I just read on Aydin’s blog that vkontakte.ru, a Russian Facebook clone, has reached #34 on Alexa rankings.  I think this is very interesting.

I see Facebook as a game-changing company.  My hypothesis on social networks following the Facebook model are in a race against time.  Some have great early leads in that race, such a StudiVZ, but Facebook is a natural monopoly and will eventually attain the global social graph.

vkontakte.ru may be the case to disprove my theory.  It is a relative newcomer, i.e. Facebook had opened up its email address restrictions by the time vkontakte had achieved critical mass.  Yet, it continues to accelerate its growth.

Through my experience with Mondus.net, I am a first-hand witness to how social networks grow.  I will continue watching vkontakte.ru.  This may really be a strong evidence that it’s the seed populations that determine growth patterns in social networks, making it extremely difficult to foresee or plan.  Or, it may be proof that Russia is an extraordinary market, supported by the fact that, as Aydin points out:

Russia is the country in Europe with the lowest market share for Google at 32%
(versus Portugal’s 94%) and its top 3 sites are all homegrown: Yandex,
Mail.ru and Rambler. Facebook might find itself fighting an equally
uphill battle in this important BRIC internet market.

That’s a likely question to come up when one hears the news of AOL paying $850m to buy Bebo with its 40m uses.

However, it’s a wrong question.  Facebook and Bebo are not apples to apples.

Bebo is, by all means, a success.  It successfully attacked international markets before Facebook was interested in them and before MySpace focused.  However, at its core, Bebo is a media company.

I have been proposing that social networks have diverged into two paths.  One is the media path.  Led by MySpace (with its Entertainment company DNA), the media approach sees the users of a social network as an audience and is focused on creating and distributing content, usually sourced economically, to that audience.  Others here include Bebo, Netlog, and Friendster.

The other path, with much fewer followers, is the one Facebook leads.  It’s the technology path.  (Orkut has the right DNA to play here but Google could not make that happen).  This model goes after the social graph, and the win is an infrastructure win:  Adding an identity layer to the internet.  The stakes are much higher.  The players have to think of themselves as technology companies.  Facebook is a technology company.

That’s why the Bebo – Facebook comparison is the wrong one.  Bebo priced its audience at $20-25/user.  I would imagine, MySpace would price its audience around $50/user, getting a market leader premium.  These are still big valuation bets on future monetization of the attention of these users.

Bebo must agree with me on some version of this thinking, otherwise it would not have settled on the audience pricing.

Two days ago I posted about a list Jason created on money saving tips for start-ups.  His #11 is:

Fire people who are not workaholics. don’t love their work… come on folks, this is startup life, it’s not a game. don’t work at a startup if you’re not into it–go work at the post office or stabucks if you’re not into it you want balance in your life. For realz.

Jason has been getting quite a bit of fire on this particular tip (as he frequently does as a provocative blogger).  I think I understand where Jason’s coming from and I think his revisions above gets to the heart of his point more precisely.

In any case, David from 37signals has a great response to the comment about working with workaholics, making one rethink the definition of workaholism.  How much of it has to do with passion, how much of it is brought on by other (usually unhealthy) reasons?

I never thought of myself as a workaholic.  There have been times where I put in large amounts of time to the work at hand, but I have to say, the moment work ceased to be enjoyable, every minute I had to dedicate to it was painful.

Here are David’s five reasons to fire workaholics:

1. Workaholics may well say that they
   enjoy those 14 hour days week after week, but despite their claims,
   working like that all month, all the time is not going to be
   sustainable. When the burnout crash comes, and it will, it’ll hit all
   the harder and according to Murphy at the least convenient time.
2. People who are workaholics are likely
   to attempt to fix problems by throwing sheer hours at the problem. If
   you’re dealing with people working with anything creatively that’s a
   deadbeat way to get great work done.
3. People who always work late makes the
   people who don’t feel inadequate for merely working reasonable hours.
   That’ll lead to guilt, misery, and poor morale. Worse, it’ll lead to
   ass-in-seat mentality where people will “stay late” out of obligation,
   but not really be productive.
4. If all you do is work, your value
   judgements are unlikely to be sound. Making good calls on “is it worth
   it?” is absolutely critical to great work. Missing out on life in
   general to put more hours in at the office screams “misguided values”.
5. Working with interesting people is more interesting than just
   working. If all you got going for your life is work, work, work, the
   good team-gelling lunches are going to be some pretty boring straight
   shop talk. Yawn. I’d much rather hear more about your whittling
   project, your last trek, how your garden is doing, or when you’ll get
   your flight certificate.

Jason Calacanis has a great list on some easy tips for start-ups to save costs.  I agree with most of the points.  In fact, we followed basically the same rules at SelectMinds in New York, and at Mondus in Istanbul.  In Istanbul the list varies a bit and it’s difficult to cut some corners.

For convenience, here’s Jason’s full list below.  The post is worth a visit since there are more good tips in the comments.

