AOL Sells Bebo: What a Screw Up

In a massive case of “what were they thinking” AOL bought social networking site Bebo for $850 million; and in a case of “what are they thinking now,” the company has sold it, reportedly, for around $10 million to a hedge fund: Criterion Capital Partners.

It was stupid for AOL to pay that much in the first place and maybe naive to think that it could take on Facebook. But now, on the other end, it’s probably misguided to get rid of the site for that little.

I don’t know what the headcount and other costs associated with Bebo are. But Facebook’s privacy flap has created an opening for others to exploit. Alternatively the site could be reinvented and/or the platform could be used in various ways (a la Yahoo-Facebook) across AOL properties perhaps.

Bebo could reposition as a media-sharing site for parents or families as Multiply has tried to do. Or it could be reinvented as a mobile service. The point is there are probably several ways, now that AOL wrote off its value, to use Bebo.

I doubt the hedge fund will do much with the site. A year or so from now they’ll flip it or be compelled to shutter it entirely.

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Harris Data on the ‘What’ & ‘Why’ of Social Media

Earlier this week pollster Harris published some interesting data from a consumer survey conducted in April (n=2,131) about social media attitudes and motivations:

[N]early two-thirds (64%) of online Americans use social media, and most social media users (84%) reveal information about themselves via social media channels.

Among the findings is also a discussion of the influence of reviews and their various sources (click to enlarge graphics).

While 84% of social media users are providing tweets and updates, more than 20% are discussing brands and products or generating reviews. The following charts show the relative influence of reviews by content source and by age group:

The hierarchy of review influence is:

1. Friends & family
2. Reviews from newspapers or magazines (experts/professional/editorial)
3. One’s broader network
4. Blogs/message boards
5. Celebrity “reviews” (most influential on the 18-34 yr old group)

Do You Trust Your Social Network?

Obviously the Facebook privacy row caused lots of people to discuss the question of trust on social media sites. One research firm (Vision Critical) conducted a survey of “4,000 randomly-selected adults in the US, UK and Canada” on the question of trust, privacy and social networks. The results came out at the beginning of last month.

There are a number of findings about trust and consumer attitudes toward various media categories. Here’s the relevant “slide” regarding the perceived trustworthiness of social networks:

You can click the image above to enlarge it. What it says is the following (the numbers vary by country but are generally consistent across the board):

• I am very concerned about my privacy on online social networks: a majority said yes
• I worry that online social networks are selling my personal information to advertisers: a slight majority said yes
• I don’t mind online social networks using my personal preferences to target ads I see because it means they’ll be more relevant: only 20% to 25% said “yes” to this idea.

Quit Facebook day was largely a failure, with only 35K joining (out of more than 500 million members globally):

Let’s assume the survey results above are somewhat representative of the larger population of Facebook members. The failure of more of them to quit may reflect ambivalence about the site: people don’t want to leave the party but they may be acting in a more cautious and circumspect way regarding what they’re doing and sharing.

Has your behavior or have your attitudes about posting/sharing on Facebook changed at all in the wake of the recent Open Graph/Social Plug-ins privacy controversy?

Disney Selling Toy Story Tix on Facebook

As the NYT is reporting, Disney has begun to sell movie tickets on Facebook for the upcoming Toy Story 3:

It points toward all sorts of commerce that might take place on Facebook.

I’ve long believed that Facebook is ideally positioned as a “social shopping” platform. But this is just the beginning of transactions on the social network, which could eventually become a significant source of revenue for Facebook in addition to advertising.

Facebook’s Coming Q&A Service & Local

There are a range of “Q&A” services in the market: Yahoo! Answers, kgb, ChaCha, Quora, Aardvark (Google) and several others. Yellow Pages Group (Canada) and SuperMedia offer variations on this idea in the yellow pages segment.

Now Facebook is about to launch a Q&A service and it’s taking “applications” for beta testers:

We at Facebook are preparing to launch a brand new product to the world. We think it will be as exciting as Facebook Photos and Facebook Events, but we need your help to make it great.

