Places is Facebook’s Biggest Bet to Date

Facebook looks bulletproof.  It crushed its early competition, shrugged off privacy missteps and created a billion dollar platform within just a few years.  Built not on the backs of techie early adopters but of college kids, Facebook was quick to demonstrate its global, mass appeal.

And its appeal has held steady.  While young techies sneer at Aol and Yahoo!, they’re still on Facebook.  Sure, you see the errant “as soon as my Mom friended me it was over” comment but those users are outliers.  While it remains an industry maxim that the mighty will fall, there has been no viable challenger and no real test of Facebook’s dominance.

Until now.   Facebook’s launch of Places is without question its riskiest move to date.   Why?

For starters, by challenging Foursquare Facebook has chosen to take on a focused, scrappy underdog.   A different fight than their battle with Google where even being a challenger could be counted as a win,  this fight will say a lot about how nimble an organization Facebook – just a couple years out of start-up mode itself – remains.  Facebook has already gone from pulling in Google talent to shedding key engineers on a regular basis.  A loss to Foursquare will speed the trend, lessening their ability to attract top engineering talent.

Another important consideration:   over the last 16 months Foursquare has found two million users willing to replicate (some would say refine) their social graphs.  While they did this with the help of Facebook’s API they didn’t rely on Facebook as a distribution channel (unlike Zynga).   It’s widely perceived that Facebook users can’t be bothered to recreate their social graphs and that these “switching costs” make user-acquisition too difficult for competing services.  A win by Foursquare – heck, even survival – while in direct competition with Facebook will call that assumption into question.  The “if Foursquare could do it” bullet point will factor into countless strategic decisions.

Finally, a loss will show that Facebook does, in fact, have limitations.  It took a number of years and countless failed products before the community realized that Google was not unstoppable on all fronts.  Right now Facebook is seen to have the potential to win at everything – display, search, even video – that it has taken “the internet from Google”.   It’s worth noting that a Location Based Service like Places isn’t the same as, say, Google dabbling in Wave.  It’s a pretty organic extension of Facebook’s social networking foundation.  A Places loss, particularly in tandem with a Foursquare win in LBS, won’t be the end of Facebook but it will show it to be far more vulnerable than is presently assumed.

To be sure, Mark Zuckerberg is betting on none of the above.  Last night’s high-profile announcement showed supreme confidence as did his decision not to acquire Foursquare.  Facebook has gone “all-in” with Places – it’s a big bet and their success or failure with it will dramatically impact the industry.

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Did an Early API Launch Help Foursquare Outpace Gowalla?

Early adopters have seen this before — friend invites from “normals” pouring in (Facebook, 2008), big brands arriving (Twitter, 2009) and servers failing as a team struggles to scale (Twitter, 2006–2010) — yes, Foursquare is blowing up and even going mass.  Given the explosion of smartphones, a “location-based service” taking off is hardly surprising.   What has made Foursquare’s ascent noteworthy, even suspenseful, has been its race with Gowalla.  The competition between the two has been well-covered in the tech media and deservedly so:  though one is in New York and the other in Austin they do pretty much the same thing and launched around the same time – it appeared to be an even match.  Now however, Foursquare appears to be pulling away – fourteen or so months after launch, it has attracted 2 Million users while Gowalla has only 340,000.  Although it may be too soon to declare a winner, it isn’t too early to look at why this is happening.  While there are many differences worth examining, a recent visit to the Foursquare app store has made me wonder if Foursquare’s early release of its API has given them a meaningful boost.

For those unfamiliar, APIs (Application Programming Interfaces) allow outside developers to quickly build additional services using the data and functionality of an OS, application or website.  Sometimes the APIs carry a cost to use though often they’re free of charge.  For a new site, releasing APIs enables what Caterina Fake, co-founder of Flickr, called “BizDev 2.0” – a fast, mostly lawyer-free way to turn a service into a platform.  When building an audience any network effects help and while the focus is often on users attracting other users, APIs provide their own value.  API development can spread awareness to new users, increase engagement with additional functionality and yield entirely new use cases.  Those are pretty distinct competitive advantages and ones that a startup should obviously embrace.  In the case of Foursquare vs. Gowalla, Foursquare did it first.

