ImaginativePRO Blog

BLOOMBERG: FACEBOOK SHOULD WAIT UNTIL 2012 TO GO PUBLIC

Facebook Inc. will probably put off its initial public offering until 2012, giving Chief Executive Officer Mark Zuckerberg more time to gain users and boost sales, three people familiar with the matter said.

Facebook would benefit from another year of growth absent the added scrutiny that comes with a public listing, instead of holding an IPO in 2011 as investors speculated, said the people, who asked not to be identified because Facebook doesn’t discuss share-sale plans. Still, Zuckerberg, who holds board control, could push for a stock sale at any time, they said.

Waiting lets Zuckerberg, 26, hone the skills needed to steer a company that issues quarterly results while facing criticism on such matters as user privacy. Facebook, valued at $24.9 billion, would use the time to propel its user base beyond the 500 million mark reached this month and add to sales that two of the people said may double to at least $1.4 billion in 2010 from $700 million to $800 million last year.

“The burden of being public has never been greater,” said Kevin Landis, who manages about $260 million at Firsthand Funds in San Jose, California, and has invested in the technology industry for 16 years. “Zuckerberg doesn’t have to put his name at the bottom of four 10-Q statements every year and attest that everything in there is true or else he’s responsible. The minute it’s public, he does.” Landis doesn’t have direct knowledge of Facebook’s IPO plans.

Jonathan Thaw, a spokesman for Facebook, owner of the world’s largest social network, declined to comment. Zuckerberg, in a television interview this month, said Facebook will go public “when it makes sense,” without elaborating.

Pressure Allayed

Some investors had speculated a share sale might happen in 2011 after venture capitalist Jim Breyer, a member of Facebook’s board, said in January that the Palo Alto, California-based company isn’t focused on a 2010 sale. Instead, Facebook’s management is trying to woo more users and developers, Breyer said at the time.

Startups are often urged to sell shares by employees and investors eager for a return on their equity. In Facebook’s case, some of that pressure has been allayed by private sales, often facilitated by such exchanges as SecondMarket Inc. and SharesPost Inc., which help find buyers for startup shares.

SharesPost values Facebook at $24.9 billion, more than double its value in March.

Zuckerberg’s Challenges

Zuckerberg faces a range of challenges, including management of a rapidly growing workforce and rising competition from companies including Twitter Inc., the blogging service that has amassed more than 190 million monthly visitors.

Facebook is also contending with heightened regulatory scrutiny over how it handles users’ personal data. And it’s up against a lawsuit that contests company ownership. A New York man, Paul Ceglia, claimed in state court in June that he owns an 84 percent stake, based on an April 2003 contract. Facebook has said the lawsuit is “frivolous, if not outright fraudulent.”

“If they have other sources of capital, the company would probably be better off deferring an IPO until Zuckerberg had more experience under his belt,” said Ray Valdes, a San Jose, California-based analyst at Gartner Inc.

Facebook’s timetable may disappoint technology investors who speculated an IPO would encourage other startups to wade into the public markets. Venture-backed IPOs dwindled in the past 2 1/2 years as the financial crisis wiped out investment banks such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. and forced many hedge funds to close.

IPO Dearth

This year, 40 companies put off or have withdrawn IPOs in the U.S., according to Bloomberg data.

“The companies that went public in the second quarter had to have readjusted price expectations on average,” said Hans Swildens, founder of Industry Ventures LLC, a San Francisco-based investing firm that owns a Facebook stake. “The capital markets are swinging week by week. It’s a very hard time.”

Facebook, founded in 2004, now has about 1,400 employees. Investors include Accel Partners,Microsoft Corp. and Elevation Partners LP, the private-equity firm among whose founders are Bono and Roger McNamee. Besides Zuckerberg and Breyer, board members are Internet entrepreneur Marc Andreessen, money manager Peter Thiel of Founders Fund and Donald Graham, CEO of The Washington Post Co.

Zuckerberg holds board control, according to “The Facebook Effect,” a chronicle of the social network’s origins by David Kirkpatrick.

Silicon Valley ‘Watershed’

Elevation Partners has bought Facebook shares in private transactions that total $210 million, a person familiar with the matter said in June. Digital Sky Technologies, a Russian investor, has accumulated a stake of almost 10 percent, people familiar with the matter said in May.

Mutual fund managers and individual investors want their own chance to invest in Facebook’s growth, said Ted Hollifield, a partner at law firm Dorsey & Whitney LLP in Palo Alto.

“There’s definitely the market demand and appetite for a very successful IPO,” said Hollifield, who works with venture capital firms and startups. “Facebook’s IPO is going to be a huge watershed for the whole Valley.”

COMMENTARY:  It seems that there is no shortage of material about Facebook.  It comes in regularly now, like the electronic ticker for the New York Stock Exchange.  

