors) will sit tight until the right offer comes along – or never and take their chances on the IPO market. In the end, I think being a part of larger entity would serve Facebook well, mainly because a social network needs context. And as Facebook opens up and grows beyond its core membership of college students, it will have to replace the context of the college campus with content and experiences that people share – something that Yahoo! has in spades.

Should B2B marketers blog?

My colleague, Laura Ramos, researches B2B marketing and is doing some work around B2B blogs. She has some thoughts on how B2B companies should be approaching blogs, which I've included below -- it's a cross-post from Forrester's Marketing Blog on which she writes. Any additional thoughts about the success and applicability of B2B blogs would be most appreciated -- we'd especially like to hear how companies are going through the decision making process of whether to have or not have a blog.

On to Laura's post!

Along with podcasts and RSS feeds, blogs are showing up on business marketers’ radar. Of the 210 B2B marketers who told us that they use these emerging tactics today, over 70% said they planned to boost their spending on social computing tactics during the next 12 months. But just because firms like Boeing, HP, NetApp, Sun, and Unica have entered the blogosphere, does that mean every marketing executive should as well? My answer today is a qualified “Perhaps.”

Successful blogs have two interconnected ingredients, a community that finds reading the blog -– and contributing to it -- valuable. Outside of high tech, B2B marketers will find it hard to hand content control over to customers, prospects, and public commentators. Mainly because they worry that bloggers might say things that hurt their company’s image, brand, or standing in the market. So although many B2B blogs use an authentic voice, they come across as more promotional than openly communicative. Jim Firestone’s “Big I, little t” blog is such an example, although Xerox gets credit for taking steps to get closer with customers.

From our own experience at Forrester, blogs are a bit like children –- they demand constant attention and nurturing to grow up properly –- so deciding to initiate a blog is not a decision taken lightly. Questions marketers should answer are: What is the purpose of the blog?  Who is the audience?  Will the blog encourage participation? And, who should own the blog’s content?  Beyond these, B2B marketers should know:

• Does our business – or industry group – change quickly enough to support the realtime publishing model? While innovations among industrial components like ball bearings, pumps, and compressors may not keep pace with Moore’s Law, their manufacturers shouldn’t rule out blogs entirely. Niche industry publications like Chemical Week, Masonry Magazine, and Scrap (the bimonthly magazine of the Institute of Scrap Recycling Industries) have readership that blogs, as a less expensive publishing media, could supplement or enhance.

• How does the blog fit into the rest of our communication (notice, I didn’t say “marketing”) strategy? Consider whether the blog community can help boost customer service, innovate new products/services, or enhance the flow of information inside the organization. Promotion is not the sole reason to establish a blog.

The bottom line? Get familiar with blogs by reading and contributing to relevant, related ones. But don’t prioritize blog investment above other interactive tactics like search marketing, email, and Web seminars where the results are easier to measure and the value is easier to quantify for now.

And let me know if you disagree or see things differently.

Mixi -- Japan's top social network -- goes IPO

In Japan, the hot news is the IPO of Japan's largest social networking site (SNS), Mixi. Launched in February 2004, the site has grown to 5 million members in July, up from just 3.4 million in March. I thought I’d take a closer look at the first real public market valuation of a social networking service in detail, primarily because it provides insight into the operations, valuation, and potential for SNS.

Mixi has forecasted that revenues to be ¥4.8 billion or US$40.8 million with pretax profit of ¥1.7 billion or US$ 14.4 million. Advertising accounts for 80% of the revenue, with the rest coming from service fees. In the IPO, it raised US$93 million.  Update: I made a major mistake, basing the valuation on the amount raised, not the value of the IPO shares. Here are the correct numbers -- many thanks to commenters Dan & Shin for the corrections. The IPO share price was ¥ 1.55 million for 70,500 shares, for a total IPO valuation of ¥109.2 billion, which is just under US$ 1 billion. At Friday's close, the share price was at ¥3.12 million, making Mixi's valuation just under  ¥2 billion. a little under US$1 billion. Another way to think of it is US$18.60 US$ 200 for each user in the network at the IPO price. 

A rough back-of-the-envelope would value MySpace’s 100 million users at US$1.8 billion US$20 billion and Facebook’s 7.5 million users would be worth $139.5 million US$1.5 billion. As a commentator reports beow, Facebook recently raised a round of financing valuing the company at $500 million pre.  Granted, the I’m not taking into account the multiplicative network value of additional members, so this is likely undervaluing the value of MySpace’s and Facebook’s audiences.

So how hot is the stock? The IPO price per share was 1.55 million yen (US$ 13,200) which rose to 3.15 million yen (US$26,800) per share in bidding, doubling the price (Note that these are unfilled bids as the Japanese stock market doesn’t allow trading on the first day of an IPO unless buy bids match sell bids).

So watch this stock in the next few days/weeks to see how the market reacts to it. I’ll be looking to see not only the stock price, but also how the company performs in terms of monetizing the users.