As a beta tester, your job will be to ask great questions and provide great answers about your favorite topics. Economics? Skydiving? Relationships? Mexican Restaurants? It’s up to you. You’ll be the first person outside of Facebook to use this product. Your expert writing will be seen by tens of millions of people — including job recruiters. And we’ll bring our best beta testers out to California to tour Facebook headquarters and meet the team.

The intent is to tap Facebook’s massive global user base for answers to a range of questions that are very broad in scope:

We don’t know exactly how the service will operate, but it has clear local/LBS potential. Many people today ask questions of their networks on Facebook: “Does anybody know a great X?”

A structured, searchable service that provides responses in near real time could become a very potent way to get (local) information and recommendations. Could is the operative word here, until we see how it works.

There are a number ways in which Facebook is poised to become a real force in local for both consumers and small businesses marketers. This is just one.

Apple & Google Battle for ‘The Master Screen’

And now for the battle of the living room . . . blah, blah, blah.

However, the report from Engadget today that Apple TV 2.0 (or 2.5) would be more connected to the iPhoneOS, run apps, have new features/content and, most importantly, be super cheap ($99) is pretty interesting:

A tip we’ve received — which has been confirmed by a source very close to Apple — details the outlook for the next version of the Apple TV, and it’s a doozy. According to our sources, this project has been in the works long before Google announced its TV solution, and it ties much more closely into Apple’s mobile offerings.

The new architecture of the device will be based directly on the iPhone 4, meaning it will get the same internals, down to that A4 CPU and a limited amount of flash storage — 16GB to be exact — though it will be capable of full 1080p HD (!). The device is said to be quite small with a scarce amount of ports (only the power socket and video out), and has been described to some as “an iPhone without a screen.” Are you ready for the real shocker? According to our sources, the price-point for the device will be $99. One more time — a hundred bucks.

It’s the price point that’s the most compelling part of this.

In a long post at SEL I tried to second guess and predict what the price of the Google TV Logitech box would be. I came in at under $300 (probably $200 – $250). If in fact Engadget is correct and we see a $99 Apple TV box it’s going to force a corresponding price reduction or adjustment from Logitech and/or any other Google TV hardware partners (though not Sony). It’s very much like the smartphone market: you can’t hope to sell a subsidized smartphone in the US for more than $199 these days.

I was at a UBS conference earlier this week where a speaker argued that TV was now irrelevant because of the cloud and all the other screens we use for content. I quite disagree.

The living room (or family room) TV is arguably the “master screen.” And it’s going to morph into a multipurpose media center that includes Internet access, phone/video chat, social media, transactions, local search, apps, games and so on.

Things like yellow pages search on AT&T’s U-Verse or the “Visual 411″ widget for Verizon FIOS TV are going to seem very primitive by comparison to what’s coming.

Indeed, it’s time to prepare for the coming of “Internet TV” in earnest.

Unsolicited Social Media Advice for Y!

I just got off the phone with someone talking about Yahoo! and social media, and that triggered some thoughts.

Yahoo! has been involved with social media for a long time. Yahoo! Groups and Answers are two early examples. There are also Flickr and Delicious and MyWeb (shuttered). And Yahoo! Local was one of the most “robust” user-generated local review sites in the pre-Yelp era. There was also the “smart in-box” Y! Mail strategy.

Yahoo! has thus enjoyed successes as well as failures and, in my view, seen some spectacular missed opportunities.

For example, back in 2006 I suggested that Yahoo! buy a blogging platform like WordPress or Six Apart. The company offered the relatively awkward Yahoo! 360 at the time. That service was subsequently shut down. And there are other examples of Yahoo! services shuttered before their time or insufficiently supported and emphasized (Yahoo! Fire Eagle is one of those, Neighbors is another).

Putting aside the rumored attempt to buy Foursquare, Yahoo! is planning on building out its social media assets further and reportedly going to be rolling out some new things in the coming months.

I think one potential acquisition the company should consider is Multiply. Originally a social network with a rich set of tools and capabilities, the site has become primarily a media sharing and storage site for adults/parents. Kind of an anti-Facebook, it would be a solid asset that Yahoo! could use and integrate with Flickr — and Shine, as well as other properties, I suspect.