I will stick my neck out again, and state that Facebook will go IPO sometime between 2010 and 2012. There, that gives me some breathing room, given my track record predicting IPO's  I didn't think Tesla Motors' IPO would be that successful, but I was proven wrong.  

SIMBOL MINING DEVELOPING COMMERCIAL PLANT FOR EXTRACTING LITHIUM FROM SALTON SEA GEOTHERMAL WELLS

Production of lithium, manganese and zinc battery chemicals

The local unemployment rate has hit 37 percent in recent years. The mummified remains of a murder victim were found in the area in March. Crystal meth is a cottage industry.  

But compared to Afghanistan or Bolivia, the Salton Sea just might prove to be an easier place to extract lithium for car batteries and consumer applications. And it's only two-and-a-half hours from San Diego.

Simbol Mining in approximately 18 months will open its first commercial plant and is in the process of trying to demonstrate that its technique for extracting lithium from geothermal wells can provide the metal to battery makers at a lower cost than conventional techniques.

"Lithium from Chile costs around $1,400 per metric ton now," says Josh Green, a partner at Mohr Davidow Ventures, the lead investor in Simbol. "We will be meaningfully below that."

Chilean lithium mining workers extracting raw lithium ore

Chile obtains lithium through evaporation in salt pans. Mineral lithium obtained through mining costs around $4,500 a metric ton.

If it works, Simbol could rocket to prominence. The company has discussed its technology before, but only in terms of prototypes and prospective plans. If all goes well, Simbol will come to market at around the same time that major manufacturers and battery suppliers will be laying out plans for a broader expansion of plants to meet demand for electric cars.  

Argentinian lithium extracted from brine by Salares Lithium/Talison, the world's largest producers of lithium

Lithium is only one component of a lithium-ion battery pack and the raw material is not necessarily the most expensive ingredient. Battery manufacturers have to invest billions into factories and electronics for controlling battery cells and power consumption.

Lithium, however, is the most volatile ingredient when it comes to pricing. Soaring demand has prompted some to claim that lithium shortages may emerge. While others have countered that -- as the third element on the periodic table -- lithium supplies are adequate, others note that lithium generally gets mined overseas. That means shortages, embargoes and price fluctuations are real concerns.

Relatively recent discoveries of the element in Afghanistan and Bolivia have in some ways made matters worse. The new strikes mean that supplies exist. But the chronic political instability of both nations creates fears that attempts to extract it will raise prices or put pressures on mines in safe nations.

Simbol sucks lithium carbonate out of the flow of water in geothermal wells. Water plunged into the geothermal wells comes back to the surface with 1) heat to create steam for a turbine and 2) traces of lithium from beneath the surface. Zinc, manganese and other elements can also be extracted (picture credit: Extreme Media Studies).

The concept is actually part of a larger greentech trend called resource recovery. Ostara Nutrient Recovery Technologies, one of the early leaders, has created a system that extracts phosphorous and ammonia from human sewage and converts it to a high-grade fertilizer it calls Crystal Green, which should not be confused with Crystal Light powdered drink mix. Companies like 212 Resources and Altela, meanwhile, mine oil from refinery sludge (see also: Eleven Great Things to Do With Sewage).

Five geothermal wells exist in the Salton Sea and there is potential for 50 more wells in the area. The first Simbol plant could be capable of generating millions of dollars' worth of lithium a year, Green said. The region as a whole could ultimately produce billions of dollars' worth of minerals.

The downside? Simbol's mining technique, developed at Lawrence Livermore National Labs, may only be applicable at the Salton Sea. The region has a lithium concentration of 200 parts per million or greater, he added. Although the complete extraction technique may not be transferable to other regions, some of the technology is applicable to lithium operations in Chile, Green noted.  

Simbol is one of two subterranean investments at MDV. It also put money into Laurus Energy, which has refined a technique developed in the old USSR to convert coal to gas underground. The technique drastically reduces particulate matter and greenhouse gas emissions by burning the coal in place: only natural gas comes to the surface.

"It's the champagne of fossil fuels," says MDV partner Erik Straser of natural gas.

Earlier this year, Laurus signed a deal with the Cook Inlet Region Inc., a Native American-owned corporation, to build a plant in Alaska.

COMMENTARY:  Simbol Mining is a very exciting company, possibly on the cusp of developing a new proocess for commercially extracting lithium from geothermal wells. As a youth, I lived near the Salton Sea, and it is hot, dusty and desolate.  It was a sort of dumping ground for used tires, auto bodies and old equipment.   

If Simbol Mining is successful in developing a commercially viable lithium extraction plant, that can produce commercial quality lithium at or below the existing cost for imported lithium, I see nothing but good things for the company as the demand for lithium batteries, particular for electric vehicles begins to take off.  The company's timing is excellent as the demand for electric vehicles begins to take off.   

