Revenue proof of concept, Facebook policing apps and games revenue

Mike on Ads: Are you generating revenue?: "Doesn't matter if it?s adserver, behavioral tracking, a new media network ? each idea has a revenue-generating ?quick win? you can close to prove the business works. Right Media was a profitable for over a year before it launched the exchange. A single good CPA deal with AOL funded most of the first year of the company!" Creating a proof of concept in the market (user and customer demand) is something to do before one starts scaling like crazy.

Inside Facebook: Facebook?s Evolving Approach to Platform Governance: "It's now been 5 days since Slide's Top Friends application disappeared from the Facebook Platform as a result of an apparent Developer Terms of Service violation. This suspension is the most severe punitive action imposed by the Facebook Platform team that the development community has seen yet, and is at least in some sense emblematic of Facebook's evolving approach to Platform governance and regulation." Betting on an ongoing ability to annoy Facebook's or other social networks' users with forced invites and similar things is not something an application developer should do. If the social networks turn into true platforms, there is likely opportunities to build strong application companies (like on the PC). However, application developers must realize that Facebook (the company) as a service provider has more power over application developers than Microsoft had as the product provider of Windows.

Dave Perry (of Shiny and Acclaim fame) posting on Lightspeed Ventures Partners' blog: 29 business models for games. Listing 29 different ways of designing the revenue-generating part of a game's business model.

Weekly roundup

Master of 500 Hats: Chad Hurley, YouTube CEO/Co-Founder, talks to entrepreneurs @ June Startup2Startup dinner. Telling the story of YouTube.

Facebook. The valuation game Facebook investors played last fall seems to be catching up with them as TechCrunch and Silicon Alley Insider report that one or a few small shareholders are trying to sell (some of) their shares at a $3-5 billion dollar valuation (which still is 3-5 times what LinkedIn is valued at).

Gizmodo: Classic Clips: Bill Gates Chews Out Microsoft Over XP. Creating great and usable products is the best kind of competitive advantage you can have in the Internet space. If management doesn't own that issue, the problems Bill Gates describes in his flame of Windows usability will appear.

Tara Hunt: Happiness as your business model. [via: Fintsomsnus] On motivations and more. Describing why the notion of homo economicus is flawed and how other motivations drive individuals' behavior.

Jyri Engeström: Nodal Points: The Emerging Real-Time Emerging Web. Jyri's presentation slides from reboot10. Additional notes on the presentation from Joho the blog.

Nokia acts as data really is the next Intel Inside

In his article What is Web 2.0? Tim O'Reilly wrote Data is the next Intel Inside (a.k.a. a strategic advantage).

In the PC world it was about controlling the operating system and its API:s (which Microsoft did with Windows), but now it is about access to scarce data. One real-life example: Nokia paid $8.1 billion for mapping company Navteq last fall. Compare that with ?264 million ($410 million) for the 52 % of Symbian Nokia didn't own, followed by making the Symbian operating system open source.

Summer reading

I've, so far, stacked up on four books for summer reading in July:

- Sarah Lacy's Once you're lucky, twice you're good on dot.com entrepreneurs
- Founder of Dennis Publishing Felix Dennis' How to get rich (corny name, I know)
- Spencer E. Ante's Creative Capital on the birth of venture capital
- Clay Shirky's Here Comes Everybody

Any other suggestions?

Monday's links

Some interesting articles from last week:

Paid Content: LinkedIn Raised Its Big Round; $53 Million From Bain and Others; $1 Billion Valuation. "This brings the total money raised by the company to over $80 million and it has said it would have revenue of $100 million for 2008. LinkedIn, which says it is already profitable, will use the investment to make acquisitions and expand its overseas operations. The NYT story also breaks down in more details the revenue sources for the company: LinkedIn will get only a quarter of its projected $100 million in revenue this year from ads; part of it is also the premium subscription, which let users directly contact any other user; and then the third source of revenue is recruitment tools that companies can use to find passive job seekers." It is not only about ads...

Watchmojo: Traffic Does Not Correlate to Revenues. "Revenues grow over time as you become better versed with what clients look for and penetrate advertisers and marketers decision making process. Month over month, revenues grew even if traffic began to taper off." Traffic is business-to-consumer, advertising sales is business-to-business, which explains to some extent why they don't correlate perfectly. Longer term losing traffic will affect your revenues negatively, though.