Multiply has raised about $27 million in funding and could be acquired probably for under $100 million. Clicker is another company that Yahoo! should take a close look at because it’s social and cross-platform. And in some ways it’s a model of what Yahoo!’s social media strategy should be: a useful tool or content site, with community integrated into its fabric. RedBeacon would be yet another one. But direct involvement with lead-gen might not be where Yahoo! wants to go with its local strategy.

If Yahoo! hadn’t backed away somewhat from Shopping I’d also argue the site ought to get deeper into social shopping — a place where it was an early pioneer with the now dead Yahoo! Shoposphere. This sort of thing appeals to women in particular and is a very fertile area for promotions and advertising.

I’ll add one more: Yahoo! should look very seriously at the just-launched local coupon aggregator DealMap from Center’d. CEO Jennifer Dulski was GM of Local, as well as occupying other roles at Yahoo! before she left. She’d probably be ambivalent about going back but it would be a great asset for Yahoo! both in Shopping and Local.

Finally, in addition to any new acquisitions or product offerings, the company needs to exploit its existing assets. That includes renewed attention to Local (extending into mobile) and better exploitation of Answers in mobile.

Related: Yahoo! announced the acquisition of Associated Content. Below is the press release:

Yahoo! to Acquire Associated Content

Extending Leadership in Content With the Addition of 380,000 Contributors

SUNNYVALE, Calif.–(BUSINESS WIRE)–Yahoo! Inc. (NASDAQ: YHOO) today announced it has signed a definitive agreement to acquire Associated Content Inc. This strategic move extends Yahoo’s ability to provide high quality, personally relevant content for the benefit of more than 600 million users as well as tens of thousands of advertisers. As Yahoo! enhances its social, mobile, local, and media offerings, the acquisition of Associated Content reinforces the company’s longstanding promise to offer the best of the Web — by combining Associated Content’s approximately 380,000 contributors who provide rich and varied content on a broad array of passion points, with Yahoo’s leadership in partnering with established content brands and the award-winning team of editors and experts from Yahoo!.

“Combining our world-class editorial team with Associated Content’s makes this a game-changer,” said Carol Bartz, CEO, Yahoo! Inc. “Together, we’ll create more content around what we know our users care about, and open up new and creative avenues for advertisers to engage with consumers across our network. These are important aspects of building engaging consumer experiences on Yahoo!, and one of the reasons why we’re one of the most visited destinations online.”

“The Associated Content team and our 380,000 contributors are looking forward to joining Yahoo! and to the opportunities that being part of a global Internet brand presents,” said Luke Beatty, Associated Content founder and president. “Combining our crowd sourced content with Yahoo!’s distribution, world class editorial team and online marketing leadership will accelerate our growth as we continue to leverage our best-of-breed platform to deliver high quality compelling content on more than 60,000 topics.”

For advertisers, this deal will expand Yahoo! into more topic areas and real-time content generation. The combination promises to offer advertisers even more opportunities to engage groups of passionate consumers in ways they will find uniquely appealing to their interests and tastes. Having insight into user intent through its leading search products enables Yahoo! to identify topics important to advertisers and users. Yahoo! plans to use Associated Content to create content around those topics and leverage Associated Content to contribute content to existing media properties. Associated Content also provides more opportunities for Yahoo! to partner and collaborate with publishers who can help the company shape the tremendous variety of content coming in, into something bespoke and even more engaging.

While current Associated Content content is U.S.-centric, Yahoo! expects to scale the platform globally.

Associated Content was founded by Luke Beatty in Denver, Colorado, in 2004. Associated Content receives more than 16 million unique users per month (comScore) and the editorial staff reviews more than 50,000 pieces of content per month, including articles, images, audio and video.

Yahoo! expects to complete this acquisition in the third quarter of 2010. Financial terms were not disclosed.

Facebook Beats Yahoo in Q1 Display

A significant milestone, reported by the WSJ:

In the first quarter, Facebook pulled ahead of Yahoo for the first time and delivered more banner ads to its U.S. users than any other Web publisher, according to market-research firm comScore Inc.

