Now that we are beginning to digest what Open Social is, the natural question on everyone’s mind is what Facebook’s move will be.

Google’s launch strategy was smart to paint Facebook as the dominant incumbent.  I think a smart move at this stage for Facebook could be to decide to play in the Open Social game.

Fun to watch…

I am trying to understand Open Social.  So far, the most useful commentary has fome from Marc Andreessen in these two posts.  Ning is obviously a key supporter of the project but to me, it looks like Open Social somewhat makes Ning redundant.

I will probably understand more as the platform is launched and we see more examples of applications.

Maybe I am losing my abstract comprehension ability :).

It’s the meme that won’t go away!

I’ve said it before, and I’ll go on the record again:  It is not a bubble until the investing public gets involved!

Josh Kopelman has an amusing post on the topic today.  He notes:

We live our lives by routines.  In January, we all make resolutions
for the new year.  In November, we give thanks for the bounty of the
harvest at Thanksgiving.  And for those in the tech industry, in
October we go to the Web 2.0 Conference and try to outdo each other
with our declarations of "Bubble 2.0".

I have been trying hard not to use the phrase "social graph", and replace it with "social network", but it has been difficult as "social network" now describes the websites that help you manage your social graph.

It’s clear that the best such application is Facebook.  At least, it was the first encarnation of Facebook.  More on that to come.

And now that Facebook is a platform, questions about what sort of a platform it is spring to mind.  For me, there have been two persistent questions, and today two friends of mine posted about them, making my job easier.

First, Baris looks at the economics of Facebook apps and comments:

The #1 app, Top Friends has 2.8M active daily users.  Can’t easily tell
how many monetizable pageviews they get per user per day, but even at
this massive usage, it’s hard to see them making more than $1000/day.
That’s $360K/year, again not bad, but not a slam dunk.

So, we know popularity <> earnings, and so far, popularity is the only success metric.  With these apps spreading, Facebook seems to be the only one who wins. Add to this that most of these are apps that spread when Facebook did not limit the number of invites you can send to your friends to 10/day.  To build a freestanding Facebook app doesn’t seem to make sense.  Baris is hinting at the next generation of apps that squeeze additional value out of the social graph, and that may be interesting.

Second, Aydin points out the changing demographics of Facebook:

• Between ’06 and ’07 the proportion of 18 to 24 year olds on Facebook went down from 35% to 25%
• Between ’06 and ’07 the proportion of 35 year old plus segment on Facebook went up from 35% to 46%

Facebook has been used a certain way by its first gen inhabitants, who were defined by certain characteristics (see danah boyd’s excellent study on this).  They were what made Facebook very very different.  The next wave (post-September 06) flocked because of these differences. We will see if they change Facebook.  My bet is that they will.

Emre Sokullu, the founder of Grou.ps had developed a collaborative utility, UnDisposable, to keep his userbase records clean in Grou.ps.  It has now grown powerful enough to be used by Facebook, among others, to filter disposable email addresses.

It’s a great example of how the power of masses and good will can be aggregated to create a useful tool.  Congratulations, Emre.

So it looks like Facebook’s hit the $10b mark earlier than many people’s predictions.  There was much talk of a $10b+ IPO in 2008 or 2009, but the rumored MSFT move makes that look like an impossibly modest target.

Let me go on the record:  At $10b, Facebook is still a good deal for Microsoft.

Take a look at these numbers from Inside Facebook:

• Facebook now has more than 42 million active users (double the
  number one year ago when it opened up registration and growing at more
  than 200,000 per day since January)
• More than half of Facebook users are outside of college (85 percent of US college students still use Facebook)
• More than half of active users return daily (users spend an average of 20 minutes on the site per day)
  
• Facebook is the top photo sharing application on the Web
• There are more than 6 million active user groups on the site
• More than 80% of Facebook members have used at least one application built on the Facebook Platform

The price is $250 per active user.  This is an audience belonging to the weathiest segment in the world, wiy 100% YoY growth. At 20 minutes a day, you have unprecedented attention.  Plus you know who they know and talk to.  At least $20m of those users, share with you more than you they share with Google.  So, you also have intention information.