Foursquare officially launched their API in November 2009 (after having already worked with developers to launch ten apps) three months before Gowalla launched theirs.  On the face of it this first-mover advantage appears to have paid off handsomely – while Gowalla has yet to publish a list of apps, Foursquare now lists 42 apps in their app store including games, check-in enhancements, clients and a service that allows users to track venues by gender ratio.  Although it doesn’t yet appear that any of the apps have been widely embraced, like, say, Tweetdeck for Twitter, behind all them are API-evangelists.  The developers are out there promoting their work, explaining Foursquare to their moms and generally rooting on Foursquare’s success. While the developers might eventually work with both APIs, being first to feed the hunger for location data has most certainly helped Foursquare capture developer attention to the detriment of Gowalla – these influencers had signed onto Foursquare before Gowalla even fielded a team.  In a quick sprint for supremacy this advantage may have been the deciding factor.

There are, of course, some unanswered questions:  Exactly how much incremental usage has the API generated and are the network effects of all of these apps just a blip compared to, say, the larger social graphs (to say nothing of the more frequent boozing) of New Yorkers vs. Hill Country Texans?  Can Gowalla catch up or overtake Foursquare through an even more-aggressive approach to their API or, for that matter, through some other means?  Answering these questions, asking more and getting a fix on an API ROI will yield considerable benefits for internet entrepreneurs.  We’re watching in real-time as the market determines a winner in Location Based Services – a likely b-school case study in the making – and following closely as these companies maneuver will be incredibly informative for start-ups in any category.

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What Would I Do if I Were the NYC Chief Digital Officer?

The greatest city in the world is hiring a Chief Digital Officer!  Katherine Oliver, head of NYC Media and part of the search, calls NYC an “urban digital sandbox” and I couldn’t agree more – with the city already opening up data, a Mayor who knows a thing or two about media/technology and an incredibly innovative tech scene there’s so much opportunity that unquestionably the toughest part of the job would be prioritizing.  As a New Yorker and a nerd I just can’t resist a bit of shoot-from-the-hip ideation and good old-fashioned nitpicking – here are five quick thoughts:

1.  Create a New York City app store.  This could include both the city’s own apps (like 311) but also ones produced by third parties such as the apps that came out of NYC Big Apps, those using public data like Sense Networks’ Cabsense and any others that may be useful to residents and visitors alike.  The city could consider a certification program that distinguishes between NYC-produced, made-in-NYC and endorsed-by-NYC.  Great opportunity to pioneer how municipal apps are presented and could be a scalable model for Apple/Android/etc.

2.  NYC Fitness Leaderboard. Why wait for the marathon?  We New Yorkers walk circles around most other cities every day and many of us increasingly track our weight/steps/health through connected technology.  The city could partner with Fitbit, Withings, Garmin and Nike+ to create a (summer-long?) challenge to get New Yorkers up and out there and on the record.  Mayor Bloomberg can challenge other cities to see if they can keep up!

3.  Foursquare. Sure, it’s blindingly obvious but from what I’ve seen no other city is officially using it yet and there’s so much to do.  And if they refuse to partner Mayor Bloomberg can award Dennis and Naveen a “jury duty” badge…

4.  Wholesale Facebook Fix.  For starters, why is some guy named Christian Belland using http://www.facebook.com/Newyorkcity?  Some NYC departments are already doing a great job on the platform – go Education!  go Parks!  go DoITT! – but overall there are some big misses.  In addition to Mr. Belland’s namesquatting there is also a New York City listing whose “founded” info is “First Settled by Euros in 1624″ and which lists NYC’s products as “Taxis, greek coffee cups”(sic).  Sure, the coffee cup line is a good one and maybe most of the 496,486 fans realize that it’s unofficial but perhaps there ought to be an official and comprehensive counterbalance.  Facebook is a bit of a glaring omission on the Stay Connected section of NYC.gov site (which includes Twitter, YouTube and Flickr) so hopefully this is in the works.

5.  Twitter Best Practices. I really enjoy the 311NYC tweets but I like their list of who they follow even more – it serves as an index to all of the city’s Twitter accounts.  It’s a model that should be followed on the rest of the city’s Twitter pages and in the “Favorite Pages” section of all NYC Facebook pages.

Without question I’m merely scratching the surface here – simply opening the city’s data will likely be a decade-long process – but doing that and extending the city’s digital reach with other innovations will yield incredible value for the city’s businesses, residents, visitors and for the government itself.  As a New Yorker I can hardly wait.