Simbol Mining is definitely a company well worth watching.  My only regret is that I just heard about it.  I would've loved to be involved in assisting the company obtain its first seed capital.   I just looked at their webpage and am very impressed with the number of awards they have won for green technology innovation.  Quite impressive.     

Courtesy of an article dated August 10, 2008 appearing in GreenTechMedia

ZUCK GOES TO WASHINGTON TO DISCUSS PRIVACY CONCERNS ABOUT FACEBOOK WITH SENATOR'S

"Hey Tyler, you thinking the same thing I'm thinking? Yeah, Cameron, let's sue"

Facebook chief executive Mark Zuckerberg made his first trip to the Hill on Tuesday, meeting with Republican members of the Senate's high-tech task force and others to talk about Internet privacy and other tech issues.

Zuckerberg's private meetings came after a researcher released data on more than 100 million Facebook users, showing how easily it is to gather profile information about those users who are making their names, locations and e-mail addresses available to the public.

Federal regulators have become increasingly concerned about how data are being used and collected with no clear rules on protecting consumer privacy on the Web. Lawmakers have responded with proposed legislation to make that process more transparent and curb some of the practices of advertisers.

Facebook confirmed Zuckerberg's visit but didn't elaborate on the day of meetings.

"This is his first visit to the nation's capital in an official capacity and he looks forward to sharing our company's unique perspectives on 21st-century innovation, U.S. competitiveness, the economy and related issues with a range of interested parties," said spokesman Andrew Noyes.

Noyes declined to comment when asked whether Zuckerberg met with other lawmakers or regulators at the Federal Trade Commission or Federal Communications Commission.

Ron Bowes, a security researcher with Skull Security, said he collected profiles of Facebook users to show there is a "scary privacy issue" for users when their information is available to the public, according to his blog.

Facebook said it does not share its users' information with advertisers and that information collected by Bowes was already set as public by users.

COMMENTARY:  I think the trip to Washington, D.C. to meet with our nation's senator's will be a good thing for young Zuck.  He better get used to this.  Anytime your website has 500 million members, you will be on their bullseyes.   I assume that this is an invitation, and not a subpoena, which means he will probably not be sworn in.  Just to make sure, I am willing to bet he is taking his top lieutenants and legal team with him.  I hope that the Senate's they reveal videos or text of the proceedings.  It should make for some interesting reading.  Stay tuned.

VENTURE CAPITALISTS NOT SO ENTHUSIAST -- OH NO, WE MISSED THE EXIT!!

How confident are venture capitalists about the industry right now? It depends on whom you ask, and how you ask it.

Mark Cannice/University of San Francisco

The Silicon Valley Venture Capitalist Confidence Index

A small quarterly survey that checks the confidence meter of venture capitalists in Silicon Valley shows these investors lost some of their enthusiasm in the second quarter due to concerns over macroeconomic trends, unpredictable liquidity opportunities, and regulatory uncertainty specific to the venture industry.

As he does each quarter, Professor Mark Cannice of the University of San Francisco emailed Silicon Valley VCs in June and asked them to estimate their confidence in the San Francisco Bay Area entrepreneurial environment over the next six to 18 months. On a five-point scale, with five being the most confident, 32 VCs registered an average of 3.28. That’s lower than the first-quarter reading of 3.65 and ending five consecutive quarters of improvement.

So much for VCs getting their swagger back.

But wait, there’s another survey. This one, from executive-recruiting firm Polachi Inc., is much larger, polling more than 1,000 VCs nationwide. Among the survey’s six questions is, “Are you more confident about the state of the VC industry today than you were one year ago?” Fifty-six percent said yes.

As Polachi notes, that’s considerably better than in last year’s survey when 60% said no, even if that was during one of the worst years for venture investors on record.

No matter whether confidence is rising or not, venture capitalists have plenty to be worried about. According to the Polachi survey, the exit market is the top concern, followed by investor syndicate risk and their portfolios.

Cannice compiled comments from most of the VCs in the survey, asking them to clarify their confidence rating. One of the weightiest comments came from an anonymous investor who seems to have lost his confidence in everything: “Structural shifts in the venture business will constrain the availability of capital at a time when funds need cash. Several firms will collapse in the next 18 months. Add a bit of carry tax and corporate income tax rate increases and a soft Euro and US economy and you have a more difficult situation developing.”

Here are some select venture capitalist comments from Cannice’s survey (you’ll see a common theme):

Bob Ackerman, Allegis Capital: “While entrepreneurial activity continues apace, uncertainty around the broader funding and exit environments continue to place an on-going damper on new investment activity…Until either or both of these factors are addressed, capital investment in new ventures is likely to be moderate.”