1. Buy Macintosh computers, save money on an IT department
2. Buy
   second monitors for everyone, they will save at least 30 minutes a day,
   which is 100 hours a year… which is at least $2,000 a year…. which
   is $6,000 over three years. A second monitor cost $300-500 depending on
   which one you get. That means you’re getting 10-20x return on your
   investment… and you’ve got a happy team member.
3. Buy
   everyone lunch four days a week and establish a no-meetings policy.
   Going out for food or ording in takes at least 20-60 minutes more than
   walking up to the buffet and eating. If you do meetings over lunch you
   also save that time. So, 30 minutes a day across say four days a week
   is two hours a week… which is 100 hours a year. You get the idea.
4. Buy cheap tables and expensive chairs.
   Tables are a complete rip off. We buy stainless steel restaurant tables
   that are $100 and $600 Areon chairs. Total cost per workstation? $700.
   Compare that to buying a $500-$1,500 cube/designer workstation. The
   chair is the only thing that matters… invest in it.
5. Don’t
   buy a phone system. No one will use it. No one at Mahalo has a desk
   phone except the admin folks. Everyone else is on IRC, chat, and their
   cell phone. Everyone has a cell phone, folks would rather get calls on
   it, and 99% of communication is NOT on the phone. Savings? At least
   $500 a year per person… 50 people over three years? $75-100k
6. Rent
   out your extra space. Many folks have extra space in their office. If
   you rent 5-10 desks for $500 each you can cut your burn $2,500 to
   $5,000 a month, or $30-60,000 a year. That’s big money.
7. Outsource accounting and HR—such a no brainer.
8. Don’t buy everyone Microsoft Office–it’s too much money. Put Office on three or four common computers and use Google Docs.
9. Use Google hosted email. $50 or free per user…. how can you beat that?!?! Why screw with an exchange server!?!?
10. Buy
    your hardest working folks computers for home. If you have folks who
    are willing to work an extra hour a day a week you should get them a
    computer for home. Once you get to three hours of work a week from home
    you’re at 150 hours a year and that’s a no brainer. Invest in equipment
    *if* the person is a workaholic.
11. Fire people who are not workaholics. don’t love their work… come on folks, this is startup life, it’s not a game. don’t work at a startup if you’re not into it–go work at the post office or stabucks if you’re not into it you want balance in your life. For realz.
12. Get
    an expensive, automatic espresso machine at the office. Going to
    starbucks twice a day cost $4 each time, but more importantly it costs
    20 minutes. Buy a $3-5,000 Jura industrial,
    get the good beans, and supply the coffee room with soy, low fat, etc.
    50 people making one trip a day is 20 hours of wasted time for the
    company, and $150 in coffee costs for the employees. Makes no sense.
13. Stock the fridge with sodas—same drill as above.
14. Allow
    folks to work off hours. Commuting sucks and is a waste of time for
    everyone. Let folks start at 6am or 11am and you’ll cut their commute
    in half (at least in LA).
15. Go to each of your vendors
    every 6-9 months and ask for 10-30% off. If half of them say yes you’ll
    save 5-15% on fixed costs. People will give you a discount if they
    think they are going to lose the business.
16. Don’t waste money on recruiters. Get inside of linkedin and Facebook and start looking for people–it works better anyway.
17. Really
    think about if you need that $15,000 a month PR firm. Perhaps you can
    get a PR consultant to work on 2-3 projects a year for $10-15k each and
    save 75%. More PR firms are wasted half the year while you build up
    your product anyway.
    …
18. Outsource
    to middle America: There are tons of brilliant people living between
    San Francisco, Los Angeles, and New York who don’t live in a $4,000 one
    bedroom apartment and pay $8 to dry clean a shirt–hire them!

Emre Sokullu, the founder of Grou.ps and ReadWriteWeb blogger, has recently posted some insightful commentary on the Turkish internet market and some recent developments.  I don’t agree with parts of his post, namely his point on LinkedIn, but it’s definitely worth reading if you follow the Turkish internet market.

Facebook has been re-writing a lot of rules over the last few months.  In one, they have redefined growth for an internet company in Turkey.  Now we have a new benchmark:

Facebook has 2.8m users living in Turkey.

That is up from virtually zero 6 months ago.

In comparison, Yonja, the largest Turkish social network, reports (on its home page) about 5 million registered members.  Yonja got there in 4 years, and Facebook in 6 months.

Now, in both cases we can talk about duplicate accounts, etc., but that’s all noise.  The signal, however, is clear.

BTW, Facebook is now live with its crowd-sourced Spanish translation.  French and German are next.  Watch out Skyrock and StudiVZ.

Like many, I have had an eye on Yahoo stock for a while.  Having bought and sold it around $30 a few times, the weakness of the last few months made it look appetizing.  I never got around to buying any.

So, I can relate to Microsoft.  The opportunity to fortify its web arsenal against Google is attractive.  It’s also a  very sensible area to spend the tons of cash the company has sitting around.  Wall Street would approve, as well.  All around, it seems like a pragmatic move.