If the buyer will not know how to generate cash from this trove of potential revenues, it will be due to their own incompetence.

I presume MSFT will try to get some options for enlarging their stake in their deal.  Facebook has been a tough negotiator, but if they do, I’ll bet that those options will get exercised.

Finally, Barış is talking about the largest venture deals ever:

1  Chorum Technologies Richardson, TX Communications & Networks: Fiberoptic Equipment & Photonics Out of Business
2  CoSine Communications Redwood City, CA Communications & Networks: Connectivity Products Publicly-held
3  Internet Brands El Segundo, CA Media/Content/Info.: Media, Content & Information  In IPO Registration
4  Tellium Oceanport, NJ Communications & Networks: Fiberoptic Equipment & Photonics Publicly-held
5  TradeOut.com Valhalla, NY Cons/Bus Services: Business Services (Not Financial) Out of Business
6  Zhone Technologies Oakland, CA Communications & Networks: Connectivity Products Acquired/Merged

If we count this prospective Facebook deal a venture deal (I am not sure I would – I think there’s much less growth capital needs, and much more strategic direction involved), it easily tops this list. Interestingly, 4 of the 6 deals above are infrastructure deals.  I have always seen Facebook as a true technology company – one that is installing a social infrastructure over the pipes of the internet.

This is really interesting to watch.

There’s a new acquisiton in the Turkish internet industry – IMSG has acquired Zap Medya for approximately $13m (probably after an earnout).  The announcement also discloses that Zap had 2006 revenues of $12m and pre-tax earnings of $2m.

Zap is an interesting company that it has somewhat cornered the dysfunctional online advertising industry.  I presume that the bulk of the $12m revenues is actually media billings of its customers and, if true, it points to the enormous cuts the middlemen have in the Turkish online advertising market, given the very high net margin indicated by the earnings figure.  One has to wonder how sustainable the current model is, given that the media buying agencies, which previously have outsourced their online work to Zap, have started launching their own online companies and departments.

The acquisition is good news for Turkish internet sector, as more and more international players are taking notice of the opportunities here.  Congratulations to the Zap team.

PS. I am going through a much slower blogging period, largely due to a new baby. 🙂

UPDATE: Bulent Boytorun, Zap’s CEO sent me a message with some corrections, as well as some clarifications on the transaction and Zap’s business.  Here are the hightlights:

…the figures that were disclosed were not properly announced. The 2 m is
a figure forecast for 2007 at an expected turnover of around 20 m USD,
and Zap’s sole income is not the media billings [but also from our creative and content management services].
…
Not a majority of our profits are generated from our creative & content management services, but it is still quite sizable.
…
It is the usual practice to have about 10 % media commission on online
media billings throughout the world, since the budgets are much smaller
than those on TV or newspapers and the work involved is quite
extensive. However, especially big networks add to this commission
their adserving costs -which may be between 5 to 50 cents per CPM- as
well as additional creative and analysis charges or even extra charges
for strategic planning.

Here at Zap, we provide all these services free of charge
(including at many cases the whole creative work if it is in connection
with a sizable campaign) and all is included in the commission we
charge.

Congratulations to Anne, Blue and the rest of the team at SelectMinds.  They have just announced a Series A round by Bessemer Venture Partners.

SelectMinds has been clear the leader in parts of the enterprise social networking market.  The challenge will now be to expand the product offering to own what is still a fairly open area.

My bet would be that they will.

I have been contending that there is no Web 2.0 bubble, until I heard the news:

Classmates filed for a $125m IPO

Now I am scared.  Classmates is as far from Facebook as it can get on the internet, and yet is looking to cash in on the buzz around the entire social networking market.  This is how a bubble gets created – by public market fund-raising that resembles pump-n-dump operations.  Om agrees.