Igor Sill, Geneva Venture Management: “Key to investment timing in start-ups is visibility in public market liquidity, and though we’ve seen a few IPOs, there appears to be little appetite for IPOs over the next 6-9 month period. Having said that, there are several outstanding, profitable and high growth private companies well prepared to go public when the public market window prevails. Optimistic employment metrics will go a long way in opening up the public markets for new tech offerings.”

Brian Panoff, Granite Ventures: “I think the fundamental value of innovative technology companies remains strong. In this type of economic environment, productivity gains through technology are more important than ever. My optimism is only tempered by instability in the capital markets and regulatory environments.”

Bill Byun, Samsung Ventures: “General deal flow is strong but the next few quarters will determine the enthusiasm, based mainly on market performance.”

Dan Lankford, Wavepoint Ventures: “The large tech companies have cash and are looking to fill their product pipelines, so we are starting to see some acquisitions. It would be helpful if the public equity markets could show some positive movement.”

THE STORY BEHIND THE SALE OF PLAYDOM TO DISNEY BY INVESTOR JEREMY LIEW

Walt Disney Co.’s $563 million deal to acquire two-year-old Playdom Inc. was the latest big exit in the hot social-gaming space, which is still relatively new considering Facebook launched its third-party platform only in May 2007. The deal follows Electronic Arts Inc.’s acquisition of Playdom rival Playfish Inc. for at least $300 million in November.

Playdom’s Sorority Life

We caught up with Jeremy Liew, a partner with Playdom investor Lightspeed Venture Partners, to talk about the Disney deal and what he sees happening in this game of musical chairs.

Q. Why was there so much interest in Playdom?
A. At the end of the day Zynga is not really viable, so who else is out there at the top of everybody’s list? Playdom. It’s generated a lot of interest from a lot of people. Disney stepped up.

Q. You mean Zynga—the largest player in the space and reported to be valued at upwards of $5 billion–is essentially too large now to be acquired? (Zynga is reported by The Wall Street Journal to be in talks with Google about a partnership for a new Google social network.)
[Zynga's] valuation is pretty high, which makes them a difficult company to acquire for a lot who would be interested. That’s not to say it’s not worth it–it’s an incredible company. It just means there’s not very many who could afford them.

Q. This was an extremely quick venture exit, even within consumer Internet. How did your firm make out in the deal?
A. Disney made an offer and made a really compelling offer and it was hard to refuse. It wasn’t like we sat around and said we’re going to sell the company. It was opportunistic. Disney wanted it a lot and made it clear it was a strategic thing for them. [For us], we made money and made money fast.

Q. With these big media and entertainment companies seeking to get in on social gaming, do you expect to see more consolidation in the industry?
A. Probably. Other media and gaming companies want to think about what their play is as well. This is a game of musical chairs and there’s probably more people than chairs. You’ll probably see more (consolidation) in this space–big companies but also smaller companies as well, for team and talent, not just scale and revenue.

Q. So despite the strength of “the big three”–Zynga, Playdom and Playfish–there’s still opportunity for start-ups and investors in social gaming?
A. There will continue to be a lot of interest in this space. There’s plenty of interesting companies–though not Zynga-scale. There’s Rockyou, which is one of our portfolio companies. There’s Crowdstar (the fourth-largest social game developer on Facebook), Watercooler, Slide. They’re all out there building games for this market.

Q. What attracted you to Playdom when you made the investment, way back in October?
A. Its real focus on revenue and business model from early on is part of what attracted me. And it was a scrappy and bootstrapped business. Then when John Pleasants (former chief operating officer at Electronic Arts Inc.) joined the company he really took the business to a whole new step upwards.

I’ve known him since we worked at CitySearch 15 years ago. He’s terrific and really scaled up the business. He’s built up a lot more in terms of studios internationally and acquisitions. He’s set up the company strategically to really be a force to increase its scale and scope.

Game designer Jon Radoff designed this astonishing "A Brief History of Social Games: 3100 BC - 2010 AD".

Click HERE to enlarge.

COMMENTARY:  Interesting story and I am not surprised to hear that Zynga is now worth an estimated $5 billion.  It's private, so nobody really knows for sure.  VC's have been pouring capital into Zynga, and the social game producer has not failed.  They cast a giant shadow over the entire social game space with big titles like Farmville and Mafia Wars.

Courtesy of an article dated July 28, 2010 appearing in The Wall Street Journal's Venture Capital Dispatch

WHARTON: CUSTOMERS ACQUIRED THROUGH WORD-OF-MOUTH ARE 16% MORE PROFITABLE

"Did you hear about PBT Consulting, that Tommy Toy really knows his stuff"

While marketers have long believed that customers acquired through word-of-mouth referrals are more valuable, a new study from Wharton University has even put a number on it: WOM clients are about 16% more profitable than those generated by conventional advertising.