Here’s some background on the features that make Mixi unique and successful in Japan:

- Invitation-only participation. Most of the Mixi users I spoke with said that they use Mixi only to connect with their friends. The most used feature – the “diary”. They update their own and frequently check their friends’ diaries. While essentially a blog, many users don’t consider it one, as it’s really only for their friends.

- Anonymous profiles. As a rule, the Japanese don’t use their real names on their profiles. While this is also often true in North America, I found it interesting that users made it a point to tell me that they didn’t use their real names. Also, very few of the Mixi users I spoke with said that they had ever interacted with people they did not know, the complete opposite of the behavior usually found on MySpace.

- Heavily mobile-based. Several users told me that text messaging updates actually facilitated participation as they were more comfortable writing than engaging in face-to-face conversations.

- Groups. Mixi has over 900,000 groups that users have created, which can in turn be sorted by date created or popularity. This simple sorting creates momentum for the Mixi groups, versus the static organization of groups on MySpace.

- Structure. Unlike MySpace, Mixi is highly structured with minimal ability to change the layout. The users I spoke with liked the structure, as it created certainty about how users were to interact with each other.

Update: Several users reminded me of a key feature -- the ability to see exactly who has viewed the page, allowing them to keep track of their social connections.

For additional background on Mixi, here are a couple of good resources: Metropolis Magazine’s article “In the Mix” a great, detailed overview of how social networking is used in Japan. Pete Cashmore at Mashable also gives a nice overview of Mixi while News.com has a quick overview article.   

Update: Newsweek also has a short write-up.

Listen up marketers: 24% of Gen Yers read blogs

We recently published a short piece, “Marketers: Keep A Keen Eye On Gen Yers” that looks at how these young adults (aged 18-26) use the Internet differently from their older brethren.

Here’s the short executive summary:

Gen Yers — 18- to 26-year-olds who came of age with broadband, cell phones, and iPods, among other things — stand apart from older generations because of their hands-on approach to the Web. Marketers trying to anticipate future consumer trends should tune in to Gen Yers. As these do-it-yourselfers become a primary consuming audience, they will carry with them their cross-channel shopping enthusiasm, active blog usage, and reliance on the information-scouring powers of Google.

One key data point that stood out for me: 24% of Gen Yers read blogs, which is twice as often as the 12% of Gen Xers (ages 27-40) and three times the 7% of Young Boomers (ages 41-50) that read blogs. So skeptics of blogs should suspend their disbelief and look to at least one bellweather demographic to get an idea of how widespread blog readership can potentially grow in the future.

So if you’re a marketer that targets Gen Yers, you should at a minimum be monitoring what your audience reads. Tools to monitor the blogosphere include paid services like Nielsen BuzzMetrics and WebSideStory’s HBX or do-it-yourself sites like Technorati. And an excellent “how-to” resource is this iMedia Connection article, “How to Measure Blog Influence”.

This then begs the question whether marketers should have a blog themselves to connect with blog readers. I usually answer with a qualified "yes", with the huge caveat that companies shouldn't have a blog just to have one. The better question to ask is whether you are interested in engaging in a different type of dialog that this generation seeks in its regular interactions -- one characterized by give and take and a culture of generosity. All too often, I talk with marketers who see blogs as yet another channel through which they can foist their existing marketing messages. So Gen Yer marketers, I encourage you to tap into the power of blogs but beware as this group can sniff insincerity out in a nanosecond.

Meet up in Seoul

I'm safely in Japan (Osaka to be precise) and am heading off to my first round of meetings today. I've been Skyping and connecting with no problems, which is a joy -- although I have to admit that I am having Blackberry withdrawl.

Some of you inquired if I will be going to South Korea and the good news is, yes!

I've arranged so that we can have a small gathering for lunch in Seoul on Friday, September 15th at 12pm, near the Grand Intercontinental Hotel. If you are interested in attending, please RSVP to me at cli@forrester.com and I'll send you the details.

Similar to the get-together in Tokyo, I'll have some short comments about my current research, but I'd also like to learn as much as possible from you about how social computing and search is used in South Korea.

So hope to see you there!

Meet up in Tokyo

I’ll be traveling to Tokyo in early September and I’d like to meet a few of my blog readers at a Forrester-hosted cocktail gatering in Tokyo. It will take place on Tuesday, September 12^th from 6-8pm near Forrester’s Tokyo office, which is near the Marunouchi Hotel.

This is my first time in Tokyo and I’m eager to learn more about how companies and consumers are using search, blogs, and social networking, and general media sites. I’ll be giving a short introduction of my current research on the different adoption rates of social computing by consumers, but most of the time will be spent in informal networking.

Also, Forrester is hiring analysts in Japan – there’s a current opening for a Telecom & Networks Analyst and more openings will be coming. So if you have ever been curious about what it would be like to work for Forrester, please let me know, or even better, come next Tuesday!

If you are interested in attending, please send an email to RSVP to Mako Kosuge at mkosuge@forrester.com as soon as possible as we have limited space available for attendees. Mako will send you specifics on the location in a confirmation email.