Overall, Facebook.com served 176.3 billion display ads on its website over the first three months of 2010, or 16.2% of the total, said comScore. Yahoo served 131.6 billion banner ads to Yahoo users, and Microsoft served 60.2 billion, according to comScore. The data don’t include ads that Yahoo and Microsoft delivered to other Web sites through their networks, a major source of revenue for each.

By revenue, Facebook has a long way to go to catch up to its more established rivals. The social-networking site earned more than $500 million in revenue in 2009 and is forecasting revenue of more than $1 billion in 2010, according to people familiar with the matter. Yahoo earned $6.5 billion in revenue in 2009, mostly from advertising.

Obviously there’s enormous potential with SMBs on Facebook as well. It’s another possible distribution point for local ad networks too. Just take PaperG’s automated display ad creation tool for SMBs and distribute on Facebook — voila.

When location kicks in we should see some really interesting new ads/campaigns on Facebook. Along those lines . . . the company, I predict, will also become a mobile ad network (or its equivalent) in the not-too-distant future.

Facebook Poised to Enter LBS Game

At the F8 Facebook developer event many people expected the company to announce its long-awaited location feature. It didn’t happen. But, according to AdAge, location is imminent for Facebook and marketers are already on board:

Facebook is preparing to launch location-based status updates for its users. But the social network is also planning to offer it to marketers, including McDonald’s.

As early as this month, the social-networking site will give users the ability to post their location within a status update. McDonald’s, through digital agency Tribal DDB, Chicago, is building an app with Facebook would allow users to check in at one of its restaurants and have a featured product appear in the post, such as an Angus Quarter Pounder, say executives close to the deal.

The launch of the feature is complicated to some degree by Facebook’s existing PR problems over privacy. However, let’s assume that those subside. Furthermore, “checking in” is entirely “affirmative” and voluntary.

Beyond the check-in capability (and potential advertising angle) it’s not clear how location will manifest on Facebook (online or in mobile). But let’s assume that it will look something like this:

The AdAge article and others wonder aloud (as is now an almost perfunctory exercise) . . . is this a Foursquare or Gowalla “killer”? I would say no.

I look at the whole thing somewhat differently. I would see this as the potential mainstreaming of check-ins.

We’ll obviously have to wait and see what shows up later this month (apparently). But Facebook will likely broaden the market and help expose more people to LBS and check-ins. And the McDonald’s angle is very interesting.

Couponing, deals and mobile loyalty is becoming a huge area of mobile marketing and Facebook may further expand it.

In February, I wondered over at Internet2Go how long it would be before Facebook became a mobile ad network (with its 100 million active mobile users). This could be the beginning — and it could become more “effective” than anything Facebook is doing with display online.

Update: AdAge is further reporting that McDonald’s “will be one of many marketers in on the ground floor and will be integrated into the platform sometime after Facebook turns on the feature for consumers.” These “ground floor” marketers apparently have been “stymied by the lack of scale with services such as Foursquare, Loopt, Gowalla and MyTown” and are eager to get into the LBS game with Facebook’s greater reach and scale.

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Over the past 24 hours there have been several posts about the relative sizes of Foursquare (1 million plus), MyTown (2 million) and Google Latitude (now apparently 3 million users). Google’s Steve Lee also “hinted” to the Web 2.0 crowd apparently that check-ins were on the way for Latitude.

All of this in the aggregate makes the check-in phenomenon a more mainstream part of the local-mobile experience.

vFlyer Adds FB to Listings Distribution Network

vFlyer is intended to simplify the process of distributing local (mostly real estate) listings around the Internet. Like others the company is also trying to solve the local “fragmentation problem.” All the Local SEM firms offer a version of this service too. As part of that vFlyer has added Facebook to its “network.”

The new functionality now allows real estate professionals to show their listings as part of their Facebook pages:

Earlier Roost introduced similar functionality.

