The Billion Dollar Mind Trick

2961565820_3d59b7bdfbYin asked not to be identified by her real name. A young addict in her mid-twenties, she lives in Palo Alto and, despite her addiction, attends Stanford University. She has all the composure and polish you’d expect of a student at a prestigious school, yet she succombs to her habit throughout the day. She can’t help it; she’s compulsively hooked.

Yin is an Instagram addict. The photo sharing social network, recently purchased by Facebook for $1 billion, captured the minds of Yin and 40 million others like her. The acquisition demonstrates the increasing importance — and immense value created by — habit-forming technologies

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Dollars, Sense, And 40 Billion Facebook Credits

facebook creditsRoughly 16 billion Facebook Credits were distributed and consumed in 2011. In 2012, I predict that the use of Facebook Credits will soar by three times to over 40 billion Credits spent on virtual goods, digital goods and more. The growth will be fueled by new digital content available on Facebook, use of Facebook Credits to reward brand loyalty and better marketing of a social currency that is still in its infancy.

The following chart shows the growth of Facebook Credits revenue reported by Facebook from 2009 to 2011.

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Event Marketing: The Key To F-Commerce?

facebook commerceSpeak to people who think Facebook will be a screaming buy at its likely IPO valuation of $100b+ and they will say with confidence, “Facebook is just getting started.” What they mean is that Facebook is just starting to find ways to monetize its 845 million users; the social network started with the lowest hanging fruit, which was advertising, then moved on to taking a cut of in-app virtual goods purchases, and now presumably has a long laundry list of other ways to enmesh its users and grow its top line.

High on that list is a controversial proposition: commerce on Facebook, otherwise known as F-commerce. Though an initial rush of branded retailers set up storefronts on Facebook pages, several of them, including GameStop, JC Penney, Nordstrom, and The Gap, decided in February to shut them down. It turns out that simply replicating a web storefront on Facebook isn’t compelling for consumers, particularly when the brand’s fully-functioning and pretty convenient web site is only one click away. Moreover, brands were leery of driving commerce traffic to Facebook rather than to their own sites where they could better control the experience and manage consumers through a purchase conversion funnel.

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It’s Not About Instagram — It’s About Mobile

instagram logoIt has been more than a week now, but Techmeme today is dominated by Instagram related headlines. Was the Board involved? Did Marc Andreessen know? Did Instagram take the $50m from Sequoia and others before agreeing to be acquired? Was $2bn the right ask? Was $1 billion cheap or is it a bubble?

These are soap opera-like questions. Interesting? For sure if you have insomnia. Deep? Not really.

A week after the acquisition I think we all need to be stepping back and reflecting on the meaning of the deal as it relates to our future. Actually, if we do that, many of the other questions do become easier to answer, and possibly more interesting.

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An Open Letter To Those Not Employed At Instagram

instagramDear Non-Instagramers,

Sorry that you didn’t get bought out for $1 billion last week. That’s got to be a bummer. Kevin Systrom just made enough money to buy a boat big enough to make Larry Ellison jealous and you’re still living in a studio apartment.

Instagram is a one-off. A fluke. An anecdote that many entrepreneurs will mistake for data. Please don’t be one of them.

This happens about every half a decade. The first mover in a space gets taken out in record time with a ridiculous valuation and the founders look like epic geniuses. Do you remember YouTube? Sure you do. But what about Revver, Metacafe, Guba and Veoh? I didn’t think so.

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How Social Currency Is Driving Identity, Trust and New Industries

social-currencyAs our lives increasingly move to the digital realm – whether it’s what we read, what we watch, photos that once sat in frames now uploaded to a server farm somewhere in the rural United States, or even the 140-character thoughts we share with the world ­­– comes the very reconstitution of our identities online. A German artist named Tobias Leingruber recently took this concept to its logical extreme when he produced physical identification cards based on Facebook profiles (this attempt at satire was executed so well that Facebook sent Leingruber a cease-and-desist letter three days later).

Between the lines of Leingruber’s satire, though, is a very real, emerging concept. What Leingruber hit on is something I refer to as social currency. Social currency essentially refers to the idea that every person has an online identity formed through participation in social networks, websites, digital communities, and online transactions. Our everyday activities — web searches, status updates, ‘likes’, tweets, and comments — they all leave a trail of data behind which we tend to see as ephemeral or throwaway.

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WWE Pushes The Social TV Envelope At WrestleMania XXVIII

fisheye wwe stadiumWrestleMania has transformed itself from a small wrestling event to an international media spectacle. In its 28th incarnation, held at the beginning of this month, there were no signs of it stopping.

World Wrestling Entertainment did something unique last year – it announced the main event for WrestleMania over a year in advance. The big match featured Dwayne “The Rock” Johnson, a huge cross-over star, and John Cena, the current flag bearer for the company. Recognizing the challenges of trying to keep interest for the match a year in advance, the WWE turned to social media. I wanted to talk to some of the people driving this initiative, both on- and off-screen. Jason Hoch, SVP of Digital Operations for the WWE, discussed his social media strategies for fan engagement and social TV.

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Strategy For Startups: The Innovator’s Dilemma

929005910_a12cbbc1ecStrategy. Unfortunately, it suffers from a bad reputation among startups. It is associated with consultants who are paid millions of dollars only to come back with a two-by-two matrix of animals. Not that there is anything wrong with it. Some of my best friends are consultants.

However, strategy is crucial for startup success. Startups usually operate in an environment of constrained resources while competing with strong incumbents. Hence, the right strategy can be a matter of life and death. This post is the first in a series of posts that will explore concepts in strategy and how they apply to startups.

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How The IPO Ruined Google

Groupon-Tops-Google-at-IPOI’m a Google-phile. Or at least, I was. Lately, my gut’s felt a bit wobbly every time someone mentions the big G. Page, Brin and company have lost their focus. Once, they helped us all find the stuff we needed. Now, they spend their time in slap fights with Facebook. It’s almost like the Googlers are no longer in charge at Google.

That’s because they’re not. The Google IPO put the company’s fate in the hands of investors. And it’s ruined the company. IPO-bashing is popular right now. But I’m not just jumping on the bandwagon here. The evidence is pretty damning: Pre-IPO, Google was laser-focused on being the best tool on earth for search-and-discovery, and they appeared unstoppable. Post-IPO, the company has lurched from one social media debacle to another.

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The Market Curve: The Life Cycle Of New Technology Markets

healthy_marketEditor’s Note: This guest post is written by Doug Pepper, who is a General Partner at InterWest Partners where he invests in SaaS, mobile, consumer Internet and digital media companies. He blogs at dougpepper.blogspot.com.

Everyone expects startups, even successful ones, to undergo a cycle of hype, disappointment and ultimately growth on the way to a sustainable business. But what about new technology markets themselves? Does the growth of a new market follow a similar pattern?

Fred Wilson recently wrote about the twists and turns that startups face (expanding on Paul Graham’s astute “Startup Curve”). I’d like to take those ideas further and describe the “Market Curve” — a similar path that new markets take on the path to sustainability.

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