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Nine Reasons Why The Video Biz Isn’t Totally Toast

Many tech types assume that video is doomed to follow music into the no-longer-making-money-from-content-better-go-on-tour-and-sell-t-shirts industry, apparently thinking that piracy and new distribution channels will so devalue the product that it will be nearly impossible to monetize.  Bill Gurley posted a few weeks back a long-necessary 101 on affiliate fees that clearly illustrated a rather robust value chain that wasn’t going to be upended by new distribution anytime soon but the story is much bigger than those fundamental economics.  While we are without question in the early stages of some degree of “creative destruction” of the existing video business there are several, actually fairly diverse, reasons why video isn’t screwed.  Somewhat in a particular order:

1.  I won’t watch my favorite movie as many times as I listen to my favorite song. Yes, I know: obvious use case differentiation here.  But it’s worth remembering that the time spent jumping through whatever increasingly sophisticated hoops are necessary to download a video illegally isn’t going to be amortized nearly as well as the average illegal song download.

2.  The labels didn’t control the pipes but the video suppliers do. That difference, and the attendant ability to monitor and moderate traffic on those pipes, puts MSOs in a wholly different position. It’s one thing to empty out a store when the night watchman is asleep and quite another when the owner is standing at the entrance with a loaded gun.  Fan of net neutrality?  So am I but I wouldn’t be surprised if the price of a deal on net neutrality legislation were to involve some kind of exception specifically targeting infringing traffic.

3.  Apple would prefer that content owners get paid. First, they built iTunes into an incredible machine for getting users to pay for content.  Then, by barring Flash they’ve kept multitudes of free content off of the 100MM iOS devices sold thus far.  And now, just hours ago, Steve Jobs made it clear:  in Google’s (ad-supported) world content owners suffer, in Apple’s (premium world) they prosper. This is by no means the end of free content but it’s a seismic shift and clearly strategic for Apple.

4.  Bandwidth caps. Practically speaking, AT&T’s move away from all-you-can-eat bandwidth impacted only one type of content:  video.  Look for revenue-sharing, unmetered deals to be cut between the carriers and the sports leagues/networks/studios to keep the consumer sell simple.  Will there be unmetered tiers for torrents?  Hmm, uh, no.  The Pirate Bay should probably not sit around waiting on a call from AT&T BD…

5.  Video ads are the most effective ads of all time and we’re used to seeing them. Beyond affiliate, rental and download rev you can actually make money off of ads too?  Damn, I’m beginning to think I should get out the camera…

6.  Video has release windows and users are used to them. This alone isn’t enough to save either TV or Movies but it’s worth pointing out that music was largely binary: it was available and you had it in your collection or you didn’t.  Video users can typically rely on a timeline of availability with diminishing costs of viewership/ownership as the content ages.  Even if these windows continue to conflate it provides a better environment for steering users into legitimate channels.  Live events, of course, continue to exist on their own plane.

7.  Long before digital, music had a “mixed tape” culture. It’s a subtle thing but music users didn’t need to be trained to “steal”, many were already doing it.

8.  Music artists are heroes to their fans, movie studios are not. You expect Les Grossman to sue you; he will sue you and he’ll enjoy it.  Contrast that to all the hand-wringing about musicians having to sue their fans.

9.  There are already loads of options out there for legal video. Will they deter everyone?  No, but they’ll deter many.

So, what did I forget?  I’ll hold off on a discussion on the OTT space for another post but will close with what I think is pretty instructive, Steve Burke from Comcast doesn’t actually think they’re competing with Google TV: “It’s likely to be more devices, more things in more devices, but at the end of the day, it’s clearly in a program company’s interests to have a cable company or a satellite company or a telephone company paying them affiliate fees for their programming…”

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The Future of Music

Back in January I attended Sam Lessin’s fantastic futurists meetup where he brings in guests to speculate on the impact the next 30 years will have business/life/etc.  In January his subject was The Future of Music and his guest was Lyor Cohen whose track record as a music exec is simply amazing – a true pioneer.  You know you’ve been to a good meetup when you leave with lots of ideas (or as I’m beginning to think of them “blog fodder”) and this was a great one.

I was surprised to find that what actually excited me most wasn’t thinking about the evolving business models (I usually love to nerd out on that stuff) but rather thinking about how the lives of frustrated musicians and dedicated music lovers will be different from mine.  Perhaps this shouldn’t have been too surprising – I was a piano lesson flunkie with a weak ear and questionable sense of rhythm.  I looked on enviously while friends in high school played in bands while I mastered hanging out in record stores. Further, the meetup happened on the heels of a Christmas where our three year-old son Jake had requested a “rockin’ guitar” and where I also splurged on Beatles Rock Band.  Ultimately this all left me pondering how music 30 years from now will look different in a few areas.  Here are my questions, what do you think?

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Simple Advice for Youngins Pt. 1: Your Media Career = Frogger

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My BBQ Guide for SXSW and Austin

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Almost done…

Years in the making…from the same people who brought you http://twitter.com/jpmarcum…for the first time the full story can be told….

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