These customers initially generated a higher profitability than others with the same demographics. And while that difference eroded over a three-year period, they remained more loyal -- a trait that did not degrade with time. Combined, that resulted in a 16% difference. "In the short run, these word-of-mouth clients are more valuable because of higher margins," Christophe Van den Bulte, a professor of marketing at the Wharton School* at the University of Pennsylvania and one of the authors, tells Marketing Daily. "And in the long run, they are more valuable because there is less churn."

The study looked at about 10,000 customers of a large German bank over several years, with about half coming from a WOM program, which paid existing customers about $30 for each referral, and half coming from such conventional ad methods as direct mail. "We wanted to see how well these referral programs turn social capital into economic capital," he says. "But we also wanted to measure how effective they were -- this was the first study of its kind to assess the financial impact of these programs."

That's good news for marketers right now, he says, as they continue to become more skeptical of the impact of traditional media, and are increasingly relying on social and viral methods. "With very basic analysis, marketers can see exactly how much they spend on referral programs, and how much they get in return," he says.

Referrals work so well because the person making the recommendation acts as a matchmaker, in effect screening potential customers on behalf of the service or product. But there is also the benefit of emotional attachment. "It is easier for people to remain with a dental practice or a bank or even a law firm because you know other people who are there, too," he says.

"It's the idea that friends of my friends are also my friends, which is why we think these customers are more loyal. It's different than online message boards, for example, where you are essentially relying on the kindness of strangers."

WOM tends to be less effective for products or services that have many search attributes, where people can go online to compare prices, interest rates, or product features. "But for those that are experience intensive -- what kind of cell phone reception people in your area get from a certain carrier, for instance -- you do want to talk to people you know."

Van den Bulte says that preference for using acquaintances over experts is increasingly applicable in such industries as pharmaceuticals. "The effectiveness of sales calls has been eroding, so pharma companies have been targeting opinion leaders. But they are discovering many doctors don't want to hear what national experts think -- they want to hear from doctors with practices and patients similar to their own. That experience is more compelling than what experts say."

But like any relatively new media, WOM's effectiveness may be short-lived. Recently, Cone, a Boston-based cause related agency, released new data showing that while 77% of American consumers say they are more likely to buy a product or service recommended by someone they know, they are also taking those recommendations with a bigger hunk of salt than they used to: 81% go online to verify those recommendations before actually making a purchase.

"That's why it's important for marketers to think of the power of WOM not just to generate customers, but to perform other functions, like generating customer excitement, retention and even maintenance," Van den Bulte says.

One of his favorite examples is a colleague who participates in ALS fundraisers, riding a tandem bicycle with his wife all over the world to raise money for research: "His enthusiasm makes me much more likely to be involved. A direct mail campaign or sassy ads could never do that."

COMMENTARY:  It's really important to understand that Word-of-mouth or WOM is not advertising per se, but the end result of social interaction.  It is a form of person-to-person advertising.   First off, you must have a good product or service.  No exceptions.  Secondly, you must have a group of fairly loyal evangelists.   These loyalists serve as your spokespeople, spreading the word about your product or service.  

The power of WOM is exponential, because ten loyalists will tell ten of their friends, and those ten will tell ten others, and so forth.  Individuals are more likely to consider or purchase a product if they receive the information or recommendation from a close friend or associate.  When WOM is effective, a brand can create incremental increases in sales and brand loyalty, so this is the power of WOM.  A bad product or service can also create negative WOM, so the process works in reverse, destroying a brand's loyalty and severely tarnish its image, and hence negatively impacting sales.  Examples: Toyota and BP.  

There are several ways to create WOM:  1) identify your best customers and make them feel important, 2) offering existing customer loyalists with rewards, merchandise or discounts to talk about your product to their friends, 3) engage and interact regularly with your customers, 4) ask your customers to try your product, especially an improved version of the product, 5) provide quality service and treat your customers with respect.   The best WOM is initiated organically, without the need to directly solicit your customers to spread the word about your product.  Some great examples of organic WOM include: Apple, HP, Facebook, Twitter and others.

Courtesy of an article dated July 28, 2010 appearing in MedaPost Publications Marketing Daily

SECOND LIFE GROWS IN SPITE OF THE GREAT RECESSION

Second Life is a great case study in social media trends. First came the huge wave of hype in 2005-2006, when every marketer and his mother felt compelled to get into the pioneering virtual world created by Linden Labs, which was touted as the future of online virtual interaction. Then came the backlash, as self-identified "original" users bemoaned the influx of newbies and corporate brands, with some even engaging in acts of virtual terrorism. And then came the anticlimax: growth slowed dramatically, many newbies and marketers lost interest, and Second Life slipped from the headlines.