Consumer Reports: ‘Social Insecurity’

In a report intended to be somewhat inflammatory, stoke fear and sell magazines accordingly, Consumer Reports reveals data from its latest “State of the Net” survey. Here are two public bullets of interest to me:

• 52% of adult users of social networks such as Facebook and MySpace have posted risky personal information online (personal information, street address, kids photos, etc.)
• 23% of the users of Facebook . . . either didn’t know that site offered privacy controls or chose not to use them

There’s lots of stuff about scams, fraud, malware and so on. I cite the report as further evidence that a meaningful number of Facebook users don’t fully understand privacy on the site and/or aren’t aware of the potential exposure of their information beyond their immediate friends on Facebook.

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Related: EFF doesn’t Like Facebook Connections and points out all the privacy issues.

Sency, Location & Geotweets

I spoke with Evan Britton, who founded Sency a Twitter search engine. The company (at Chirp) was the first to launch a geographic lens on tweets. Britton refers to it as “real time location search.”

In New York for example I can find out what’s being said about the Times Square bomb in real time:

But one quickly can imagine that it could be used in the same way other engines are used to gain information on local businesses, places and events. The challenge with the “Twitter firehose” is cutting through the noise and organizing and filtering the information in usable ways.

Britton estimated that location information (either via geotagging or place information from Twitter profiles) covers more than 20% of all tweets today. That number, regardless of its precision, will grow as more and more tweets are geotagged.

Citysearch is obviously associating tweets about particular restaurants and places with their profile pages. But there’s a great deal more to come on this front. And those that can do the best job of separating wheat from chaff will be the winners.

You can bet that lots of folks will get into this game as more and more tweets become associated with places. And as Twitter posts are indexed by major search engines and secondary engines such as Sency you can also imagine how Twitter becomes an increasingly effective local-promotional tool for SMBs.

Others Start to Index Facebook ‘Likes’

Real-time search engine “OneRiot” is now indexing Facebook Likes as part of the Open Graph API:

[W]e were very happy to see Facebook opening up public data with the Open Graph API and other products at f8 last week. For example, “Likes” can now be shared across the web in interesting ways. Realtime search engines can now process that “Like” as a social signal to help increase the relevance score of a page in the index.

At OneRiot, we have now started to experiment with this Facebook data.

Until today, we’ve been indexing the links shared on Twitter, MySpace, Digg, Delicious and by our own OneRiot panel to help determine our search results. Now, with the addition of Facebook data, OneRiot delivers search results that reflect the pulse of a much, much wider social web.

That’s very nice — using Likes as a relevance signal for the algorithm — but there’s something more interesting here.

I had previously thought that only Facebook would be able to access all the Like data and wrote about what that might enable in the local segment:

All the local publishers in North America and Europe implement Social Plug-ins, etc. Millions upon millions of businesses are “Liked.” That creates a master data set in the aggregate. Facebook will know:

• The favorite sushi restaurants in every city
• The favorite contractors
• The favorite attorneys
• The favorite  . . . in every category

They’ll know all these things in the aggregate and in terms of my network in particular. Each “Like” is a “vote” in the same way that each link is a “vote” in the SEO world. But a Like vote is much better than a link vote.

In a very short period of time Facebook will have a ton of valuable data. What will do with all this data (courtesy of all the local sites that will implement Social Plug-ins)?

I’m not a developer or engineer so I’m on shaky ground a little bit here. But if, as OneRiot says, all the Like data is available to third parties then they can do what I was suggesting only Facebook would be able to do: create a killer database of local favorites.

You can bet that Google will be thinking about this and tapping into that data if it’s public. Shouldn’t you also?

Facebook Developing an Answers Service?

The AllFacebook blog reports that Facebook is testing a new “questions” product similar to Quora (or Aardvark, ChaCha, kgb or Yahoo Answers):

Some users have begun reporting seeing a new “Questions” product within their homepage, something oddly similar to Quora, a product developed by ex-Facebook employees that also recently raised funding at an $86 million valuation. While it doesn’t appear that this product has any integration with Quora, it appears to be in direct competition to Quora as well as Yahoo! Answers.

The AllFacebook post doesn’t really speculate about the model or implications for the broader market; however there are obvious local and mobile use cases. Beyond general and pop culture questions this could quickly become a word of mouth local recommendations engine:

• What’s the best . . . ?
• Where can I find . . . ?
• What is there to do . . . ?
• Who do you recommend . . .?