Jason Calacanis: Finding your startup's "moment". ""The moment" is the exact time when an individual, after engaging your product, "gets it." By "gets it" I mean they understand your product's value proposition at such a deep level that they: 1. get excited, 2. have an epiphany of sorts, 3. can explain the value of your product to others easily"


Paid Content: Display?s Big Spender: University Of Phoenix; Category Continues To Wait For Big Brands. "When it comes to big spenders of online display ads, forget Procter & Gamble or General Motors: the biggest buyer is the University of Phoenix, a for-profit institution which devotes an average of $20 million monthly to online ads, mostly for display. The numbers, from TNS Media Intelligence and cited by WaPo, highlight the glacial pace of big brands shifting their ad dollars to display." Online advertising really is three different types of advertising: search, performance-driven display advertising, and branding-oriented display advertising. While there are several similarities between the three types, it is in understanding the differences and how each fits different sites one can create a profitable business.

Yahoo and Google in search partnership

Yahoo choosing to use Google to monetize some of its searches is a really big deal. Adding $800 million revenue and $250-400 million or so in cashflow is basically adding the revenue of a combined MySpace and Facebook to Yahoo (and a lot more cashflow). This shines light on the fact that search is far more valuable than other online advertising.

Stoppa FRA-lagen

Signalspaning mot yttre hot är i sig inget förkastligt, men FRA-lagen är en dålig lag som medför att militären rutinmässigt kan signalspana mot svenska medborgare. Ett antal borgerliga riksdagsledamöter bör visa civilkurage på onsdag och inte följa partipiskorna.

1. Läs mer på Stoppa FRA-lagen.
2. Skriv till din riksdagsledamot om du inte vill att han/hon ska rösta för FRA-lagen.

Sunday links

Mike On Ads: The Plight of the Ad Technology Startup. "As a new company you have two options ? start an ad-network and inject yourself directly into the money stream or selling your technology to one of the existing players in the food-chain. Realistically ? most agencies and publishers aren?t very tech savvy, so as a cutting edge technology player you are primarily limited to selling to ad-networks. Here's the problem ? although running an ad-network can be a highly lucrative business ? selling technology to one is not."

Futuristic Play: 5 steps towards building a metrics-driven business. "Given my history blogging about viral marketing, I'm occasionally approached by folks who ask me, "For product X, how would you promote it and make it viral?" I think there's an expectation that there's a playbook which you can directly apply to every situation.

Unfortunately, there's no real answer to this - ultimately, I think any advancements that can be made to your business function based on the fact you make very gradual improvements based on creating goals, measuring subcomponents, making hypotheses, and testing them. There's no better way to do this than to just do it."

Futuristic Play: Data portability: Is the social network data you're hoarding treasure or trash? "As a result, it may not surprise you that data around in-market behaviors (aka Intent) are worth a LOT more than the more watered down stuff (aka Interest), particularly because you can prove to advertisers that the former will make them money."

Martin Spanar!: Visdomsord från en vän. "Återigen poängen - den tid det tar att göra någonting riktigt bra, är inte nödvändigtvis längre än den tid det tar att göra det hafsigt, tillräckligt bra, glida förbi lägsta-nivån. Genom att lägga ribban högt sparar man alltså tid totalt. Dessutom, det som är värt att göras, är värt att göras ordentligt."

Martin Spanar!: LinkedIn - 10 steg till svart bälte. "Klipp-och-klistra inte från ditt CV - Linkedin fungerar i sina bästa stunder som ett sätt för dig att nätverka professionellt och hålla kontakten med vänner i yrkeslivet - men det är ingen HR-avdelning eller rekryteringsrobot du skriver för. Du skulle nog inte dela ut blad med din meritförteckning innan du har introducerat dig för någon så gör det inte här heller. Istället ska du tänka på att beskriva dina erfarenheter och förmågor som du skulle framställa dom för en person du träffar. Tänk på att skriva för datorskärmen - korta textblock som är visuellt attraktiva."

Union Square Ventures: The Weird Economics of Information. "But entrepreneurs don?t just have one conversation, they have hundreds. The more open they are in each of those conversations, the more the person on the other side is likely to engage. They may unconsciously see it is a fair trade, the entrepreneur?s ideas for theirs. The more detailed the conversation the more places for a counterparty to interact. The more they understand about the entrepreneur's plans, the more likely they are to come across other insights from other conversations that would be valuable to the entrepreneur and the more likely they are to pass them along. So an entrepreneur who is aggressively open with his or her ideas builds a very effective network that aggregates data, information, and insights that are immediately relevant to those ideas."

Good places on the US West Coast?

I'll spend a big part of my vacation this summer taking a road trip in California and other parts of the U.S. West Coast. If you have tips on places to visits, hotels to stay at, people to see, things to do etc, etc please leave a comment or send me an e-mail (henrik@torstensson.com).

Article based on easiest available data

I found Dagens Industri's article and commentary on Swedish community sites today to be very shallow business journalism and the headlines to be worthy of a tabloid. Unique visitors to a single site is an important metric, but it is far from the only one. Revenue, profit and overall reach for a company's web sites are also important. The readers deserved a more in-depth look at the subject than they got.