Bosomy avatar figure with master sargent tattoo on right arm  

Long-haired Captain Jack's avatar figure with tattooed arms and funky doo

Second Life social gathering of avatars

A montage of Gen-Y avatar chicks no doubt

Last month it was back

 in the news, but for all the wrong reasons, when Linden laid off 30% of its workforce to consolidate operations in North America. This spurred speculation that the end of the (virtual) world was nigh, all firmly denied by the company's bosses, who said Second Life is doing just fine, thanks. And while it's hard to know what the future holds, Second Life does indeed appear to be surviving -- even thriving. In fact, this may be the most instructive part of the social media story arc, because (like the World of Warcraft) it's an example of an online social network reaching equilibrium, or "maturing."

Social media watchers tend to focus obsessively on the number of users, and there's no question that Second Life appears to have leveled off over the last year or so. From two million in 2005, the total number of members soared to 18 million this year, but only a small fraction of these are active users. Zooming in on active users, defined as those who log in several times a month to spend at least one hour on the site, the numbers increased from about 25,000 in 2005 to roughly 700,000 in 2009-2010. In 2010 there have been peaks and valleys (with the number of active users ranging from 680,000 in February to 820,000 in April) but that still puts it in the 700,000-750,000 range -- stable, maybe even growing a little bit.

Long story short: after five years it's clear that Second Life won't be competing with Facebook, which recently crossed the 500 million mark. But I would argue that the number of active users is only half the story. The other half of the story is what those users are doing, how much time they spend doing it, and let's not forget about money, money, money -- how much are they spending online, and how much is Linden making?

Second Life's relatively small user base logs an impressive number of hours on the site, and the total amount of time continues to increase. From 2008-2009 the number of active users increased 16% from 600,000 to 700,000, while the total number of hours logged increased 20% from 400 million to 480 million. In the second quarter of 2010 the total time spent increased 33% over the second quarter of 2009, to 126 million hours. Active users spend an average of 100 minutes on the site during each visit, and some of these people are crazy, with reports of hardcore users spending 12 hours a day or more in-world. According to the company, users create about 600 million words in text messages and other content every day.

Then there's the money: Sales of virtual goods continue to increase at a remarkable pace, making Second Life one of the largest markets for virtual goods next to Zynga games like Farmville and Mafia Wars. Total dollars spent on virtual goods in Second Life increased steadily from $30 million in 2005 to $344 million in 2008, then jumped again to $567 million in 2009, and so far they are up about 30% year-over-year in 2010, putting the site on course for over $700 million. Not all of this goes into Linden's pockets, of course: several analysts pegged Linden's 2009 revenues at $80 million-$100 million, based on user fees, subscriptions, and land sales. I don't know how much Linden spends on server costs for Second Life, so it's hard to know if they're turning a profit (maybe not, which would explain the layoffs).

But regardless of Linden's profitability, all this is important because it suggests that the Second Life user base, while relatively small, is committed and heavily engaged with the site. Turning from Second Life to the larger marketplace, I think this is an important fact for marketers to bear in mind as they deal with the continuing -- indeed, accelerating -- proliferation of social media. Because reach and scale aren't everything, especially online, where the audience is highly fragmented and likely to fragment further. In this arena a small, highly-engaged niche audience may be more valuable than a large, apparently indifferent one (Facebook, I'm looking in your direction).

COMMENTARY:  I used to be a fairly active Second Life member named Turk Xeno.  I had some pics of me as a raccoon, fire breathing dragon, dog, frog, Arabian shiek (my favorite), disco dancer, security guard, commando, young college student, dude on a motorcycle, and I would go invisible from time-to-time and spook people.  

I had a great time on Second Life, but after about two years, got burned out and then the recession hit.  Virtual businesses went out-of-business just like they do in the real world.  Houses went up for sale, but nobody would buy them.  Sound familiar.  Discos, strip joints, whore houses and bars were empty.  Even the Amsterdam Red Light District was barren.  

Second Life had a number of technical problems, and on some days you could not login, sometimes you were stuck in a part of Second Life and could not "transport" yourself to another part of Second Life.  On many days there never seemed to be enough bandwidth, and you would be logged out, then have to log back in.  I used to login late at night, and then the international crowd would be online.  I haven't been a member for about a year and a half, so don't now if they ever fixed it.  Another problem, you regularly had to download their software updates to avoid having technical problems.  I believe they have fixed that by using a browser interface.    

I have been covering Second Life on and off, and it's pretty hard to put a fix on whether they are making money, but I suspect that it is somewhere in the neighborhood of $150-$200 million, but the costs to run Second Life are very high, and I suspect their profits took a big hit in 2009-2010, which is why they laidoff 30% of their staff.  It is mostly an international crowd on Second Life, with the U.S. representing 30% of the total members, but that could've changed.  Lots of Brazilians, Europeans and Asians, which made it fun to communicate.    