The rest of this post is at Internet2Go.

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Update: Some additional information at GigaOM, makes it seem akin to Aardvark.

MerchantCircle Expands Q&A, Says ‘HelloMetro’

Social answers or Q&A is quickly becoming a larger part of the local experience. There are a range of Q&A communities and engines out that are wholly or partly local: Aardvark (now part of Google), kgb, ChaCha, Quora, YPG Answers, Yelp has forums, SuperMedia just introduced this today, AT&T’s coming Buzz.com and there are other examples (e.g., Facebook, Twitter to some degree).

And this morning MerchantCircle is expanding its successful Answers program to include the Demand Media-owned AnswerBag service.

The press release does a more succinct job explaining the reciprocal deal than I would:

Through this agreement, questions posted to Answerbag.com will be routed to more than one million members in the MerchantCircle network, and the top responses from merchants on MerchantCircle Answers will be shared with the Answerbag community. As a result, Answerbag users will be able to tap into MerchantCircle’s massive network of experts. MerchantCircle members will also realize a broader distribution of their advice around the Web. Launched in September 2009, MerchantCircle Answers has received nearly 80,000 questions resulting in close to 100,000 responses from MerchantCircle members.

There’s also a parallel deal being announced with city guide HelloMetro, which is somewhat broader in scope:

MerchantCircle has also signed a similar partnership with HelloMetro, a global network of 1500 hyper-local city guides that lets people get to know a city through local articles, history, attractions, real estate, jobs, business listings and more. Through the partnership, consumers will be able to ask questions on more than 1,000 HelloMetro city websites and get answers from local experts they can trust, all powered by MerchantCircle Answers. MerchantCircle will also help HelloMetro business users connect with one another with its social networking system. With both partnerships, MerchantCircle members will receive attribution for their contributions.

In addition MerchantCircle claimed listings (not an advertising category) will become the “featured businesses” on the 1,000-plus HelloMetro sites.

MerchantCircle’s Darren Waddell told me yesterday that roughly 2/3 of MC’s revenues come from advertising (by third parties, e.g., AdSense) and one third from SMBs who opt for MC’s advertising services. We talked a good deal also about future product direction and features. I also asked whether the company, which relies very heavily on SEO, had seen a decline in traffic in the wake of Google’s map and local results taking up more page one real estate.

Waddell said that because MC is more of a long-tail site than most local directories he said that he thought MC had been less impacted than others. He did say there was a drop in traffic but that it seems to be returning to previous levels.

While MC continues to be critiqued by some for its earlier, questionable sales practices it has now become a pretty valuable asset and business network waiting to be scooped up. (The site claims more than 1 million SMB “members.”) I predict we may see that this year or very early next. According to the public information I’ve been able to find the site has only raised about $15 million total. MC would be quite a bit cheaper for a Google to acquire, for example, than Yelp would have been.

Where 2.0: GOOG, MSFT, YHOO, Yelp

Yesterday at the Where 2.0 show I watched the big search engines (and Yelp) discuss local. It was a short, 35-minute panel and in some ways it was similar to a Kelsey or Borrell panel but also quite different in the context of the developer-centric Where show.

From a product standpoint this is the hottest show about local because it cuts across domains: mobile, social, local. However I’m running the only discussion on monetization later today at 2pm Pacific. The conference has historically not cared about business models and making money; it’s mostly about “cool stuff.”

I’ve written up what I could capture of the local panel discussion at Search Engine Land.

What you see crystallizing at this show are the connections between mobile, local and social and you get a sense of how the entire market is accelerating. Foursquare epitomizes this but the trend is by no means limited to Foursquare.

The Dark Side of Groupon Sites

Let me just say up front that this post is based on the experience of a single restaurant owner and should be taken in that context. However I was quite surprised, yesterday, to hear the individual’s experience with Groupon, after I brought up the group-buying phenomenon. I’ll paraphrase what I was told by the owner.