However, I don’t think it can succeed.  M&A transaction, like organ transplants, have some compatibility requirements.  Microsoft and Yahoo are inherently very different companies.  I think they can manage to combine reasonably well, but the resulting entity will still not have what it will take to cacth Google.

What has kept Google the winner in the web game is its DNA.  Google was born on the web, grew by respecting the web ethos and, now, as a large company, has largely managed (I understand the credit goes to Brin and Page) to make sure its critical moves are guided by its web DNA.  Even though its revenues are largely from advertising, Google remains a technology company.  It creates technology and pushes it out to the edge, where value is created.  (Facebook is another example of a company that appears to do this very well.)

Yahoo, although it was also born on the web, has evolved into a Media company, presumably because of Terry Semel’s sensibilities.  It was never a technology company.  It has media DNA.  Media is an IP sector.  It’s about protecting and monetizing your IP.  Value is generated at the core.

Microsoft has strong technology DNA but it never managed to become a web company.  It is a software company at heart and software is a sector driven by IP monetization.  Furthermore, Microsoft is a  company with aggressive tendencies (which the web sector has labeled "evil") and, has become tremendously successful by creating technology, keeping it at the center and protecting and monetizing it very aggressively.  The value is created at the core.

Value at the edge versus the core.  This is the key difference between Google and its competitors.

I don’t think you can change a company’s DNA.  And a company with software DNA buying a company with media DNA will not be able to beat Google in the web game.

So what do you do?

For me, the best advice comes from Henry Blodget.  To summarize:
 

• Microsoft and Yahoo combine their Internet forces and assets in a stand-alone company called "Yahoo"
• Microsoft
  will trade its Internet division and $10-$15 billion in cash for 51% of
  the combined company’s stock (resulting in an overall valuation similar
  to Microsoft’s $45 billion offer). 50/50 would make sense, but Steve
  won’t agree unless he has control, and Steve holds more cards.
• Microsoft will control a majority of the board.
• The
  new board will immediately decide on the combined company’s management
  team, and that team will immediately take control of the company. Not
  in early 2009. Now.
• Steve will be chairman of both boards.

…

• Stand-alone company will be free to do whatever is necessary to
  maximize the value of its own business, without having to worry about
  whether this hurts Microsoft’s core business.
• Stand-alone
  company can grant stock options and hire and retain top talent who
  don’t want to hitch their wagons to Windows and Office, be employees
  number 79,862 and 79,863, and work for Microsoft.
• Stand-alone
  company will avoid the bureaucratic nightmare of having to fight for
  resources from a senior team who are also worried about fate of
  Windows, Office, Xbox, etc.
• Stand-alone company won’t have to
  compete with IBM, Oracle, Software-as-a-service vendors, Sony, Apple,
  and Research in Motion in addition to Google.
• Stand-alone company will have a massive war chest and will be able to compete with Google for acquisitions.

Good thinking from Blodget but I can not imagine this happening.

Much of the DNA and "edge vs. core" thinking in this post has been cultivated through via Umair’s writing, who thinks the deal is a horrible idea and:

…that this is the end of Yahoo as we know it. Fine – the real Yahoo, sadly, suffocated a long time ago.

The
real point is: this is the end of Microsoft as we know it. Yes, I know,
finally, isn’t it nice, etc – more to the point: the endgame will be to
leave Google more firmly in the driver’s seat than ever before.

For me, GOOG just became a big "buy" at $515.

Xing has finally moved to acquire Cember.net, the only online professional networking platform in Turkey. Given Xing’s previous moves in Spain, this is perfectly in line with the company’s expansion model.  The company has announced that the deal cost €4.36m.

Fast-growing Xing, a competitor to U.S.-based LinkedIn,
said it would pay 4.4 million euros ($6.4 million) in stages
for cember.net.
   

"Xing is driving forward its course of consolidation in
Europe," it said in a statement, after it bought Spanish rivals
Neurona and eConozco in the last year.

The Hamburg-based company, an early social networking
company to go public in 2006, had 4.25 million members at
end-September and offers services in 16 languages.

The €15/member price tag for the acquisiton shows that there’s still a bit of a discount for Turkish internet properties.  Xing is trading at about €45/ member.

Cember.net started out heavily inspired by Xing (which used to be OpenBC), and the founder team of Çağlar and Nihan Çolak Erol have executed their plan flawlessly.  Congratulations to the team!

On the heels of the news that there’s a massive value destruction wave coming into Turkish music with TTNetMuzik.com, here’s a great post from Seth Godin, on what the music industry should be thinking about.

While I agree with Seth on pretty much all points, I think the music business, in fact all sectors facing digitization, needs to digest a massive change in mindset: They have been profiting from an artificial friction creating high marginal costs for scale.  With digital content, that friction has disappeared.  It will continue to erode on other areas with artificial friction.

The music business has to understand Seth’s rule 0:

The new thing is never as good as the old thing, at least right now.
Soon,
the new thing will be better than the old thing will be. But if you
wait until then, it’s going to be too late.  Feel free to wax nostalgic
about the old thing, but don’t fool yourself into believing it’s going
to be here forever. It won’t.