Courtesy of an article dated July 29, 2010 appearing in MediaPost Publications The Social Graf

RUMOR: GOOGLE IS DEVELOPING A "FACEBOOK KILLER"

It's those Google guys again:  CEO Eric Schmidt, co-founders Larry Page and Sergey Brin doing their best to "do no evil"

Rumors that Google is quietly developing a Facebook killer, dubbed "Google Me," have been circulating for about a month. Now, sources tell The Wall Street Journal that the search giant is in talks with makers of "popular online games" to create "a broader social-networking service that could compete with Facebook." 

"By this point everyone and their mother knows that Google is trying to create a Facebook-type social networking service," writes TechCrunch. "It's been confirmed by Quora's Adam D' Angelo, given an ETA by a source internal to Google, and a name, 'Google Me' by [Digg.com founder] Kevin Rose." 

As Search Engine Land points out, "There were reports two weeks ago that Google has invested $100 million-plus in Zynga, makers of the uber-popular Farmville game." According to The Journal, game developers -- including Playdom, Electronic Arts' Playfish, and Zynga -- could serve to flesh out a new service Google is already building. 

Rather than face Facebook head on, "Google seems to have settled on a strategy to assemble the pieces of a social offering," Daily Finance suggests. "Google Music is another big one on the horizon -- hoping it can string them together later. Google already has powerful email, IM, and Web-based sharing products. If it can build up its entertainment offerings, it may be able to piece together a challenge to Facebook." 

Asked about Facebook, Google head Eric Schmidt tells The Journal: "The world doesn't need a copy of the same thing." 

"Duh," counters Social Beat. "Of course, Google will have to differentiate what it does, and it will likely do so by recruiting people for its social network through every Google property, from search to Gmail." 

While still unconfirmed, The Journal explains, "Google's push into social games represents the latest attempt by the Web-search leader to capture users and advertising dollars that are increasingly flowing to social networking, an area dominated by Facebook, Twitter Inc. and others." As ZDNet notes: "Social networking sites such as Facebook and Twitter have the one thing that advertisers love most -- eyeballs."

COMMENTARY:   I just posted a RIM BlackBerry Bold 9800 rumor, so let's do another.  Don't you just like rumor posts?  

Seriously, Google has this grand strategy of becoming everything.  They re into smartphones, alternative energy, mobile ad networks, browsers, venture capital, mapping, digitized books, desktop apps, patent searches, etc.  When will this mashup end?  

Larry and Sergey have started this Google culture, that allows all their engineers to "moonlight" and seek new lifeforms, "where no man has gone before".   

That is innovative thinking and entrepreneurial, bit highly disorganized.  There is no central mission.  At least Apple co-founder Steve Jobs has a grand plan.  It's called the "digital hub" and he has executed it masterfully.  Anything tied into digital media, communications and entertainment is fair game and the iPod, iPhone, iPad, iMac, itunes, Apple Store, apps, prove he has a grand plan.

Meanwhile over at Facebook, Zuck has received another subpoena from somebody claiming he cheated them.   500 million members and growing.  Folks, the social networking wars is over, and Facebook won.

Courtesy of an article dated July 28, 2010 appearing in MediaPost Publications Around The Net   

RUMOR: RIM GETTING READY TO 'OFFICIALLY' ANNOUNCE THEIR NEW BLACKBERRY BOLD 9800 SMARTPHONE

RIM is rumored to be releasing its hottest handset, the BlackBerry Bold 9800 at an event with AT&T next week. It's destined to be an AT&T-exclusive, which is also chiming with some media noise about the Bold 9800 being RIM's "iPhone killer."

RIM's BlackBerry Bold 9800

Reuters is reporting a group of cell phone industry analysts are strongly hinting the Bold 9800 will launch at the upcoming RIM press event next Tuesday August 3rd in the morning, Eastern Standard Time. According to these informed folk, the timing is critical, and the sooner "they are going to say it is going to be available, the better," as the market appears primed for excellent sales. It's no coincidence that Apple's iPhone 4 launched just a few weeks ago, either.

Chinese BlackBerry Bold 9800 clone

What do we know about the 9800? It's the first device that'll be running RIM's new flavor of OS, BlackBerry 6 (bringing a faster webkit browser and new, sleeker look and feel to the UI, which has been looking clunky and old-fashioned compared to its Apple and Android rivals), and it will be similar to some previous incarnations of the BlackBerry, with a large touchscreen that slides vertically to reveal a physical keypad. Amusingly enough, given the fact that a big-shot news agency like Reuters is calling it a serious rival to the iPhone, there's some discussion online that a leaked demonstration video of the 9800 reveals that it may suffer from a similar "death grip" antenna effect like that reported to affect the iPhone 4.