This particular restaurant, located in the middle of the country, had just opened and needed customers. It also had gone over its construction budget and was short of “marketing” dollars. So it turned to Groupon. Initial promotion suggestions from the restaurant were reportedly rejected by Groupon as being insufficiently aggressive. The final, accepted, promotion was very aggressive, such that the owners feared there might be no margin on these Groupon customers.

I was told that while businesses can specify a minimum threshold of customers, required to honor the offer, they cannot specify a maximum or cap the number of respondents. This created fear that there would be 1,000 takers of this particular deal. It turned out that there were just under 500, according to the restaurant owner.

One one level this is a great result: 500 new customers potentially to spread the word and become repeat business. This was the owner’s precise objective.

I asked if he had tracked these new customers and determined how many repeated. The owner said no. I also asked whether they “got the list,” the email addresses of those taking advantage of the offer. He told me that Groupon wouldn’t give him the list, which I found literally shocking.

The restaurant owner’s experience ultimately turned out fine and the promotion “worked” in terms of getting people in the door. But he also speculated and talked about the experience of smaller service businesses such as hair salons or dentists, which must service customers in a serial manner.

He said that his wife had, as a consumer, taken advantage of one of the Groupon offers in connection with a salon. She called and couldn’t get an appointment until many weeks later — the demand was so great. If there are 300 customers who take advantage and make appointments right away that may suck up an SMB’s time for weeks. Imagine weeks of work with very thin margins.

The restaurant owner complained that “there are things Groupon doesn’t tell you.” He said the restaurant’s website got hit with tons of traffic and their phone was ringing off the hook. “You basically have to become a call center,” he said, after the deal hits. “Most small businesses aren’t prepared for something like this.”

But he did appreciate that Groupon offered “pure performance marketing” as opposed to clicks and even calls, which were more speculative. He obviously didn’t like some of the Groupon policies (i.e., not divulging emails, lack of a cap) and the lack of education or information to prepare for the experience.

Assuming that this story is accurate it seems to me that the “group buying” model as presently constituted is unsustainable. Consumers love these deals but SMBs are going to become increasingly ambivalent about them. They “work” in that they get people in the door in a very direct way. But unless that initial foot traffic is smartly leveraged and there are repeat visitors or great word of mouth the value of that initial frenzy is minimal and debatable.

As more Groupon-like sites seek to gain consumer attention there will be an effort to get deeper and deeper discounts from businesses. As an initial matter that may work, but over time this may backfire and undermine the ability of these sites to get businesses to participate. It’s also largely a one-shot deal. The restaurant owner I spoke to probably wouldn’t go back to Groupon because of the limited margins.

Platforms like Perry Evans’ new Closely represent a similar model but enable the SMB to control the flow of promotions and set their terms.

Startup Closely Brings ‘Live Offers’ to SMBs

Perry Evans, one of the founders of MapQuest and the former CEO of Local Matters, is launching his new venture at the DEMO conference today. The company is called Close.ly and it offers a spin on group buying, coupons and social marketing for small businesses (SMBs). It’s very very interesting.

It’s positioned as a “social action platform” for SMBs and the publishers and channels that work with them. This is how the release out this morning describes the effort:

Closely Business Edition is a real-time application service that allows small businesses to centrally launch, manage and measure promotions through social media channels such as Facebook and Twitter, enabling them to build their customer base and manage demand with real-time, socially engaged offers.

Closely Business Edition puts the professional social marketing tools found in branded group buying services into everyday business use for live local promotions. Connecting a live offer page to each social media post, Closely enables a business to engage their followers and fans with individual and group offers. A Live Marketing Dashboard delivers advanced productivity and performance to the business with flexible offer publishing, scheduling and analytics.

I got a quick demo of the product from Perry Evans a few weeks ago. I was impressed by the careful thinking behind Closely and think that Evans is entering the market at the right time with a “right product.” It’s an evolution of pure couponing but also of group buying.

He distinguished Closely from the Groupons of the world, which it resembles at first Glance. He pointed out that many SMBs are ambivalent about the group buying sites, which work well but exact a hefty margin and so can’t really be used by SMBs on an ongoing basis. As I pointed out earlier in my discussion of Analog Analytics, they’re mostly a “one night stand” for SMBs seeking new customers or a quick infusion of business.