Will Apple be nervous? Probably not. The iPhone has revolutionized the smartphone market, and the newest unit has been selling like hotcakes, despite the press furor around the phone's potential antenna performance issues. It's also been grabbing increasing numbers of business users (and even more so with the iPad), which is RIM's traditional stomping-ground--to such an extent that RIM's even been forced to appeal more and more to the consumer market. The 9800 is not an "iPhone killer," sorry Reuters.

Still, the market price of RIM's shares bumped up slightly today on the news, and the phone will certainly find good sales among BlackBerry enthusiasts, and consumers who are shy of Apple--assuming the 9800 hits the shelves at the right price (though its leaked off-contractretail price of $700 isn't very promising in this regard). The phone will debut on AT&T before hitting Canada and Europe later in the year.

COMMENTARY:  Research in Motion, that's a name for you.  Just doesn't fit with reality.  RIM better get going and announce the release date, start a media and PR blitz and plug a special promotion to their existing BlackBerry owners, because the company needs a huge shot in the arm.  The company is old-fashioned and slow to innovate to the touchscreen technology of the iPhone and Android-based smartphones.  

I have been very critical of RIM, because both the Apple iPhone and Android phones are pecking away at its market share, which recently declined drastically (see previous post) and which a recent survey showed that as many as 40% of BlackBerry users polled were thinking or planning on switching to the iPhone.  Not good news for RIM.

The new BlackBerry Bold 988 design reminds me a lot of the Palm Pre which unfortunately never got any attraction in the marketplace.  HP bought out Palm earlier this year just for the operating system.  Does this mean HP will be coming out with a mobile device of their own?  A new iPhone or iPad "killer"?

If there is going to be an iPhone killer it will be from Android OS smartphones, which recently surpassed the Apple iPhone in unit sales during the month of May 2010.  Finally, Apple is getting some competition.  I never thought Google could do it, but Schmidt, Larry and Sergey have proven everybody wrong, although their Nexus One smartphone went down in flames.  

If there ever is an opportunity to grab a piece of the smartphone market and stop the iPhone's momentum, it is now.  Apple recently took a huge PR hit when Consumer Reports refused to pass the new Apple iPhone 4 because of their antenna reception problem.  Jobs called it "a total crap", and gave any iPhone owner with a reception problem an instant "fix" -- a new bumper.  I hope that decision does not come back to haunt Jobs, because they have sold over 3 million iPhone 4's and a total recall would cost $1.5 billion according to some estimates.

The fact that there is already a Chinese knock-off of the rumored Blackberry Bold 9800, does not surprise me.  They already have one for the Iphone 3, and before long, an iPhone 4 knockoff will be on the streets.  I love those Chinese knockoff artists.

Courtesy of an article dated July 28, 2010 appearing in Fast Company 

NOAA WARNS MANKIND TO GET READY FOR A WARMING WORLD

The National Oceanic and Atmospheric Administration's just-released 2009 State of the Climate report bears few surprises for those who follow climate science--the past decade was the warmest on record, and the Earth has slowly been heating up for the past 50 years.

TEPCO:  Chart depicting rising CO2 levels starting 1990 and projected through 2030

The difference between this and every other climate report, however, is that NOAA gathered research from 300 scientists in 48 countries to produce a compelling document that covers every aspect of our planet's climate. The report is, according to NOAA, the first to bring together "multiple observational records from the top of the atmosphere to the depths of the ocean."

CCN:  Global map depicting rising temperatures  -- temps (red) highest among industrialized nations

NOAA's report uses 10 features to measure global temperature changes. Seven of the features (air temperature over land, sea-surface temperature, air temperature over oceans, sea level, ocean heat, humidity, and tropospheric temperature in the "active-weather" layer of the atmosphere) are rising significantly, while three (Arctic sea ice, glaciers, and spring snow cover in the Northern hemisphere) are declining.

"Hey, Mr. NOAA Man its hotter than a summer in Lubbock, let's end this global warm meet, falling behind on my golfing." 

It's a fairly discouraging situation, according to the NOAA:

The report emphasizes that human society has developed for thousands of years under one climatic state, and now a new set of climatic conditions are taking shape. These conditions are consistently warmer, and some areas are likely to see more extreme events like severe drought, torrential rain and violent storms.

Does this mean we should seriously start considering geoengineering? Maybe, but it's just as important to focus on mitigating the consequences of the coming set of climatic conditions. A combination of geoengineering and solid preparation for a warming world may be the best solution (if it can be called a solution) that we have available.

COMMENTARY:  Not withstanding my political humor, global warming is upon us.  To deny that global warming is reaching an irreversible stage affects the very existence of mankind and every living creature on earth.  This should be a concern to everybody regardless of political affiliation, rich or poor,  developed or underdeveloped.  We need to get to work.

Courtesy of an article dated July 28, 2010 appearing in Fast Company