Closely sees itself as something much broader — a social action platform — that can be used for prospects and existing customers on an occasional or regular basis. It also provides a dashboard, analytics and a way to regularly engage users of social media. In other words, it offers a way to create and schedule promotions and distribute them with existing social media channels, without having to rely on group-buying email networks.

Here are screenshots of the offer landing pages (a profile page substitute) and the SMB dashboard:

Closely empitomizes a new phase in SMB marketing, which combines familiar elements (offers/coupons) with less familiar tools and services (social media) that are quickly being adopted by SMBs. It’s also part of a trend bringing increasingly sophisticated online marketing capabilities to SMBs at very low cost.

Facebook Passes Google: What Does It Mean?

Hitwise (though not comScore) now says that Facebook has passed Google to become the largest site on the Internet:

But the figures above don’t include all Google properties. And Yahoo + Yahoo Mail are larger than Facebook and Google.com. So these numbers can be massaged and manipulated to make various claims.

I want to ask: Is this merely symbolic or does this event suggest a material change in the nature of the Internet and the way we discover information online?

My view is that something has changed (over the past 18 months) and that social networks, user-generated content and social communication — extending into mobile — is part of a new Internet paradigm. Search remains critical but social is an alternative or counterpoint.

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Here are the Nielsen top sites data for February (which contradict the Hitwise data above):

RedBeacon Morphs into Social Platform

When RedBeacon won the TechCrunch50 as the “OpentTable for service businesses,” I lauded the site’s elegant design and theory but “dissed” what appeared to be naiveté on the part of the model (and some of the folks who were celebrating it).

Here’s what I said at the time:

As a general matter local businesses are time starved, confused about online advertising and generally overwhelmed by pitches for their marketing dollars. Getting them to show up and participate at RedBeacon is going to be an enormous challenge. Let me repeat that: an enormous challenge.

If the founders have a five to seven year time horizon they might be prepared for the very long, slow climb up the mountain that is local. Alternatively they might be secretly thinking they’re a useful platform and will be acquired by a yellow pages publisher or other traditional media company if they can prove value and gain some momentum. Perhaps; it’s more likely than succeeding as a stand alone company.

Somewhat less challenging than getting local businesses to self-serve and participate in RedBeacon is building consumer awareness. Yet that too will be tough, with search engines and so many other sources of local business information online. The booking part is novel and differentiates RedBeacon from many local destination sites. But the third party appointment vendors (e.g., Bookfresh) will enable sites like Yelp to add booking and appointments quite easily. Yelp has 25 million uniques and a consumer brand. Tough to match.

Yet without brand awareness and usage among consumers, those local businesses that are more savvy and motivated will not show up because they’re not likely to get much response. And without a critical mass of local business participation the value won’t be there for consumers either. It’s a classic chicken and egg problem. The fact that RedBeacon won — again, I have nothing against the site or its founders — also reflects to me the disconnect between the bubble world of startups and their funders and the real world.

Good luck to RedBeacon and congratulations. I hope that they prove my skepticism wrong.

Yesterday the company held a WebEx to cite progress and announce a partnership with (parenting) group creation platform BigTent. They said this was merely the first of a number of partnerships.

RedBeacon appears to be starting to prove me wrong because they seem to have been smart about some enhancements and changes to the site, most notably the integration of Facebook. In effect it appears that RedBeacon is shifting somewhat to become a social platform and hub that manages recommendations for service providers across a range of sites.

The following are a few illustrative slides from the presentation:

Big Tent integration:

They say they’ve had little difficulty signing up service providers:

RedBeacon is also now facilitating greater communication (still no phone) between the SMB and the prospect:

The slides go on like this: problem, lesson, solution . . .There appear to be a range of tweaks and changes that make the site more consumer and SMB friendly and they appear to be very thoughtful changes. But perhaps the smartest of all is the social media integration:

RedBeacon is still in a crowded segment but it’s now not simply a destination site with a Chicken and Egg problem; it’s a social media platform that can extend reach through deals like BigTent and Facebook. Very smart.